The importance of codes of practice published by the Tenant Farming Commissioner (TFC), Bob McIntosh, should not be underestimated.
For example, where a code states a landlord or tenant “must” take a particular action, failure to do so will constitute a breach of the agricultural holdings legislation. If it says that a party “should” do something, then a failure might result in a breach of the code and could be reported to the TFC for further investigation. Where it “recommends” an action, a landlord or tenant will not be adhering to good practice if they do not follow the recommendation, but it isn’t a breach as such.
The code, entitled Agreeing and Managing Agricultural Leases, is intended to reduce the scope for disagreement and misunderstanding between landlords and tenants.
It requires a landlord to provide a prospective tenant with a draft of a new lease at least a month before it is due to start. It also states all agreements between the parties, during the period of lease, should be in writing and adds that the parties should engage in constructive discussion before termination.
The TFC’s tree planting guide outlines how a secure tenant or a tenant under a limited duration tenancy (LDT) can use land for tree planting under the diversification rules, an important move as many farm businesses look to tap into non-agricultural income streams. The document sets out the process of obtaining a landlord’s consent and the grounds on which a landlord may refuse consent. It also provides information about waygo compensation which the landlord or the tenant may be entitled to when the lease is terminated.
Importantly, a tenant risks having to compensate a landlord at waygo if the value of the trees at that time is less than the value of loss or rent due to the landlord up until the timber is harvested. It also acknowledges, where the landlord has a right to resume, the risk to the tenant is that the landlord may take the land in hand and do the planting themselves.
The guide on the agricultural tenancies covers the transfer in life (by assignation) and on death (either under a will or under the intestacy rules which apply where the deceased tenant did not make a will). The guidance provides a very useful starting point for any tenant who wishes to better understand their options. However, it’s important to bear in mind that the TFC guidance does not consider the tax consequences of a transfer, and this should always be reviewed carefully before taking any steps towards a lifetime transfer, in particular.
The TFC’s recommendations for modernising the categories of eligible improvements led to an updated list coming into force in early 2019. This means additions such as slurry pits and central heating now potentially qualify for compensation, as long as work began on or after January 10 last year.
Looking ahead, June this year sees the end of the “amnesty” on tenants’ improvements: an opportunity for landlords and tenants to agree on a list of improvements eligible for compensation at tenancy termination.
The TFC’s code of practice on the amnesty explains how landlords and tenants can work together constructively to agree this list.
While it may seem six months is plenty of time, the amnesty process can prove lengthy, so the guidance is to seek advice sooner rather than later, particularly if there is doubt over whether works, including those listed in the 2019 order, will qualify for compensation.
Linda Tinson is a partner with Ledingham Chalmers.