We have previously explained what an agricultural tenancy is and the forms it can take, (which you can read here). However, changes made on 1st September 2024 mean that the position around agricultural holdings has changed.
An agricultural tenancy that commenced before 12 July 1984 usually qualifies as an Agricultural Holdings Act (“AHA”) tenancy in accordance with the Agricultural Holdings Act 1986 (“the 1986 Act”). This type of tenancy allows for rights of tenancy succession to two further generations after the original tenancy has taken place. If a previous tenant has died or retired within a specific timeframe then a potential successors can apply for a succession tenancy.
A valid application must be made by the potential successor to the Tribunal either:
- Within 3 months of the death of the tenant; or
- 1 month from the day after notification of the tenant to the landlord of their retirement.
The Tribunal retain discretion as to whether the potential successor meets the tests of suitability and eligibility under the 1986 Act.
The Tenant Farmers Association has identified the modernisation of agricultural tenancy rules surrounding succession. The Chief Executive, George Dunn described the succession rules as a “set of complex rules” with onerous requirements.
What are the changes?
From the 1st September 2024, a proposed successor must demonstrate that they are both eligible and suitable to succeed an agricultural holding.
Eligibility:
There is no longer a requirement to satisfy the Commercial Unit Test otherwise known as the “Occupancy Test”. A potential successor can now separately occupy another commercial unit of agricultural land which previously was not allowed.
Both of the following tests must be satisfied by the potential successor under the new changes:
- Close Living Relative Test
The potential successor must be a close living relative of the previous tenant.
- Principal Source of Livelihood Test
The potential successor must demonstrate that their sole source of livelihood came only from agricultural work on the holding in at least 5 of the last 7 years of the previous tenant’s tenancy.
There is also no minimum age that the outgoing tenant must be before a potential successor can apply for succession on retirement.
Suitability:
Once the potential successor passes the Eligibility Test, they must prove that they are suitable to become the tenant of the holding tenancy.
The previous position was that the potential successor had to demonstrate that they have sufficient training and experience, were of suitable health and financial standing in order to take on the tenancy and run the holding.
Whereas now, the potential successor must demonstrate their ability to farm the holding “commercially to high standards of efficient production and care for the environment”.
Therefore, the new position is that the potential successor must demonstrate that if the tenancy was on the open market, a prudent landlord would shortlist them for the tenancy.
What does this mean?
The new changes require potential successors to comply with a stricter process to demonstrate their suitability for a succession tenancy thus providing landlords with a comfort as to the nature of the proposed successor.
The changes acknowledge the progressive attitudes of potential successors and no longer penalises those who take on additional opportunities whilst awaiting their opportunity to succeed a family tenancy. The changes have been implemented as a response to modern farming practices.
The 1986 Act remains unamended therefore, the changes are to be interpreted alongside the key clauses in the 1986 Act.
Legal advice should be taken by landlords and tenants at the earliest opportunity in the event of a death or retirement of a tenant.
If you would like further information or advice in relation to the new changes surrounding agricultural tenancies, please contact the Commercial Property team by calling 0161 330 6821 or emailing bromleys@bromleys.co.uk.