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Last edited 09 Dec 2021
An agricultural tenancy is a type of business lease when a party rents agricultural land or buildings to run a farm business. The two most commonly used types of agricultural tenancies are full agricultural tenancies (FATs) and farm business tenancies (FBTs).
FATs are agricultural tenancy agreements made before 1 September 1995. They are also known as Agricultural Holdings Act tenancies (AHAs) or 1986 Act tenancies, since they are governed by the Agricultural Holdings Act 1986.
FATs typically offer lifetime security of tenure as well as certain rights granted to tenants. For arrangements made before 12 July 1984, FATs have certain succession conditions. Should the tenant die, a close relative may be able to take on the tenancy if an application is made within three months of the original tenant’s death. Under this condition, succession can only be passed along twice. If the tenant wishes to retire, it is possible to name a close relative as a successor to take over the tenancy.
Should tenants make significant long- or short-term improvements during the period of the arrangement (and with the approval of the landlord), they may be entitled to compensation at the end of the lease. The amount is generally based on the increase in value of the property due to the improvement.
- If all or part of the land is continuously used for trade or business during the tenancy.
- At least part of the land is farmed during the tenancy.
- Both the landlord and tenant exchange declarations of the intended agricultural use of the property (which should be its primary and continuous purpose) before the tenancy begins.
Under the s.38 of the ATA 1995, agriculture is defined as including:
“…horticulture, fruit growing, seed growing, dairy farming and livestock breeding and keeping, the use of land as grazing land, meadow land, osier land, market gardens, and nursery gardens, and the use of land for woodlands where that use is ancillary to the farming of land for other agricultural purposes.” Livestock includes "any creature kept for the production of food, wool, skins or fur or for the purpose of its use in the farming of land".
Note that the grazing, keeping and breeding of livestock is only deemed as agricultural if the animals are used to work on the farm or are sold for their meat or skins. This does not apply to animals that are used for recreational purposes (except in certain circumstances where the care and grazing may take place on the agricultural land but the recreational activities take place elsewhere) or non-business activities.
The tenant may be permitted to change the land to non-agricultural use if a notice stating this intention has been properly submitted in advance and granted by the landlord. If the tenant fails to do so and no longer complies with the agricultural parameters of the FBT, the arrangement could then be covered under another type of business leasing arrangement.
Generally, FBTs are more informal than FATs; this is meant to encourage diversification. They also tend to have fewer restrictions regarding formal requirements. For example, an FBT does not necessarily have to be a written agreement between a landlord and a tenant, since they may occur through informal arrangements such as grazing licences.
- Landlord and Tenant Act.
- Permitted development rights for the change of use of agricultural buildings.
- Permitted development: The end of the high street or a blessing in disguise?
- Scottish Land Reform Bill.
- Security of tenure for commercial leases.
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