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Tenancy agreements - take heed

For many farmers and landowners, diversification and alternative income streams are a key way of providing steady and secure income at a time when agricultural commodity prices are at an all time low, and what better way of achieving this than renting out redundant farm buildings. However, be warned that the occupation of the building by a tenant should be properly documented to ensure that your position as landlord is not jeopardised. A handshake agreement may be convenient and suit both parties at the time, but after occupation has begun, you could have already inadvertently granted significantly more rights to the tenant than you ever intended.

The Landlord and Tenant Act 1954 gives tenants of commercial property the right to renew their lease at the end of the term, even if the landlord does not want that to happen. However, a correctly worded tenancy agreement and the service of pre-tenancy notices can prevent such rights being granted to the tenant.

It is important to note that this right only applies to tenancies and not licences, which begs the next question of when is a tenancy actually a tenancy and when is a licence actually a tenancy? The landmark case of Street vs Mountford remains the definitive case law on the subject and sets out that just because a document is called a licence, it doesn’t mean that it is a licence, and each case of occupation must be considered by what happens in practical terms as to whether it is a tenancy or a licence. Therefore, due consideration and care must be given when agreeing terms to rent out a farm building to ensure that the correct documentation is put in place to protect your position as landlord.

The moral of the story? Check your agreements carefully and make sure that they accurately reflect the position on the ground as you may inadvertently be giving away far more rights to your tenant than you ever intended and gaining vacant possession in the future might not be
so easy.