Common Questions and Answers on Farm Business Tenancies

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Chapter 4

Common Questions and Answers on Farm Business Tenancies¹

4.1 SECTION 1: THE NOTICE CONDITIONS

Question

In what circumstances should notices be served?

Answer

If there is a short-term FBT agreement containing a covenant that the holding should be used for agricultural purposes only, there is no need for an exchange of notices. Any breach of the terms of the FBT agreement is disregarded in determining whether the agriculture (and business) conditions have been fulfilled (section 1(8) of the 1995 Act).

If, however, a long-term tenancy is granted it would be sensible to exchange notices so that there can be a diversification in the future without falling foul of the 1954 Act.

The landlord and tenant must give each other notice before they enter into any tenancy agreement or the beginning of the tenancy (beginning means the day the tenant is entitled to possession under that tenancy: section 38(4) of the 1995 Act). As previously stated, it is not sufficient for the landlord to serve notice on the potential tenant and for the latter to simply sign a receipt on the bottom of that notice. That is simply a receipt of the landlord’s notice and not a notice served by the potential tenant on the landlord. There need to be two

¹Note: all references are to sections in the 1995 Act.

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distinct notices: one from the landlord to the potential tenant; and another from the potential tenant to the landlord.²

Although section 3 of the 1995 Act provides that there is no need to serve a new notice if a new tenancy is granted following an implied or express surrender, there will be a need for new notices to be served by both parties, each on the other, where there are a series of fixed term tenancies. Moreover, where there has been substantial diversification, the new tenancy will not be primarily or wholly agricultural at the beginning. Therefore, the new letting will be governed by the 1954 Act. The landlord and tenant can agree to exclude the security provisions of that Act. To do so the landlord must serve the prescribed notice before the beginning of the tenancy and the tenant must make a declaration that he has received and accepted the consequences of the notice.³

Question

Can the notice be signed by an agent?

Answer

There is no requirement that the notice be signed at all. However, good practice dictates that it is. The signatures of the agents to the respective parties are obviously adequate but if they are to sign they should ensure they have the necessary authority from their respective clients to sign the notice and would be well advised to obtain a signed authority to do so (unless they already hold a general authority which includes such a purpose).

The form of such authority can be quite simple. A precedent for such an authority is set out at para 10.1.6.

²Note: even for the notice condition the character of the tenancy must be wholly or primarily agricultural at the beginning of the tenancy.

³Regulatory Reform (Business Tenancies) (England and Wales) Order 2003, articles 21 to 22,

Schedules 1 to 2 introducing a new section 38A into the 1954 Act.

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4.2 SECTIONS 5, 6 AND 7: NOTICE TO TERMINATE

Question

How can a landlord obtain early possession for development?

Answer

There is no automatic early resumption clause. Unless there is a break clause, a fixed term tenancy will continue until the expiration of the term. A yearly tenancy needs to be terminated by at least 12 months’ notice expiring on an anniversary date of a completed year.

If there is a break clause in a fixed term tenancy for longer than 3 years, the clause must be operated by at least 12 months’ notice. Break clauses in fixed term tenancies of 3 years or less are not subject to any statutory requirement as to length of notice.

4.3 SECTION 4(1)(A), (B), (C) AND (D): SUCCESSION TENANCIES

Question

What amounts to a succession tenancy so that the 1986 Act applies to the new tenancy?

Answer

Where the tenancy is obtained by virtue of a direction of the First-tier Tribunal (formerly the Agricultural Land Tribunal).

Where a tenancy is granted by the landlord after a direction awarding a succession tenancy has been made by the First-tier Tribunal.

Where the parties agree that there should be a succession tenancy and there is a written contract of tenancy indicating (in whatever terms) that Part IV of the 1986 Act should apply to the tenancy. Note the provisions of section 34 of the 1986 Act in this regard.

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A tenancy will count as an agreed succession if:

(1) the previous tenancy of the holding or related holding was a tenancy to which Part IV of the 1986 Act applied;

(2) the current tenancy is granted to a close relative of the previous tenant; and

(3) is granted to a person (alone or with other persons) who was or has become the sole surviving applicant for a direction of the First-tier Tribunal for a tenancy or is granted as the result of an agreement between the landlord and the previous tenant and begins before the date of the giving of any retirement notice by the previous tenant. If no retirement notice is given it must be granted and begin before the death of the previous tenant (section 4(2) and (2A) of the 1995 Act, inserted by articles 11 and 12(1)(8) of the Regulatory Reform (Agricultural Tenancies) (England and Wales) Order 2006).

4.4 SECTION 4(1)(F): IMPLIED SURRENDER AND RE-GRANT TO AN EXISTING TENANT

Question

If there is a variation of a tenancy by altering the terms or varying the acreage, will the tenant continue to be protected by the 1986 Act?

Answer

Not all variations of tenancies will amount to an implied surrender and re-grant.

Note the following:

In the absence of an increase in the extent of the premises demised or of the term for which they are to be held, both of which would change the legal estate, I can see no reason why the parties could not achieve the changes they desired in the terms of the lease without the law implying its surrender and re-grant for the remainder of the term of the lease.⁴

⁴Friends Provident Life Office v British Railways Board [1996] 1 All ER 336 per Beldam LJ.

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Where additional land is added to a tenancy agreement there will be an implied surrender and re-grant. The 1986 Act will continue to apply to a tenancy which is granted to a person who, immediately before the grant of the current tenancy, was the tenant of the holding, or of any agricultural holding which comprised the whole or a substantial part of the land comprised in the holding, under a tenancy to which the 1986 Act applied. As originally enacted this provision applied only if there was a purported variation of the previous tenancy. Article 12(4) of the Regulatory Reform (Agricultural Tenancies) (England and Wales) Order 2006 has...