Agricultural Tenancy

An agricultural tenancy refers to a business lease arrangement wherein one party rents agricultural land or buildings to operate a farm business. The two primary types of agricultural tenancies in common use are full agricultural tenancies (FATs) and farm business tenancies (FBTs).

Full agricultural tenancies

FATs, or full agricultural tenancies, are lease agreements established prior to September 1, 1995. They are also referred to as Agricultural Holdings Act tenancies (AHAs) or 1986 Act tenancies, as they fall under the governance of the Agricultural Holdings Act 1986.

Under the provisions of the 1986 Act, both parties involved in the agreement are entitled to a rent review every three years, with the possibility of adjusting this period if there are changes to the tenancy in terms of land additions or removals.

FATs typically offer tenants lifetime security of tenure along with specific rights. For agreements formed before July 12, 1984, FATs may have succession conditions, wherein a close relative can succeed the tenancy in the event of the tenant’s death, provided an application is made within three months of the original tenant’s passing. Succession can occur twice under this condition. Additionally, tenants have the option to nominate a close relative as a successor if they choose to retire.

Tenants may be eligible for compensation at the end of the lease for significant long- or short-term improvements made to the property, subject to landlord approval. The compensation amount is generally determined based on the increase in property value resulting from the improvements.

In cases where the tenant is responsible for property damage, the landlord may be entitled to compensation, typically calculated based on the cost of repairing the damage.

Disputes related to 1986 Act tenancies are typically addressed by the Agricultural Land Tribunal.

Farm business tenancies

FBTs, or farm business tenancies, are agricultural lease agreements established after September 1, 1995, and are governed by the Agricultural Tenancies Act 1995 (ATA 1995). They are classified as FBTs under specific conditions, including:

Continuous use of all or part of the land for trade or business during the tenancy. Farming activity occurs on at least part of the land during the tenancy. Exchange of declarations between the landlord and tenant regarding the intended agricultural use of the property before the tenancy commences, with agriculture being defined under Section 38 of the ATA 1995 to encompass various activities such as horticulture, livestock breeding, and woodland use ancillary to agricultural purposes.

It’s important to note that the grazing, keeping, and breeding of livestock is considered agricultural only if the animals are utilised for farm work or sold for meat or skins, excluding animals used for recreational purposes.

Under an FBT, tenants may request permission from the landlord to convert the land to non-agricultural use, provided proper notice is given and approval is granted. Failure to comply with agricultural parameters could result in the arrangement being categorised under another type of business leasing agreement.

Compared to FATs, FBTs are typically more informal to encourage diversification and have fewer formal requirements. They may even occur through informal arrangements such as grazing licences.

Rent arrangements in FBTs are determined by mutual agreement between the landlord and tenant, including the period between rent reviews and rent levels. Termination of an FBT can be initiated by issuing a notice to quit at least 12 months in advance, with the maximum notice period being agreed upon in writing.

Compensation arrangements for improvements made under FBTs are akin to those in FATs, with parameters agreed upon in advance in writing.

Disputes concerning FBTs are typically addressed through third-party expert determination or arbitration procedures.