Agricultural tenancies act 1995

The agricultural tenancies act 1995 (ATA 1995) remains one of the most significant pieces of UK legislation governing the letting of agricultural land and holdings.

If you are a landowner or tenant farmer, understanding this act is essential to ensuring that both landlords and tenants have clarity regarding their rights, obligations, and remedies. This guide explores the key provisions of the ATA 1995, providing clarity and practical advice for those involved in rural property leases.

Overview of the agricultural tenancies act 1995

Before the introduction of the ATA 1995, agricultural tenancies largely operated under the Agricultural Holdings Act 1986, which provided tenants with considerable security of tenure and imposed strict rules regarding rent reviews and tenancy termination. In contrast, the ATA 1995 introduced a more flexible framework, known as the farm business tenancy (FBT), providing both landlords and tenants increased freedom to negotiate terms and conditions of an agricultural lease.

Under this act, parties involved in an agricultural tenancy agreement can determine the duration, rent levels, repair and maintenance responsibilities, and other essential terms, with fewer restrictions than those previously imposed by earlier acts.

Key definitions and applicability under the act

To qualify as a farm business tenancy under the ATA 1995, the tenancy must meet specific criteria. Most significantly, two conditions must be satisfied:

• The land being let must be used wholly or primarily for agricultural purposes throughout the tenancy.
• There must be clear intention by the parties that the tenancy is to be used primarily for the purposes of agriculture.

Agriculture, as defined under the act, includes horticulture, fruit growing, livestock farming and breeding, grazing, the keeping of animals and poultry, and using land as woodland ancillary to farming operations. It is crucial for both parties to clearly establish and document the agricultural nature of the tenancy from the outset.

Farm business tenancies and the benefits of increased flexibility

The introduction of farm business tenancies brought about increased flexibility for landlords and tenants when negotiating terms. Unlike previous tenancies under the Agricultural Holdings Act 1986, which conferred significant protection for tenants, the FBT offered landlords more scope in determining rental terms, lengths of tenancy, and notice periods.

The principal benefits provided through farm business tenancies are:

• Greater contractual freedom for landlords and tenants to agree on length of tenancy and termination provisions.
• More straightforward rent review mechanisms agreed upon by both parties.
• The ability to clearly set out responsibilities for repairs, maintenance, and improvements in a bespoke manner.
• The opportunity for shorter-term agreements, allowing tenants to trial new farming methods or ventures with reduced long-term financial risk.

Duration and terminating farm business tenancies

Under the ATA 1995, the length of farm business tenancies is negotiable between landlord and tenant. They can range from short-term seasonal lets to longer term arrangements covering several years, or even decades. No statutory minimum duration is imposed, allowing greater flexibility in the regulations surrounding agricultural agreements.

Termination of a farm business tenancy requires notice to be given in accordance with the agreed terms within the written tenancy agreement.  For less than two year FBTs, you can negotiate shorter notice periods with the tenant, such as one to three months.  For two plus year FBTs the statutory notice period of at least 12 months will apply.  If no such notice terms are stipulated, the act provides default notice periods as follows:

• For tenancies of less than two years, the notice period is typically at least 12 months.
• For tenancies of two years or more, the landlord or tenant must give at least 12 months’ written notice, expiring on the contractual term date.

However, it is highly advised to clearly set out termination provisions in the tenancy agreement itself, to avoid confusion, misunderstanding, or disputes.

Rent reviews and market value

Unlike earlier legislation, the ATA 1995 allows landlords and tenants to agree their own terms around rent and rent review processes. Parties can agree frequency, methods, and references for any rent reviews. If no specific agreement is made, the default procedure under the act provides for rent reviews every three years, taking into consideration the prevailing open market rent value for similar agricultural holdings in the area.

When negotiating new tenancies, both landlords and tenants should clearly document how and when rent reviews will take place, considering the potential impact of market changes on their financial planning.

Improvements, maintenance, and compensation

The ATA 1995 offers greater flexibility for parties to establish their maintenance responsibilities, repair obligations, and how improvements to the farmland shall be managed. Typically, the tenant will be responsible for routine maintenance, fencing, soil management, and field drainage, although provisions can differ based upon mutual agreements.

One important aspect of the ATA 1995 is the compensation regime for tenant improvements. Under the act, tenants are entitled to compensation for certain agreed improvements to the land at the conclusion of their tenancy. However, such compensation claims must have landlord consent in writing before any significant improvements occur, ensuring clarity and agreement from both parties prior to undertaking substantial work.