Get off my land! Terminating agricultural tenancies

Autumn 2016

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We are all familiar with the stereotypical image of a farmer

shouting ‘get off my land!’ However, housebuilders

acquiring greenfield sites will often find that the boot (or

wellie) is on the other foot. Greenfield sites almost

invariably include agricultural land, and so it will be the

housebuilder telling the farmer to ‘get off my land!’, so that

it can obtain vacant possession and start developing the

land.

This, of course, has to be done properly. If the farmer is

the landowner, then this will be straightforward, he will

give vacant possession of the land. However, if the land

has been let out for agricultural purposes, gaining vacant

possession is far more complicated and, in certain

circumstances, may take up to two years.

Agriculture is a business run on a year to year basis.

Accordingly, most agricultural tenancies are year to year

tenancies, which must be terminated with not less than 12

months’ notice. That 12 months’ notice usually has to end

on the end date of the tenancy.

In addition, agricultural tenancies enjoy statutory

protection, most notably under the Agricultural Holdings

Act 1986 (AHA 1986) and the Agricultural Tenancies Act

1995 (ATA 1995). This statutory protection means that it

can be difficult and time consuming to terminate an

agricultural tenancy.

Agricultural tenancies fall into two categories:

1. Tenancies granted before 1 September 1995. These

are governed by AHA 1986 and are known as

Agricultural Holdings; and

2. Tenancies granted on or after 1 September 1995.

These are governed by the ATA 1995 and are known

as Farm Business Tenancies (FBT’s).

Note that an agricultural tenancy does not have to be in

writing to enjoy the protection of AHA 1986 or ATA 1995,

it can be oral or implied.

The distinction between Agricultural Holdings and FBT’s is

crucial, as Agricultural Holdings are far more difficult to

terminate than FBT’s.

Is the tenancy an Agricultural Tenancy?

Before looking at how to terminate Agricultural Holdings or

FBTs, it is important to be clear if the tenancy is an

agricultural tenancy. To qualify, the tenancy must satisfy

two key criteria:

1. The land must be used for agriculture; and

2. The agriculture must be carried out for the purposes of

a trade or business.

Agriculture includes the following activities:

• Livestock farming;

• Dairy farming;

• Horticulture; and

• Use of land as grazing land.

Note that the keeping of horses on land is not agriculture,

as horses are not ‘livestock’.

How to terminate an Agricultural Holding

An Agricultural Holding tenancy must be terminated by a

valid notice to quit. A valid notice must give at least 12

months’ notice from the end of the then current year of the

tenancy. This requirement cannot be contracted out of.

So, by way of example, if the tenancy year ends on 30

November and you want to terminate it on 30 November

2017, you must give the notice to quit by 29 November

2016 at the very latest. If you serve the notice after 29

November, then the tenancy will not end for a further year

i.e. not until 30 November 2018.

Having said this, there are a few limited exceptions to the

12 month notice requirement where a shorter notice

period will be valid (a short notice). The important

exception as far as housebuilders are concerned is where

there is a provision in the tenancy agreement authorising

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the resumption of possession of the holding (or part of it)

for a purpose other than agricultural use (e.g. for

residential development). If there is such a provision, the

notice period can be shorter, but no less than two months

in any event. So it is crucial to check the tenancy

agreement to see whether there is such a provision,

because it could save you a great deal of time.

Whether it is a 12 months’ notice to quit, or a short notice,

a notice to quit must be in the form of either an

Unqualified Notice or a Case Notice. Both are prescribed

notices under AHA 1986.

(I) Unqualified Notice

With an Unqualified Notice, the landlord does not have to

specify a reason for terminating the tenancy. However,

the tenant can then serve a counter-notice challenging it.

The matter will then have to be determined by the First

Tier Tribunal (Property Chamber), Agricultural Land and

Drainage (the ALD Tribunal). The ALD Tribunal will only

consent to the termination if one or more specific grounds

are satisfied. These include grounds such as good

husbandry and sound estate management. However, the

relevant ground as far as housebuilders are concerned is

‘non-agricultural use’.

