RET I R E M E N T & SU C C E S S I ON P L AN NI N G FOR T E NA N T S Before a tenant can consider options for retirement and / or succession, they must determine their basis of occupation.
The majority of tenanted agricultural holdings (where tenants benefit from exclusive occupation) are let on either:
•
after 12th July 1984 – it is classed as a ‘lifetime tenancy’.
What are the succession criteria? Under the Agricultural Holdings Act 1986 successors must be able to show they are ‘eligible’ by meeting the
• Agricultural Holdings Act agreements (AHA’s) – pre 1st September 1995, or;
requirements of the close relationship, principal source of livelihood and commercial unit tests. The Agriculture Act 2020 proposes to update the succession criteria by removing the commercial unit
• Farm Business Tenancies (FBT’s) – post 1st September 1995
test and amending the suitability requirements. This will not come into force until a date is confirmed in new regulations, following which a new ‘Business Competency’ test will be brought in. This new test is expected to consider the capacity to farm the holding
AHA’s normally provide tenants with security of tenure for their lifetime and can often carry statutory succession rights. FBT’s on the other hand generally provide limited security beyond the fixed term, resulting in the parties needing to negotiate future terms. It is therefore key to understand the basis of your occupation and your rights. Here are some of the key questions and factors to consider when looking at retirement and succession
commercially to high standards of efficient production and care for the environment. It is proposed that consideration will also still be given to the applicants suitability including experience, training, physical health and financial standing. Some applicants may benefit from the removal of the commercial unit test, while others may find they meet the current criteria. It is therefore important to look at the facts of each case.
When can I look to succeed? Succession can take place on death, retirement or by agreement. Applications for succession on retirement can be made regardless of the age of tenant (The minimum retirement age of 65 was removed under The Agriculture Act 2020).
planning, based on the type of tenancy you hold. These are just a starting point and we would always advise having early conversations with a professional advisor to help you plan for the future.
AGRICULTURAL HOLDINGS ACT (AHA) AGREEMENTS When did your tenancy commence, and are there succession rights? Generally, if your tenancy commenced: •
before 12th July 1984 – it is classed as a ‘succession tenancy’ – likely providing the tenant with two successions, subject to the successor meeting specific criteria.
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What is the procedure for succession?
It may be that the tenancy is actually held by a farming partnership, rather than an individual, and the
The procedure for succeeding on death differs to
successor is a partner. This could change your options
succeeding on retirement.
significantly and illustrates the importance of taking
We therefore recommend early discussions with your
advice when planning.
professional advisors to establish your rights and
It is worth noting that when an FBT tenant dies the
advise on the process as there can be prescribed forms
agreement will be brought to an end. We therefore
and strict timescales to comply with.
would
It may be possible for a succession to be negotiated between the landlord and the tenant or the nominated
recommend
early
engagement
with
your
landlord in respect of future occupation, which should address matters such as retirement and/or succession.
successor, therefore early communication is key. Under the formal procedure to succeed a tenancy, an applicant must apply to the First Tier Tribunal (Property Chamber) (Agriculture Land and Drainage) who determine if the applicant satisfies the tests
FURTHER POINTS TO CONSIDER 1. Stamp Duty Land Tax (SDLT)
outlined above. The grant of a new tenancy may give rise to a SDLT
FARM BUSINESS TENANCY (FBT) What security do I have?
liability for the tenant, depending on the length of the fixed term being granted.
2. Inheritance Tax The
landlord
may
benefit
from
enhanced
If you are an FBT tenant then it is important to check
Agricultural Property Relief through surrender
the length of the fixed term and if there are break
and re-grant of a tenancy, and therefore they
clauses, as this will determine how much security you
may be supportive of discussing plans for future
hold.
occupation.
•
FBT’s granted for two years or less automatically expire at the end of the term.
•
3. Lump Sum Exit Scheme DEFRA has outlined an intention to offer a lump
FBT’s granted for more than 2 years, will become
sum payment in 2022 to allow farmers to retire.
a statutory periodic tenancy, whereby 12 months
This lump sum will be in place of the Direct
written notice must be served to terminate the
Payments that farmers would be entitled to
tenancy.
receive during the remainder of the agricultural transition period. The farmer would need to meet
•
FBT’s in their fixed term can only be ended by
relevant conditions, including leaving the sector.
forfeiture clauses (such as death, non payment of
More details are expected to be announced in the
rent) or by agreement, known as a surrender.
coming months.
What are my options for retirement and succession?
4. Outlook Agricultural
lettings
and
landlord/tenant
Unlike AHA’s, FBT’s are not afforded any statutory
relationships have to some extent been in limbo
succession rights when the tenant dies or retires.
since the UK voted to leave the EU in 2016, as
Therefore, if you are wanting the next generation to
both parties have eagerly awaited guidance on
takeover, you will need to rely on negotiation with your
future policy and trade.
landlord. As ‘Brexit’ is complete and the principles of A well-prepared business plan will pay dividends when
domestic policy become clearer, now is a sensible
broaching this conversation with the landlord and will
time to engage with landlords and plan for the
provide context to discussions when negotiating the
future.
grant of a new tenancy.
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TAKE HOME MESSAGES 1. Know your agreement and the key timescales (whether that be the term expiry, break clauses or succession provisions). 2. Engage with your landlord and family members to establish what everybody would like to achieve from the holding and any aspirations for retirement/succession. 3. Create a business plan which details who will take the business forward and how. 4. Keep a close eye on emerging policy and how it may impact upon your decisions.
EMMA SMITH MRICS FAAV RURAL ASSOCIATE DIRECTOR
01665 568 310 ecs@gscgrays.co.uk
For more information contact your local GSC Grays office: ALNWICK
CHESTER-LE-STREET
COLBURN
EASINGWOLD
5F Linnet Court Cawledge Business Park Alnwick Northumberland NE66 2GD 01665 568 310 0 n
Dunns 2 Bowes Offices Lambton Park Chester-le-Street County Durham DH3 4AN 0191 303 9540 0
5 & 6 Bailey Court Colburn Business Park Richmond North Yorkshire DL9 4QL 01748 897630 0 n
Far Shires Granary York Road Easingwold North Yorkshire YO61 3EJ 01347 837100 0
HAMSTERLEY Swallow Cottage Hamsterley Bishop Auckland County Durham DL13 3QF 01388 487000
HEXHAM
Pod 2, Eastburn South Park Hexham Northumberland NE46 1BS 01434 611565
n
HEXHAM
Pod 2, Eastburn South Park Hexham Northumberland NE46 1BS m 01434 611565
HEXHAM
n
Pod 2, Eastburn South Park Hexham m Northumberland m NE46 1BS 01434 611565
* Please note that the information contained within this briefing is based on current understanding of Government Legistation and is subject to ongoing change. Before making any decisions that will affect your business you should seek further advice. Compiled March 2021.
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