Agricultural Tenancies and their alternatives

The sector finds itself at an exceptionally variable time. Tenancies, and other agreements allowing others to carry out agricultural operations on your land, are just one part of this. It is a good time to consider: is the approach currently being taken the right one? Even if things are going well, are there ways they could be further improved? What lessons can be learned from other businesses? Are there changes on the horizon which mean even if things are working now, a different approach might be needed in the future.

The traditional approach remains the use of a farm tenancy. Since the implementation of the Agricultural Tenancies Act 1995, new “farm business tenancies” have been very flexible, allowing freedom of negotiation on almost all matters. However, this flexibility brings with it less legislation to fall back on where matters are unclear. Therefore good professional drafting with buy-in from both parties remains a cornerstone of a successful landlord-tenant relationship.

Building such a relationship is the purpose of the Agricultural Landlord and Tenant Code of Practice, endorsed by the CLA among many other rural organisations such as the Tenant Farmers Association and Central Association of Agricultural Valuers (CAAV). We strongly advise all members who have agricultural land rented out, are considering setting up a tenancy or who are tenants themselves to thoroughly read the code and implement its recommendations as far as they can.

While the Code was written with Landlord and Tenant relationships in mind, and much of it is relevant to this area only, there are elements which are applicable to other arrangements too. In a grazing licence, for example, in which someone is given an access to land to graze it with animals but does not have exclusive possession, clarity around methods of payment and repairing obligations and a mutual willingness to ask and answer reasonable questions are both invaluable.

For its part, a grazing licence allows greater flexibility for the landowner than tenancies, including for example an ability to claim their own environmental subsidies on the land and to more easily bring the agreement to the end. However, like drafting under the 1995 Act, more flexibility means more responsibility, so more active management is required (although both licences and tenancies require frequent active involvement from the landowner in order to work well). Building a strong lasting relationship also mean providing more security than a grazing licence is able to offer.

Finally a word is needed on Contract and Share farming agreements. These are somewhat more specialised agreements allowing the landowner to take on some risk associated with the sale of products from the land. This can have many advantages, such as for tax, but requires careful management and professional input.

This means there are many decisions to be made not just on what arrangement to use but also on how to constantly manage a holding farmed in some part by another.

We have attempted to address these questions in our webinar, which was kindly supported by Michelmores, which is available below.