AHA tenancy loophole

We all work in the rural sector so the basics of AHA tenancies under the Agricultural Holdings Act 1986 (AHA) should be familiar territory.

Many of us can think of contacts or clients with AHA tenancies or AHA tenants.  While AHA tenancy agreements are still a common occurrence in the agricultural sector, they are still a very specialist area of law.  Many of us can also think of contacts, clients or AHA tenants with undocumented AHA tenancies. 

It is likely that if someone has occupied land for agricultural purposes since before 31 August 1995, they have an AHA tenancy, with or without succession rights (up to two generations), whether or not that tenancy is documented in written form. 

Poorly drafted or undocumented AHA tenancies do not contain a ‘non-assignment’ clause.  Notices that should have been served on a tenant at the start of an AHA tenancy confirming the tenancy granted was to be in accordance with the AHA 1986 are unlikely to have been served either.   Legally, this means that an individual tenant under the AHA is free to assign his or her tenancy to whoever they please.  

A savvy tenant could take advice from a solicitor specialising in agricultural tenancies and a savvy solicitor would advise that tenant to assign the AHA tenancy to a company pronto, thereby making the term of the tenancy indefinite for as long as the company remains in existence. 

Where a non-assignment clause is expressly included in a documented AHA tenancy, that tenancy would terminate (if not before) at the death of the named AHA tenant (either on the first death if no succession rights apply or on the third death being the second generation tenant of the holding). 

Assignment to a company is a very scary prospect for a landowner who would have no option but to negotiate an often substantial financial settlement for a company AHA tenant to surrender its tenancy of the holding, as a company AHA tenant holds far more value in its tenancy due to its indefinite term than an individual AHA tenant.  This does happen regularly when landowners are considering the promotion of land subject to AHA tenancies for development and cannot rely upon grounds for possession under the AHA. 

Savvy landowners, their agents and lawyers may be able to divert such a scenario by serving a Section 6 Notice under the AHA on any individual tenants who farm holdings as described above before they have the opportunity or inclination to take advice and assign their tenancy to a company.  Such a notice is binding on the tenant and requires the tenancy to be documented in writing if it has not already been done.

The moral of this story for landowners and their managing agents, is to give your agricultural tenancy property portfolio a thorough MOT and involve your solicitor from an early stage.  Your solicitor can assist with protecting what rights you do have under the AHA.