Connecting North West business to relevant training, insight, conversation and each other

Changes under the Agriculture Act 2020

Napthens - March 2nd 2021

On the 11 November 2020 the Agriculture Act was passed into law. The legislation heralds a new future for the agricultural sector and landlord/tenant relationships. We look at the significant changes to succession for AHA Tenants and how these may affect our clients.

The Government held consultations in 2019, via the Tenancy Reform Industry Group, to review and reform agricultural tenancies. Their intentions, founded on the notion farmers would be more productive should they have a greater freedom in their business planning, brought about the amendments to AHA tenancies which are to bring into practice a more fitting approach for the 21st century.

Some of these key changes are laid out below:

  • The previous requirement that a tenant need be 65 years or older to serve a retirement notice will be removed and there will be no minimum age to serve.
  • The Eligibility Criteria will be altered, removing the rather onerous Commercial Unit Test. Previously, a successor would be prevented should they farm another Commercial Unit. This will no longer be a prerequisite to the successor’s application; and
  • A further simplification to the Suitability Test. The main attribute that a potential successor will need to exhibit, is that they have the ability to farm “commercially to high standards of efficient production and care for the environment”. However, the current tests surrounding health, finance and training shall still likely apply in a subsidiary status. More information on this will be available soon, as the Act provides for further regulations to be introduced, but to date we they have not yet been released.

The intention of the changes are to make it easier for the successor tenants to be successful in their application, and then to allow current tenants to retire earlier, safe in the knowledge their successor will be in an eligible position to take over.

The two key considerations for succession planning would be, the lower retirement age (obvious benefit) and the removal of the Commercial Unit Test. By removing the Commercial Unit Test it could strengthen the position for many AHA Tenants, who historically may have been concerned that their successor may be unlikely to pass this test, as a consequence of already being in possession of other units.

In the past, farmers may have been limited to structure their business and estate planning to ensure that one of their children would not be in occupation of another commercial unit, such to allow that child to succeed with the AHA Tenancy. This may be unfair to the chosen successor of the AHA Tenancy. Under the new legislation, the chosen successor may gain occupation of the land, under the AHA tenancy, but still with no further successions available, however they in turn have the backstop of holding the freehold ownership of another farm.

It is always necessary to consider, in relation to succession, whether it is available. Therefore, it is important to establish:

  1. Does the initial tenancy have succession rights (those commencing prior to 12 July 1984 should have two potential successions, subject to various conditions being met); and
  2. If 1 above applies, how many of those successions are left.

As time progresses, changes from the Act will be subject to scrutiny and consequently further regulations will transpire. As these develop, we shall keep you updated. The Act is largely in force from 11 January 2021 however Defra have advised the introduction of some regulatory updates to come this Summer.

If you are the Tenant or Landlord of an AHA tenancy, and you have any concerns with regards to succession planning, please do get in touch.