Farm business tenancies were introduced by the Agricultural Tenancies Act 1995. Rachel Dunlop, partner with Harrogate-based solicitors Berwins LLP takes a closer look at the requirements.
The Agricultural Tenancies Act 1995 sets out the requirements for a farm business tenancy and these are:
The business condition is that all, or part of, the holding must be farmed for the purposes of a trade or business and must have been so farmed since the start of the tenancy.
The essence of the business condition is, therefore, that commercial farming must take place on some part of the holding throughout the duration of the tenancy.
Although it may be quite easy to establish if the land is being used for a trade or business, it can be more difficult to decide if it is “farmed”. One needs to refer back to the 1995 Act, not the dictionary.
The Act defines “farming” as including “the carrying on in relation to land of any agricultural activity” while “agriculture” includes horticulture, fruit growing, market gardens and nursery grounds. As we shall see below, difficulties can arise when deciding if the land is farmed when horses are kept on the holding.
The agriculture condition requires that the character of the tenancy is primarily or wholly agricultural. Once again, there is a need to refer back to the statutory definition of “agriculture”.
The notice condition requires the landlord and the tenant to exchange notices in the prescribed statutory form prior to the start of the tenancy. These notices confirm the intention of the parties that the tenancy is, and is to remain, a farm business tenancy.
With the notice condition the character of the tenancy must only be wholly or primarily agricultural at the outset. With the agriculture condition it has to be wholly or primarily agricultural at the time when the status of the tenancy is called into question, which could happen at any time during the tenancy.
If the parties intend to enter into a farm business tenancy, it is preferable for them to comply with the notice condition. However, if the parties are relying on the agriculture condition, there should be a written tenancy agreement requiring the tenant to use the holding solely for agricultural purposes.
This is because, when assessing the status of the tenancy any use in breach of that obligation would be disregarded so that the agricultural condition would still apply, unless the landlord has consented to the changed use or has acquiesced in it.
If neither the agricultural condition nor the notice condition are fulfilled, the tenancy cannot be a farm business tenancy. If the holding is used for business purposes, it will be a business tenancy protected by Part II of the Landlord & Tenant Act 1954, with the tenant having the statutory right to renew his tenancy in most circumstances – an unwelcome outcome from a landlord’s perspective.
The difficulty in determining whether a tenancy is a farm business tenancy is best illustrated by the keeping of horses on the holding.
Horses are not agricultural livestock unless kept for food production or used to farm the land.
Both exceptions will be extremely rare. Normally keeping horses is not classified as farming for the purposes of the 1995 Act. However, the use of land for grazing is an agricultural activity and the character of a tenancy of land let for grazing by horses would be agricultural, provided that the primary purpose of the tenancy is for grazing.
If, instead, the primary purpose is a non-agricultural activity, such as teaching riding, then the tenancy cannot be a farm business tenancy. If riding is taught as a business, then the tenancy will be a business tenancy protected by the 1954 Act.
So, to summarise, there is no short and straightforward answer to the question, “What is a farm business tenancy”?