Agricultural Tenancy Reform could have far reaching consequences for landlords

12 June 2019

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Following recommendations put forward by the Tenancy Reform Industry Group (TRIG), The Welsh Government is running a consultation which seeks views on reforming and modernising agricultural tenancy regulations. Although the consultation runs concurrently with a Defra consultation, there are some differences between them.

Around a third of agricultural land in Wales is rented through both formal and informal agreements that provide flexibility and allow the agricultural industry to respond to changing circumstances. The tenancies are governed partly by the terms of their individual tenancy agreements and partly by framework legislation. Under the Agricultural Holdings Act 1986, tenants are afforded security of tenure for their lifetime, whilst some also have succession rights for up to two generations of eligible close relatives on death or retirement of the tenant.

The proposals say that reform is needed to drive productivity in a sector where little structural change exists, with an aging profile of farmers and limited opportunities for new entrants to bring innovation to the sector. Older tenants with no successor have limited options to realise value from their lease to help them retire, meaning the land becomes unproductive. Proposals include enabling the tenant to assign their tenancy, for payment, to a new tenant, subject to the right for the landlord to pre-empt the assignment by negotiating to buy out the tenant and thereby terminate the tenancy.

Chris Hyde, Associate Director with Cooke & Arkwright’s Land Agency said, “TRIG has the specific aim of enhancing productivity within the rural sector in England and Wales.

“Both England and Wales have published their own consultation papers, though they are broadly similar in outlook and centre principally on changes to the Agricultural Holdings Act 1986. These will have far reaching implications if they are passed as proposed and include, amongst other ideas, the right for a tenant to assign their tenancy to a third party who is not connected to them as a close family relative.

“Any such assignment would be subject to a number of constraints and the proposal has given rise to many questions as to how it should be implemented – if at all.

“As a member of the CAAV Wales Group, at our most recent meeting we discussed in depth the proposals affecting Wales to formulate a response to the consultation. Furthermore, I sit on the RICS Rural National Professional Group Board and spent a day at their London HQ together with the Board chair drafting the reply on behalf of the RICS. 

“In Wales, the consultation is open to all interested parties until 2nd July. We strongly urge our clients to review the consultation document and consider responding on their own part, given the impact it will have to them if passed.”