Tenants right to vary agricultural tenancies

9th June 2021

Tenants now have powers, as from 21 June, to seek variations to tenancies of agricultural holdings.

The Agricultural Holdings (Requests for Landlord’s Consent or Variation of Terms and the Suitability Test) (England) Regulations 2021 (the Regulations) allow tenants of agricultural holdings to seek variations that enable them to enter into financial assistance schemes introduced under the Agriculture Act 2020.

If a tenant needs the landlord’s consent, or a variation of the tenancy, to enter into a scheme or to comply with a statutory duty, they can serve notice on their landlord requesting change. If the landlord refuses, or agrees subject to conditions, the tenant can refer the question to an arbitrator appointed under the Agricultural Holdings Act 1986 or (if the parties agree) to an expert. In order for the request to be referred to arbitration, the tenant must have paid the rent up to date and must have made the request in writing; also the request will not be referred to arbitration if there is a valid notice to quit.

The request must contain certain information, such as a description of the proposed activities and the change requested. There are time limits for both the landlord and tenant if a request is made.
The other change the regulations make are to the suitability test on succession applications under the AHA 1986. The suitability test is one of the tests a tribunal has to consider when determining whether an applicant can succeed to an AHA tenancy. Then when the change takes effect, the tribunal has to consider all relevant matters, including;

  • the person’s likely capacity to farm the holding commercially, taking into account the need for high standards of efficient production and care of the environment
  • the person’s experience, training and skills in agriculture and business management,
  • the person’s financial standing and character
  • the holding and the terms of the tenancy.

These provisions come into force on 1 September 2024 and do not apply to applications for succession where the death or retirement notice was before that date.

Both these changes should not be a surprise to the industry; they were trailed as far back as the Defra consultation on tenancies in 2019.

The variation to the suitability test is an updating of an existing right. The right to apply for a change to the tenancy is a new right, and unusual in that it allows parties to vary the terms of their agreement. Usually the terms agreed between parties are sacrosanct, subject to some specific restrictions known at the time they enter into the agreement. Here a tenancy can be varied to accommodate a scheme that may not have even been in existence at the time the tenancy was signed. The logic is that many AHA tenancies are based on agreements entered into many years ago, in the case of some succession tenancies before the current tenant was born, and so they do not truly represent an agreement between the current parties.

It would be hoped that both landlord and tenant would aim to avoid the costs and uncertainty of a reference to arbitration and resolve the matter by agreement. But the regulations provide tenants with a useful backdrop against which to conduct negotiations.