Landowners are often asked to let their land for grazing by horses; this can sometimes provide a source of income from land that is not ideally suited for the use by the main farming enterprise. However, when considering this landowners should ensure that they are able to recover possession of the land when they wish to do so and their ability to do this will depend upon the type of tenancy agreement which is used. When setting up an agreement relating to the occupation of agricultural land it is necessary to consider the provisions of the Agricultural Tenancies Act 1995, but unfortunately the position relating to occupation by horses is not entirely straightforward and can cause some confusion.
In order for an agreement to become a farm business tenancy (FBT) covered by the 1995 Act it is first necessary for all or part of the land to be “farmed” for the purposes of a trade or business. “Farming” includes the carrying on of an agricultural activity, but the trade or business need not itself be agricultural. Whilst the use of land by horses is not necessarily agricultural, as horses are not “livestock” unless kept for meat or agricultural work, it is clear that grazing is. Therefore an agreement letting land for grazing by horses can be an FBT, so long as it is in connection with a trade or business.
However, the 1995 Act also requires that in order for an agreement to be an FBT it is necessary for the character of the tenancy to be primarily or wholly agricultural. If this is not the case then it is possible that the agreement will be covered by the Landlord and Tenant Act 1954 as an ordinary business tenancy. It is difficult to be definitive about when this will be the case but, for example, if the grazing is used by a riding school run on separate premises, then the agreement relating to the grazing is likely to be primarily agricultural and therefore an FBT within the 1995 Act, whereas if a riding school is run on the land itself then the 1954 Act will probably apply.
The main options are therefore as follows:
1. A grazing agreement or grazing licence
This allows a person access to the land to graze their horses for the agreed period. So long as the agreement prohibits the land being used in connection with any trade or business then the arrangement will not be covered by either the 1954 or the 1995 Act. The landowner will be able to terminate the arrangement when he wishes, in accordance with the agreement. This may be useful if he wishes to sell the land.
If it is possible to show that the arrangement is a genuine licence then it also may be attractive to the landowner by allowing him to continue to claim single farm payments, or new basic payments, on the land. It is important that the owner of the horses does not have exclusive occupation of the land, but has access to it for grazing only, the landowner may then be able to show that he has the land at his disposal for the purposes of claiming the payments.
2. An FBT
If the land is being used in connection with a trade or business then an agreement relating to grazing may create an FBT, so long as the character of the tenancy remains primarily or wholly agricultural. If this is the case, then the ability of the landowner to regain possession of the land will depend on the length of the term of the agreement. If it is for a fixed term of two years or less, then it will terminate automatically at the end of the agreed period, or on the operation of a break clause within it. If it is for a fixed term of more than two years, or runs from year to year, then at least one years notice to terminate will be required.
3. A business tenancy covered by the 1954 Act
This will be case where the land is being used by a business for any purpose in addition to grazing, to the extent that the tenancy is not primarily of an agricultural nature. Here the landowner would be well advised to make use of the statutory procedure to avoid granting a secure tenancy as otherwise he may be unable to terminate the arrangement, unless he is able to show one of the grounds for possession such as requiring the property for his own business purposes.
In summary, if the grazing is for horses alone, not used in connection with a business, then a grazing licence may be the best option. A Landowner should be wise to the fact that any business related use of the land, could turn this into a tenancy which he will be unable to terminate on short notice.