Non-agricultural use is where the landlord proposes to

terminate the tenancy for the purpose of the land being

used for a use other than for agriculture (this would

include use for residential development) which does not

fall within ‘Case B’. Case B is one of the grounds used for

Case Notices (see below) and includes where planning

permission has been granted for the non-agricultural use.

What this means for housebuilders is that they will

probably have to use an unqualified notice when they

have not yet obtained planning permission.

An unqualified notice is therefore a risky and time-

consuming business, as it will take some time for the

matter to be determined by the ALD Tribunal. However, if

the housebuilder has not actually obtained planning

permission yet, it may be the only option.

(II) Case Notice

Where a landlord serves a Case Notice, the tenant does

not have the right to serve a counter notice and the matter

will not come before the ALD Tribunal. However, as the

name suggests, the notice must state a ‘Case’. There are

eight Cases, A to H. These include bad husbandry, failure

to pay rent or remedy a remediable breach, irremediable

breach, insolvency, and death. However, it is likely that

the Case that will be used by housebuilders is Case B,

non-agricultural use.

To succeed with Case B, the housebuilder will have to

have obtained planning permission (outline planning

permission will suffice). If it has not yet obtained planning

permission, then it must rely on an unqualified notice.

A tenant can challenge termination under Case B but this

will be by arbitration, rather than determination by the ALD

Tribunal.

Compensation

Housebuilders should note that, on top of the notice

requirements, they will also have to pay the tenant

compensation if they terminate the tenancy by an

Unqualified Notice or Case Notice.

How to terminate a Farm Business Tenancy

Terminating FBT’s is far more straightforward than

terminating Agricultural Holding tenancies.

For the purposes of termination, FBT’s falls into two

categories:

• A fixed term FBT of more than two years – this must

be terminated by either party giving at least 12 months’

written notice to the other, with the notice expiring on

the last day of the tenancy. However, if the FBT is not

validly terminated, it will continue as a statutory

periodic tenancy from year to year. To end such a

periodic tenancy, the landlord must give at least 12

months’ notice before the end date of the periodic

tenancy; and

• A fixed term FBT of two years or less - this will expire

by effluxion of time on the term date. No notice to quit

is required.

The landlord does not have to give grounds for

termination, as it does have to for Agricultural Holding

tenancies.

Arrangements that are not Agricultural Holdings or

FBT’s

There are certain arrangements that do not qualify as

Agricultural Holdings or FBT’s. Examples are:

• Grazing licences;

• Equine business (these are business tenancies and

will enjoy their own statutory protection);

• Where the use is non-business, for example grazing a

family horse;

• Non-business use; and

• Land farmed under a partnership, contract farming or

share farming arrangements.

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Conclusions

If a housebuilder is looking to purchase agricultural land, it

must investigate whether there are any agricultural

tenancies at the earliest possible stage. Even if there is no

written agricultural tenancy agreement, there may be an

oral or implied tenancy.

If the tenancy was granted before 1 September 1995, it

will be an Agricultural Holding tenancy and the

housebuilder (or landowner where the housebuilder has

not yet purchased the land) will have to get the notice

procedure going as soon as possible. This can be a long

process, especially if the housebuilder has not obtained

planning permission and therefore has to rely on an

unqualified notice. In addition, the housebuilder or

landowner will have to compensate the tenant where it

succeeds in terminating the tenancy.

Indeed, the procedure for terminating Agricultural Holding

tenancies is so complicated and time consuming that it is

well worth the housebuilder considering other ways to

terminate the tenancy which do not attract statutory

protection. These include:

1. If the tenancy agreement contains a right to forfeit, and

the right to forfeit has arisen (e.g. non-payment of rent,

insolvency etc), the housebuilder/landowner should

consider forfeiting the lease; or

2. Negotiate a surrender with the tenant. This would, of

course, involve compensating the tenant but it may

turn out to be less costly, and certainly less time

consuming, than serving notice.

Terminating FBT’s is far more straightforward. However,

the housebuilder/landowner will still have to get the notice

procedure right. If it does not, it may be stuck with an

agricultural tenancy for a further 12 months.

If you would like to discuss any of the issues raised in this

update, please contact:

:

William Cursham Associate Construction dt: +44 (0) 121 234 0066 m: +44 (0) 773 932 5929 William.Cursham@gateleyplc.com