Farm Tenancy Forum Guidance – Things to consider with longer term FBTs
The Farm Tenancy Forum, a joint venture between industry and Defra, has recently published updated guidance focusing on the use of longer-term Farm Business Tenancies (FBTs) in England. The guidance is supported by a wide range of organisations including the Royal Institution of Chartered Surveyors, Central Association of Agricultural Valuers, and the Tenant Farmers Association.
Below is a short summary of the key considerations for both Landlords and Tenants.
Farm Business Tenancies, governed by the Agricultural Tenancies Act 1995, remain the preferred method of letting agricultural land in England. They are flexible agreements, allowing the parties to determine most terms, including length, rent and repairing obligations.
The new guidance encourages consideration of longer-term FBTs as a means of promoting investment, sustainability and business resilience.
KEY CONSIDERATIONS FOR LONGER TERM FBTs
1. Term and Flexibility
While FBTs can be of any length, longer terms can provide greater business certainty and enable both parties to plan ahead. However, care should be taken to build in appropriate flexibility through break clauses, rent review provisions and clear mechanisms for dealing with change.
2. Environmental Schemes and Land Use Change
With the transition away from direct payments and towards environmental schemes, agreements should clearly set out:
- who controls entry into schemes
- how payments are shared
- responsibilities for delivering environmental outcomes
Clarity at the outset helps avoid disputes as schemes evolve over time.
3. Investment and Improvements
Longer-term agreements can justify greater investment by tenants in infrastructure, soil health and productivity.
It is important to document:
- landlord’s consent requirements
- ownership of improvements
- compensation provisions at the end of the tenancy
Under FBT legislation, tenants may be entitled to compensation for qualifying improvements.
4. Rent and Review Mechanisms
The parties are free to agree how rent is set and reviewed, although legislation provides for review at least every three years unless otherwise agreed. In longer agreements, it is increasingly common to consider more flexible approaches to rent, particularly where environmental delivery forms part of the income.
5. Repairing and Maintenance Obligations
Clear allocation of responsibilities for repairs, maintenance and compliance with regulatory requirements is essential, particularly where agreements run for longer periods.
6. Tax and Structural Considerations
Entering into an FBT changes the nature of land occupation. For Landlords, income is typically rental rather than trading income, which can have implications for tax and reliefs.
Careful structuring and professional advice is therefore essential before entering into any longer-term arrangement.
7. Dispute Resolution and Relationship Management
Given the longer duration, it is advisable to include clear dispute resolution procedures and encourage regular communication between the parties to maintain a positive working relationship.
Longer-term FBTs can offer significant advantages, including greater security, improved investment and better environmental outcomes. However, they require careful drafting to ensure that both Landlord and Tenant interests are properly protected over time.
You can view the full guidance here:
If you are a Tenant or a Landlord and are considering entering into a Farm Business Tenancy, our Rural Professional Team has many years of experience in preparing agreements and advising on tenancy terms, and would be pleased to assist.