What is my tenancy worth? – A guide to Tenant Right and surrendering from the Agricultural Holdings Act 1986

8th April 2019
Kivells Director Tom Rattray Headshot

Tom Rattray - Kivells Director, Launceston Office

I heard recently that a Tenant was walking away from his Agricultural Holdings Act 1986 Tenancy recently and I quizzed him to see whether he knew what he was giving away. I suggested he didn’t know how lucky he was to have lifetime security, potential rights of succession for future generations, and a protected rent review formula. Indeed the property that he was looking to move to, being a three bedroom cottage in the local village, was going to cost as much in rent as his 150 acre farm – which came with a four bedroom house and range of buildings!

I suggested to him how keen his Landlord would be for him to leave and that he needn’t therefore voluntarily surrender. To a Landlord, having a farm back would enable it to be re-let on a Farm Business Tenancy at an open market level of rent, for whatever length of term the Landlord saw fit, and with the ability to pass repairing and insurance responsibilities onto the Tenant.

There are also tax advantages to the Landlord in that the re-letting of the farm on a Farm Business Tenancy would enable them to achieve better Inheritance Tax relief (100% Agricultural Property Relief rather than 50% Agricultural Property Relief on the Agricultural value of the property).

Landlords will also commonly choose to let land and buildings separately to the dwelling house, which in turn can create good market levels under an Assured Shorthold Tenancy.

Such is the advantage to a Landlord in a Tenant relinquishing their tenure under the Agricultural Holdings Act 1986 then often a sensible deal can be struck to trigger the surrender, and our team has dealt with these scenarios lately.

It is also worth remembering as a Tenant, whether surrendered for a payment, or terminated for any other reason, there is a Tenant Right procedure where compensation for end of tenancy matters needs to be considered.

These include:-

  • Tenant’s Improvements (items that have been given written consent by the Landlord where the Landlord will compensate)
  • Tenant’s Fixtures (items that do not have consent, but where the incoming tenant may wish to purchase)
  • General matters of Tenant Right (such as produce in store, growing crops, unexhausted value of lime, leys, etc.)
  • Basic Payments Scheme entitlements.

In addition to this one must consider that there will be the sale of livestock and machinery (where Kivells’ wider departments can assist) and therefore one can expect that on a good sized Agricultural Holdings Act 1986 tenancy, a tenant should be able to leave their tenancy (provided they have farmed it well and left the holding relatively free of dilapidations) and use the funds they have extracted from the tenancy (and the end of tenancy compensation provisions) to acquire a modest residential property (or at least put down a deposit to ensure a roof remains over their heads).

For advice in this regard please contact your nearest Kivells Rural Professional team member.

Tom Rattray Director, Launceston Office