Tenant farmers who are considering retirement need to be aware how the upcoming changes to the Agricultural Holdings Act (AHA) being introduced under the Agriculture Act 2020 (the Act) might impact their succession planning, says Alistair Millar of Tallents Solicitors.
The legislative changes to the Act envision new practices for the agricultural sector and landlord/tenant relationships, which are more relevant both for farming and running a successful farming business in the 21st century.
Alistair highlights some of the key changes that AHA tenants should be aware of:
No minimum age for retirement
– the previous requirement that a tenant needed to be 65 years or older to serve a retirement notice on their landlord will be removed and there will be no minimum age to serve.
Removal of the Commercial Unit Test
– previously, a successor would be prevented from succeeding to the tenancy if they were already farming as a tenant or freeholder. This barrier will now be removed from the Eligibility Criteria and will no doubt strengthen the likelihood of a smooth succession to their preferred tenant.
A close relationship with the tenant
– the successor will still have to have a ‘close relationship’ with the retiring tenant (wife, husband, civil partner, brother, sister, child or have been treated as a child in relation to the marriage of the tenant). They will also need to obtain their only, or principle source of income from agricultural work either on the holding in question, or from an agricultural unit that forms part of the holding.
Simplification to the Suitability Test
– now a potential successor will need to show that they have the ability to farm “commercially to high standards of efficient production and care for the environment”. This means each applicant will have to show commercial ability as well as being able to farm in an environmentally careful manner. It’s likely that the current tests surrounding health, finance, training and business management skills shall still likely apply in a subsidiary status.
The intention of the changes are to make it much easier for successor tenants to be successful in their tenancy application, and to allow current tenants to retire earlier, safe in the knowledge their successor will be in an eligible position to take over.
As part of any succession planning, Alistair notes that it’s still essential to consider whether succession is available, and consider if that’s appropriate to your tenancy and personal circumstances.
Before proceeding, it is always necessary to establish:
- Whether the initial tenancy has existing succession rights (those tenancies commencing prior to 12 July 1984 should have two potential successions, subject to various conditions being met); and
- If this does apply, how many of those successions are left.
Alistair finishes noting that the full changes to the AHA are due to take effect in 2024 but the Act has largely been in force from 11 January 2021. If you are the Tenant or Landlord of an AHA tenancy and you have any concerns with regards to succession planning, please do get in touch with the agricultural experts at Tallents Solicitors who can guide you further with legal advice relevant to your circumstances.