Planning to Take Over the Reins of a Farm Tenancy?
- AuthorJCP Solicitors
For agricultural tenancies granted prior to 1984, it is fairly common for tenant farmers to be succeeded as a tenant by a close family member either when the tenant retires or passes away.
This type of tenancy is governed by the Agricultural Holdings Act 1986; the legislation provides certain protections and rights to the tenant and it can allow for two successions; three generations of a family can, if they meet specific criteria, hold and run the farm, one after the other. The application for succession must however be made in the correct form and in the correct timescale to the Agricultural Lands Tribunal.
Whilst in principle the idea of succession is fairly straightforward, in practice it can offer up a number of pitfalls; it is critical that a successor tenant or landlord seeks detailed legal advice to fit their particular circumstances.
Where there is to be a succession application on the death of the tenant, the application must be made within 3 months of the date of the death. If this is not done, the application will fail.
Here are some of the key criteria that must be met in order for an application to have the chance of success, in the event of the death of the previous tenant:
On death of the sole or sole surviving tenant, a close relative can apply for a new tenancy. A close relative is defined under the Act as:
- A wife, husband or civil partner
- Any person treated by the deceased tenant as a child of the family in relation to any marriage or civil partnership
Any number of close relatives could apply for a succession tenancy though in most cases there is only one eligible applicant.
The applicant would need to satisfy eligibility and suitability criteria, including livelihood and occupancy tests. The livelihood test requires the applicant to show that their main source of income has been derived from agricultural work on the farm for at least five of the previous seven years.
If they cannot meet this criteria, they would need to make an application to show they can meet the test to a material extent (the material extent allowance is not available on a retirement application). So, whilst each case would be different, the test may be satisfied if the applicant can show they have derived a substantial amount of their income or spent a substantial amount of their time working on the farm. The occupancy test requires the applicant to show that they do not have any secure rights to other agricultural land. The applicant would also need to satisfy a suitability test based on age, fitness, finances and their agricultural experience and qualifications.
When a tenant gives retirement notice to their landlord, they can nominate a close relative as their successor. The nominated successor would be able to apply for a new tenancy if the criteria on succession and retirement are met. The retiring tenant, or all retiring tenants of a joint tenancy, must be 65 or over at the retirement date or permanently incapable or conducting the farm.
The applicant should be a close relative and satisfy eligibility and suitability criteria, and the retiring tenant must give notice of retirement to their landlord, to include:
- Intention for the nominated successor to take over as tenant on the farm.
- A specified date when their nominated successor will take over the tenancy, i.e. the retirement date.
Strictly speaking, it is only possible to give one retirement notice to the landlord, so it is vital that this notice includes the two requirements above.
Unlike succession upon death, there can only be one nominated successor on retirement. If the retiring tenant gives a retirement notice to the landlord that nominates one person as a proposed successor, nobody else can then apply to succeed the tenancy. The nominated successor would need to withdraw or abandon their application to enable anyone else to apply.
Before they can apply for succession, the nominated successor would need to deliver a written notice of their intention to make the application, to the landlord and all interested parties, including the retiring tenant. A tenant should always seek professional advice before serving a notice.
The application must be made to the Agricultural Land Tribunal for Wales within one month from the date of the retirement notice being given to the landlord. The application should include a copy of the retirement notice and should be signed by the retiring tenant, or each of the retiring tenants in a joint tenancy, and the nominated successor.
The landlord and any other interested parties would have an opportunity to deliver a response to the application, on a specific form, and within one month from the date the application was served upon them. A landlord would also need to deal with the service of a notice to quit and should also seek advice.
The nominated successor would also need to satisfy the livelihood and occupancy tests mentioned above, as well as the suitability test based on the age, fitness, finances and agricultural experience. The nominated successor must fully satisfy these requirements in order to make a successful application.
This is just a brief overview of a complex area of law; detailed advice should be sought promptly where an application for succession is in prospect whether that be on the death of a tenant or when retirement is being considered. From both a landlord and tenant perspective there is benefit in undertaking some early succession planning. At least then the family will know what the position is and will be able to take action when needed. It may also allow the business to be structured in such a way to ensure that the tests for succession are properly met. Forewarned is forearmed.
JCP Solicitors’ Rural Practice team has extensive expertise in this field of law and is on hand with tailored legal support during this time. Get in touch with our expert team on 03333 208644 or email firstname.lastname@example.org