Succession planning for agricultural tenants

Wednesday 25th March 2020

Agri Tenancies Agriculture 1867212 640

The Tenant Farming Commissioner recently released guidance on the available options for dealing with the succession of agricultural tenancies. This guidance should not be overlooked by tenant farmers, particularly when the farm business includes a family home. Agricultural tenants should be advised of the difficult, lengthy and potentially more costly estate administration if a suitable succession plan has not been implemented.

The current legal framework for the succession of agricultural tenancies is outlined in the Agricultural Holdings Act 1986 (AHA). Unless otherwise consented by a landlord, the AHA permits two generations of the original farmer tenant to succeed to the tenancy, including close relatives after a death or retirement. A transfer can only be made to an individual so the successor cannot be joint tenants or a commercial unit. For example, if a farmer obtained a tenancy aged 25 in 1990, his grandchild could have a right to the tenancy in 2090.

Whilst the law is unambiguous, unfortunately it has not evolved to meet today’s current climate. How can farming productivity be protected if the younger generation do not want to work in agriculture? Why should a potential successor be prohibited from taking over a farm if they operate another farming business as a company? These questions are being considered by DEFA as parts of its consultation process for the reforming of the AHA. Draft proposals include giving tenants assignment options for a fixed term of 25 years at open market rent, removing the commercial unit test and widening the succession eligibility criteria to include nieces, nephews and grandchildren of the tenant.

Considering these potentially radical changes, it is has become even more imperative for legal advisers to carefully monitor this consultation process to ensure that landlord and tenant clients are adequately advised.

For an up-to-date guide to agricultural law, including the law on succession rights, check out our comprehensive full day Certificate in Agricultural Law course.

Become a member and get unlimited access to online content PLUS your first 3 hours' training FREE

Please enter a valid email address.