A new code of practice for projects, schemes or works requiring landlords’ consent in agricultural tenancies was recently published by the Royal Institute of Chartered Surveyors, on behalf of the Tenancy Reform Industry Group (TRIG). TRIG is the cross-industry group which advises Defra on agricultural tenancy matters.
The code was requested by Defra in order to provide guidance on the new statutory regime and specifically the Agricultural Holdings (Tenants’ Request for Landlord’s Consent or Variation of Terms and the Suitability Test) (England) Regulations 2021 SI 619 and its Welsh equivalent, when published.
Importantly the code applies across Agricultural Holdings Act (AHA) and Farm Business Tenancies, reflecting that the regulations allow tenants to seek variations to enable them to enter into the new financial assistance schemes under the Agriculture Act 2020.
The code offers useful general guidance to landlords and tenants seeking to apply the new legislation, with a focus on communication and detailed proposals. They are primarily concerned with a tenant seeking consent from a landlord, but could be used the other way round.
The code introduces a five-step guide on submitting and dealing with proposals. It aims to help negotiations as follows:
- Early consultation – between the landlord and tenant, based on full and frank disclosure to facilitate a discussion of the proposal.
- Agreeing a timetable – this should be sensible, taking into account any relevant deadlines e.g. for financial assistance schemes.
- Preparing details of the tenant’s proposal – the tenant should provide a business plan with proof of funds, giving details of required tenancy variations, assignments/sub-letting, consents and any implications on the landlord.
- Landlord’s consideration – the landlord should carefully consider the tenant’s submission requesting further information on items not properly addressed in stage 3. The landlord should then prepare a written response either approving, approving subject to conditions or refusing consent.
- Written agreement – once the landlord and tenant are agreed, the terms need to be put in writing, prepared in an appropriate form by a suitably qualified professional. The approval needs to waive any rights which would negate the landlord’s consent e.g. the ability to use a Case B notice to quit.
There is also specific guidance for requests for landlord consent or variation of terms under the regulations, which only applies to AHA tenancies. If the landlord and the tenant can’t reach agreement under the regulations and the landlord refuses consent or to make the variations, then the tenant may refer the matter to arbitration. This right doesn’t apply to other requests under the code and so AHA tenants may try to frame their proposals as being under the regulations.
The code also helpfully provides a list of reasonable grounds on which landlords and tenants may withhold their consent for cases outside of the regulations. These must be viewed in context and could include the other party suffering hardship if consent were given.
In terms of cases within the regulations, landlords are encouraged to ensure that their reasons for refusal are consistent with the considerations an arbitrator would take.