Consultation on agricultural tenancy needs better focus on flexible FBTs
A first major look at agricultural tenancies in almost a quarter of a century has prompted concern over a lack of discussion around Farm Business Tenancies (FBTs).
Lauren Dean
Chief executive of the Tenant Farmers’ Association (TFA) George Dunn said while the industry welcomed the agricultural tenancy consultations, submitted separately by England and Wales for the first time since the devolution settlement, it was disappointing to see the documents both ‘top heavy’ on the Agricultural Holdings Act (AHA).
The consultation should have instead focused on FBTs, one of the main problems for tenant farmers, particularly with their short length of term – usually about four years – their restrictive clauses and their ‘eye-wateringly high rent’.
Mr Dunn said there should also have been a joined-up position on tax relief and its need to be targeted at landowners providing longer, more sustainable lets.
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“Four years is just a flash in the pan in the farming context,” Mr Dunn said.
“If the estates or landlords who let for less than 10 years were denied access to lucrative Agricultural Property Relief from Inheritance Tax, we would see improvements in average lengths of term which are currently pitiful.”
The government’s measures have come almost entirely from the recommendations of the cross-industry Tenancy Reform Industry Group and ‘should be seen as a package of measures’, Mr Dunn said.
He added it was disappointing that the government had provided no timetable for its proposals, particularly those which would allow tenants to question a landlord’s refusal to allow activities for both agricultural and agri-environment purposes.
‘Little incentive’
Short-term FBTs were also bad for the environment, Mr Dunn said, with the lack of security of tenure providing ‘little incentive’ to think long-term and causing major issues for tenants wanting to take part in agri-environment schemes.
The TFA also said it was disappointed that the government had failed to address much-needed changes planned for the way in which farms would be supported in the post-Brexit era, pushing for Defra to bring forward its amendments to legislate within the Agriculture Bill.
“We do not want to see tenant farmers disenfranchised,” Mr Dunn added.
CLA president Tim Breitmeyer agreed there should be a move away from ‘regressive’ AHA tenancies and towards more flexible FBTs, optimising the legislative framework which surrounds them and creating advice around retirement and succession planning.
He said: “We welcome the opportunity to engage, but strongly feel we should not be tinkering around the edges of a system which has fundamental flaws, and which is widely felt to not work for either tenants or landowners.”
NFU tenants forum chairman Chris Cardell echoed some of Mr Dunn’s more positive comments that the proposals would allow greater flexibility within the sector, such as removing restrictions to tenancy law and opening up rules on succession.
Productivity
“This will allow both landlords and tenants to make investments in their farm holdings, which will help drive greater productivity,” Mr Cardell said.
“The tenanted sector produces many and varied opportunities for the next generation of agricultural entrepreneurs and plays an important role for farming businesses.
“It is therefore vital that reforms supporting this are implemented.”
Simon Pallett, partner at Carter Jonas, added the concept of introducing assignable tenancies for value had raised concern for landlords who saw it ‘as a further restriction on their opportunity to secure vacant possession when a tenant dies’.
He said: “This may be an over-reaction particularly for long-term landowners such as the institutions who are long-term landholders who seek a secure and growing income from their investment.
“The proposals provide for a market rent to be paid (effectively an FBT rent) and limit the term of the tenancy to 25-years without further succession or assignment opportunities.
“Alternatively a landlord will have a first opportunity to buy the tenant’s interest providing the tenant with some funding towards retirement.”
The situation in Wales
George Dunn said there was talk of increasing divergence between England and Wales in terms of tenancy legislation.
He said TFA Cymru was concerned about the extent to which the Welsh Government had the capacity to deliver change – particularly in light of its failure so far to bring about change to model repairing obligations for landlords and tenants, despite something similar having been completed in England four years ago.
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