Getting Your Farming Tenancy Right

I’m keen to let some of my land to a farming tenant, and I have been approached by someone I know well, who is interested in taking on a tenancy. How do I make sure the arrangement works for us both and that we get the agreement right?

You are sensible to ask this question now, before any agreement has been entered into. The more closely you pay attention to the detail at the outset, the more likely thing are to run smoothly for you both.

A farm business tenancy is a legal arrangement which sees a tenant, either an individual or a business, rent all or part of a farm for trade or business, and primarily or wholly for agricultural purposes.

A tenancy arrangement can be flexible or highly detailed, depending upon the needs of the landlord and tenant, and we recommend that it is put in writing, so everyone knows where they stand.

The tenancy arrangement should detail:

• The length of the tenancy term
• The agreed rent payable
• The maintenance obligations of both tenant and landlord
• What the tenant can and cannot do
• Details of any rent reviews

The tenant’s own name, or that of their company, can be used in the agreement, and there are implications for either of these options. If the tenancy you choose is for a fixed term longer than two years, then a minimum of 12 months’ notice must be given by either party. However, if you opt for a tenancy of two years or less it will come to an end automatically at the end of the term, with no notice needed by either tenant or landlord.

There are other considerations you should cover off, including:

• Tax issues – depending upon the length of the lease and its value, the tenant will be responsible for paying Land Transaction Tax.
• Land registration – if the lease is for longer than seven years it should be registered at Land Registry.
• Compensation – your tenant may be entitled to compensation at the end of the tenancy, for physical improvements they have made to the farm,  as long as these were made with your consent. This is particularly likely if the changes they have made have boosted the letting value of the holding.

This is a complex area of law and it is important to seek tailored legal advice before entering into any agreement. For more information contact us on 03333 208644 or email law@jcpsolicitors.co.uk

The question posed is based upon a hypothetical situation.