Recent reviews, guidance and industry commentary all point in the same direction for agricultural tenancies: towards longer-term arrangements. The reasoning is clear. Tenant farmers need enough certainty to invest in holdings, diversify their businesses and plan for the future, particularly as the sector adjusts to the move away from direct subsidies, rising costs and increasing pressure on land use.
The conversation started with the Rock Review, which highlighted that many Farm Business Tenancies (FBTs) are short, with the average length of an FBT less than 4 years. The Review concluded that shorter terms affect a tenant’s ability to invest in the holding for the long term, participate in longer-term environmental schemes and build resilient businesses. The general theme from the Rock Review was a drive for longer-term agreements to enable diversification, investment and environmental delivery, noting that “long-term tenancy agreements are one of the best ways to cope with short-term uncertainties”.
That direction of travel is now also reflected in wider law reform discussions. Earlier this year it was announced that the Law Commission will review agricultural tenancy law in its current programme of reform. Among other things, the project will look at whether the existing legal framework strikes the right balance between giving tenant farmers sufficient security of tenure to support investment and viability, while also preserving the interests and confidence of landlords in letting their land.
Practical guidance on longer-terms tenancies is also emerging. In February this year, the Farm Tenancy Forum published new guidance to assist landlords and tenants considering long term Farm Business Tenancies (FBTs) in England. Endorsed by major industry organisations including the NFU, TFA, CLA, ALA, CAAV and RICS, the guidance is intended to provide a practical framework for negotiating long term arrangements, identifying key issues early, reducing future disputes and building constructive landlord-tenant relationships.
It is clear that the Government has listened to the Rock Review and that industry is working on how longer-term FBTs may work in practice. Whilst this review and guidance is welcome, as is recognised in the Rock Review, we must not forget that the Agricultural Tenancies Act 1995 was introduced because the Agricultural Holdings Act legislation led to a significant reduction in let land coming to the market by providing lifetime security of tenure and, in some cases, succession for close relatives. The 1995 Act gave the parties much greater contractual freedom, allowing agricultural tenancies to be granted with more limited security of tenure.
This history still matters. If parties have had the freedom since 1995 to agree longer-term tenancies, but in many cases have not done so, it is worth asking why. For some institutional landlords, longer-term arrangements may be commercially attractive and easier to accommodate. For many individual landowners, however, tax treatment is often a critical consideration. In a climate where tax policy can change significantly over relatively short periods, landlords may be reluctant to commit to a long-term arrangement unless they can be confident about the longer-term consequences.
The key question, then, is not simply whether longer-term FBTs are desirable in principle, but whether the legal and economic conditions exist to make them attractive in practice. As reform discussions continue, the sector will be watching closely to see whether the pendulum shifts again: from the strong security of tenure under the Agricultural Holdings Act 1986, to the broad freedom of contract introduced by the 1995 Act, and perhaps now towards a model that better reflects the commercial realities, incentives and competing pressures of modern farming.
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