Farm Business Tenancy

Agreeing the terms of a farm business tenancy is crucial if you want to avoid difficult and complicated disputes further down the line.

Here at JCP Solicitors our Rural Practice Teams and our Commercial Property Teams have years of experience in rural matters of all kinds, and we can advise you on getting the detail right at the outset – as well as guiding you through any issues if they arise at a later stage.

A farm business tenancy (FBT) created under the Agricultural Tenancies Act 1995 is an arrangement which sees a tenant, either an individual or a business rent all or part of a farm for trade or business and primarily or wholly for agricultural purposes.

Getting the Agreement Right

A tenancy arrangement can be flexible or highly detailed, depending upon the needs of the landlord and tenant, and we always recommend that it is put in writing, so everyone knows where they stand.

The tenancy arrangement should detail:

• The length of the tenancy term
• The agreed rent payable
• The maintenance obligations of both tenant and landlord
• What the tenant can and cannot do
• Details of any rent reviews

Who and For How Long?

The tenant’s own name, or that of their company, can be used in the agreement, and there are implications for either of these options, so it is important to discuss these carefully with a legal professional.

If a dispute arises during the term of the tenancy this would normally be dealt with by arbitration. The parties could alternatively include a provision in the FBT that an independent third party settle any dispute.

If the tenancy you choose is for a fixed term longer than two years, then a minimum of 12 months’ notice must be given by either party. However, if you opt for a tenancy of two years or less it will come to an end automatically at the end of the term, with no notice needed by either tenant or landlord.

Other Things to Consider

There are other legal complexities and considerations that you will need to cover off, and that our experienced legal team can guide you through, including:

• Tax issues – depending upon the length of the lease and its value, the tenant will be responsible for paying Stamp Duty Land Tax (Land Transaction Tax in Wales)
• Land registration – if the lease in question is for longer than seven years it should be registered at Land Registry
• Compensation – your tenant may be entitled to compensation, at the end of the tenancy, for physical improvements they have made to the farm (that remain at the farm when the tenant leaves), as long as these were made with your consent. This is particularly likely if the changes they have made have boosted the letting value of the holding

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