The Agriculture Bill 2020

Simon Pallett FRICS FAAV REV, Chairman of Carter Jonas, comments on the implications on tenancy reform of the new Agriculture Bill’s tenancy reform proposals from his perspective as an acknowledged dispute resolver and arbitrator.

As UK agriculture moves towards a post-Brexit world the government has, following further consultation with the Tenancy Reform Industry Group (TRIG), published a revised version of the 2017 Agriculture Bill which fell due to the 2019 election.

Key objectives are to move from direct payments to more environmentally-focussed support reflecting “public money for public goods”, to improve farming productivity through innovation and to modernise agricultural holdings legislation to enable more flexibility in dispute resolution procedures and to encourage the right people to occupy the land with security to invest for the future. However, some of the more far reaching proposals of the 2017 Bill have not been brought forward, including an opportunity for the tenant to effectively assign their tenancy on retirement to their landlord or an incomer in return for a capital sum.

Tenancy Reform

Prior to 2017, Defra consulted on a wide variety of potential reforms to both the Agricultural Holdings Act 1986 and the Agricultural Tenancies Act 1995. Those included in the new Bill include:

Appointment of arbitrators

The Bill proposes the removal of the RICS’s monopoly on appointing arbitrators under both the 1986 and 1995 Acts. The President of the Central Association of Agricultural Valuers (CAAV) and the Chair of the Agricultural Law Association (ALA) will also be able to appoint arbitrators in response to a statutory application. These bodies will now need to establish appointment procedures and create a panel of arbitrators. It is hoped that this will lead to an expansion of those available for appointment since the RICS panel currently has only about 25 members.

Third party expert determination correction

Changes were made in 2015 to the 1986 Act to allow a third-party expert, appointed by the agreement of the parties, to determine the rent payable on review rather than leaving it to the sole jurisdiction of an arbitrator. The intention was to provide an alternative form of dispute resolution and reduce costs and delay. Unfortunately, there was an error in the drafting at that time which required the expert to be appointed at least 12 months before the rent review date. This was impractical as, at that time, neither party knew whether the rent review would prove contentious, and it led to unnecessary costs being incurred. The 2020 Bill corrects this so, as with the appointment of an arbitrator, an expert can be appointed by the agreement of the parties at any point up to the rent review date.

This will lead to an increase in the number of expert determinations and reduction in arbitration appointments. It also enables the parties to choose their dispute resolver expert who they feel would be appropriate for the dispute.

Environmental Land Management Scheme (ELMS) dispute resolution mechanism

Another tabled amendment to the 2017 Bill was an issue that particularly concerned tenants. In the 2017 Bill, this was the possibility that they would be restricted from carrying out certain activities on the holding which might in the future attract financial assistance. The obvious example now is participating in environmental schemes, which might be prevented by a user clause which did not allow such activities.

As we move to environmentally-focused support thorough ELMS, there was concern that a tenant would be prevented from entering into schemes contrary to the terms of the user clause (e.g. use of the farm solely for dairying) in the tenancy agreement. The 2020 Bill provides for a tenant to be able to refer such matters to dispute resolution, to obtain the landlord’s consent for such alternative use, or a variation of the terms of their tenancy where it relates to meeting a statutory obligation or accessing financial assistance.

This seems a sensible amendment to enable tenants to enter into new schemes, thereby maintaining their ability to maximise returns from the farm and meet their rental obligations.

Succession and smallholdings changes

The tenancy succession provisions of the 1986 Act were the subject of considerable scrutiny in Defra’s consultation. For retirement succession, the current rule that prevents tenants serving a retirement notice below the age of 65 (unless due to reasons of ill health) is to be repealed.

For succession on death or on retirement, the “commercial unit” test is repealed and the “suitability test” is expanded to reflect tenants’ increasing responsibilities to farm in an environmentally sustainable manner, whilst maintaining a high standard of efficient production.

For lettings by small-holdings authorities, county council holdings will no longer be required to be surrendered when the tenant reaches the age of 65. The rule will now be that current pensionable age will apply.

These changes are intended to enable flexibility for 1986 Act tenants to retire and pass on their tenancy to the next generation at an earlier age.

The Bill will now move forward to scrutiny and debate by both Houses of Parliament. One might expect further changes, but the Bill as published makes positive proposals to the tenancy sector as it evolves to meet the post-Brexit world. It should be supported, and should encourage dialogue between landlords and tenants seeking mutual advantage.