Successful succession part one

This is the first in a series of articles on succession tenancies; the Agricultural Holdings Act 1986 is undoubtedly an unwieldy piece of legislation and creates many traps and pitfalls for unwary landlords and tenants.

By way of background, with some exceptions, a tenancy created prior to 1 September 1995 will be protected by the 1986 Act. In effect, it creates a lifetime tenancy and in cases where that tenancy was granted prior to January 1984, it is likely to also come with succession rights attached.

Succession rights provisions

The provisions relating to succession rights are complex and, specific legal advice should be sought at an early stage.

There are three possible routes to achieve succession:

1. An application for succession made within three months of a tenant’s death
2. An application following a retirement notice and,
3. Agreed succession in line with legislative requirements.

A tenancy under the Agricultural Holdings Act 1986 is potentially a valuable asset for the tenant farmer.

In circumstances where the tenant can evidence that there are successors in place, it means the landlord may be unable to recover possession for many years. This can, on occasion, act as a catalyst allowing for negotiations by the tenant farmer to potentially purchase the freehold from the landlord at a discounted value. In addition, rent under an Agricultural Holdings Act will be significantly lower than rent under a Farm Business Tenancy, for example.

It is therefore imperative that the landlord or the tenant farmer get expert legal advice at the earliest stage, so they understand the nature and the type of tenancy that exists so they can start to consider succession and the qualifications for succession.

A business can sometimes be structured to ensure that a successor will continue to derive their principal source of income from the holding, so as to satisfy the principal source of livelihood test. Like a classic car, an Agricultural Holdings Act tenancy will be a good investment, but it needs to be understood and cared for, in order to allow a tenant to harness that investment value.

My next article in this series will examine the eligibility and suitability criteria for potential applicants.