Farm Business Tenancies: What Factors Need to be Considered?

Farm businesses can come in various forms: livestock feed manufacturing or fruit growing. An agricultural tenancy agreement will be needed if a business is operated on agricultural land. Agricultural tenancies differ from other business tenancies, as each can be unique. This can confuse when compared to other types of tenancies. 

Are There Different Farm Business Tenancies? 

Two types of tenancies can be in place, depending on when the agreement was established. Farm business tenancies are governed by the Agricultural Tenancies Act 1995 and apply to agreements made after 1 September 1995. These are commonly referred to as farm business tenancies. 

However, tenancies created before 1 September 1995 are known as 1986 Act Tenancy and are governed by the Agricultural Holdings Act 1986. Tenancies under this act have a right to a rent review every three years. 

Professional advice should be sought if you aim to create an agricultural tenancy. The same applies to those changing an agreement already in place. However, some information can help ensure you make the right agreement for your business. 

The following is an overview of the factors that must be considered by both landlord and tenants before committing to a farm business tenancy. 

Understand the Requirements of a Farm Business Tenancies 

Those entering a new agreement will be creating a farm business tenancy. A farm business tenancy requires tenants to farm the land in addition to the agricultural occupancy. There can be benefits in doing this, but only if the right tenancy agreement is completed. 

Alternatively, the landlord and tenant must exchange notices before the tenancy commences that state the farm business tenancy will remain. As each person will have their own requirement, it is advisable to seek professional advice if you’re still unsure what conditions need to be in place. 

Become Familiar with the Land 

Before entering a farm business tenancy, it is essential to know the land’s conditions. For example, there may be outstanding planning permission or third-party easements. As each tenancy can be different, the considerations that need to be made can vary, so familiarity with the land is necessary. 

Similarly, those wanting to lease land should also be aware of these factors and make tenants aware of these details beforehand. 

Ensure Rent Reviews are Frequent 

Those creating a farm tenancy may assume that rent reviews are included, but this is only sometimes the case. The landlord and tenant need to agree on the frequency of rent reviews. Similarly, they can agree that no rent review will be carried out. 

The agreement must include the terms discussed regarding rent reviews for a farm business tenancy with the agreement’s wording. If no agreement exists, the landlord or tenants can request a rent review every three years. 

In most instances, the conversation regarding rent is straightforward, but it should never be taken for granted. Ensuring that rent reviews are included can provide clarity in every instance, allowing for a proactive relationship between tenants and landlords. 

Clarify who is Responsible for Taxes 

In addition to uncertainty regarding rent, there can also be times when the taxes regarding a farm business tenancy are overlooked. For the most part, the tenant will be responsible for covering the Stamp Duty Land Tax, but this can depend on the lease. If the lease lasts seven years or more, it must be registered at the Land Registry against the landlord’s title. 

Will a Grazing License Be Required? 

The rules regarding grazing licenses have been relaxed recently, but they can still be commonplace. In most instances, a grazing license is issued short-term, averaging around six months. 

Although a grazing license allows graziers access to land and livestock, the landowner manages and controls the land. Although it can be required in some instances, those looking for longer-term solutions find a farm business tenancy is the best fit. 

Compensation Needs to Be Considered 

In some instances, a tenant may be entitled to compensation at the end of the tenancy if improvements have been made. However, compensation will only be due if the landlord agrees to the changes beforehand. 

Although there can be exceptions, compensation will often be due at the end of a farming business tenancy if the value of the holding has increased. As with other aspects of a farming business tenancy, reaching out to a professional can be worthwhile if you’re unsure how compensation will be calculated based on your circumstances. 

Be Careful of Using Online Templates 

When searching for legal documents online, there can be free templates available. However, the nature of a farming business license means that each agreement is unique. As such, using an online template can often mean several factors need to be addressed. 

Even though there is a cost associated with a bespoke farming business tenancy, it can ensure that there are no costly ramifications later on. Furthermore, the creation of farm business tenancies is often more affordable than many think. 

What happens if a Request to surrender is made? 

A farming business tenancy can be ended if both parties agree, but factors still need to be considered. For example, there may be financial implications when requesting to surrender a tenancy agreement but it will often depend on the financial circumstances. 

A landlord wishing to serve a notice to quit on a farm business tenancy of two years or more will need to give 12 months’ notice. The same is true for those who are running tenancies year-to-year. 

Discussing the conditions of a notice to quit beforehand and including them within the farm business tenancy allows for additional peace of mind for all concerned. 

Why Use Legal Matter Made Simple for a Farm Business Tenancy? 

Although some businesses have access to legal professionals, sole traders and small companies must enlist a professional’s service. Even though a lawyer can create a farm business tenancy, it can often exceed the budget many have. Fortunately, there are other options available. 

Legal Matters Made Simple has been carrying out surveys and completing paperwork for several years, ensuring customers have access to an affordable and efficient service in every instance. 

If you want to create a farm business tenancy or wish to discuss your requirements in more detail, then why not get in touch with us to discuss your requirements in more detail?

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