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Agricultural Tenancies - Three is the magic number

20 Sep 2019

Many landowners and agricultural tenants will be aware of the unique protection offered by the Agricultural Holdings Act 1986 (“the Act”). Under the Act, a farming tenant can be granted a tenancy and the right for a further two successive generations to take over the tenancy in the future. Such tenancies are therefore often known as “three generation tenancies”.

The operation of the Act can be hugely important to both landlords and tenants. A landlord may for instance wish for the tenancy to be brought to a conclusion because it can tie up the land for a considerable amount of time potentially impacting the property value. Likewise, issues surrounding succession planning and the future of a farming business often make the protection of an Agricultural Holdings Act Tenancy extremely important to tenants. These conflicting interests mean both landlord and tenant need to be informed of their rights and obligations under the Act.

For the tenant, to ensure the Agricultural Holdings Act Tenancy continues after death, an “eligible person” must give notice to the landlord of their intention to succeed the tenancy. Such notice must be served within 3 months of the date of death. The Act defines the individuals eligible to give notice of their intention to succeed a tenancy as a person who is:

  1. A close relative of the deceased;
  2. Whose main source of livelihood comes from the land and has done so for at least 5 of 7 years from the date of death; and
  3. Who does not own any other commercial unit of agricultural land?

Under the Act, a landlord also has 3 months from the date of death of the tenant to serve notice to bring the tenancy to an end. A landlord therefore has to receive written notice of the death of the tenant before they can in turn serve their notice to terminate the tenancy.

The recent case of Auliffe v Ellis highlights the issues which can arise when the succession of an Agricultural Holdings Act Tenancy is not considered. In the case, Mr Ellis died and whilst his son was an eligible person to succeed his father’s tenancy, he did not serve the required notice. The landlord did serve notice, and because the strict deadline had been missed by Mr Ellis’ son, the notice to terminate the tenancy could not be challenged. As such the family had to leave the farm which was taken back in hand by the landlord.

At Hay & Kilner the expert solicitors in our multi-disciplinary Rural Team have extensive experience in advising clients in all aspects of tenancy agreements, succession planning, inheritance tax planning and estate administration. If you would like further information about any of the above, please contact Alison Hall, or call 0191 232 8345.