Tomorrow is when the right of a secure agricultural tenant to offer to relinquish the tenancy back to the landlord in return for payment of compensation goes “live”.
The rules involve service of a notice by the tenant on the landlord, at the same time sending a copy to the tenant farming commissioner.
The commissioner then appoints a valuer who calculates the sum to be paid by the landlord, according to a set formula laid down in the rules. This involves deducting from the open market vacant possession value of the farm the value of the farm subject to the tenancy.
The sum to be paid by the landlord is one-half of the difference between the two figures plus compensation for improvements but less the cost of any dilapidation.
If the landlord does not wish to pay the valuation figure, the tenant is then able to sell the tenancy as a continuing secure tenancy, to a new entrant or progressing farmer. The price to be paid is not subject to any rules and will simply be a function of the open market.
In this article, I want to take a closer look at the definitions for new entrants and progressing farmers.
A new entrant to farming is someone who doesn’t hold a relevant interest now or during the five years preceding the acquisition of the tenancy and will not, by virtue of the acquisition, become the holder of more than one relevant interest.
A relevant interest is defined as being a tenant under an agricultural tenancy unless the tenancy is a short limited duration tenancy with less than three years to run. Being a small landholder or crofter of more than three hectares is also a relevant interest, as is being the owner of more than three hectares of agricultural land wherever such land is located.
If the relevant interest is held by a partnership or a limited company, in which the new entrant has an interest, they are disqualified if they hold a share of 50% or more in the partnership or limited company.
A progressing farmer is someone who does not hold two or more relevant interests and will not, by virtue of the acquisition of the tenancy, become the holder of more than two relevant interests.
Where the relevant interest is an agricultural tenancy that has less than one year before termination it is disregarded. A progressing farmer who holds a share of 50% or more in a partnership or limited company that holds a relevant interest is regarded as holding that relevant interest.
Accordingly, for example, a junior partner in a farming partnership who owns less than a 50% share of the partnership, even if the partnership is an existing tenant or owner of land could still qualify as a new entrant.
Likewise, an individual who has a substantial agricultural tenancy, if that is their only relevant interest, will qualify as a progressing farmer as will someone who owns a substantial farm, regardless of size, if that is their only relevant interest.
It can be seen therefore that should a secure tenancy become available on the open market, a much wider range of people are likely to qualify as new entrants and progressing farmers than had been previously thought and will have the opportunity to bid for that tenancy.
For advice on this or another related matter, please contact Hamish Lean, Head of Rural Property and Business, at hamish.lean@shepwedd.com, or your usual Shepherd and Wedderburn contact. This article was first published by The Press and Journal.