Succession to an Agricultural Holdings Act 1986 agricultural tenancy is not automatic and planning for succession to a tenanted farm is extremely important.

Jonathan Thompson, an associate at law firm, Smithson Clarke which has offices in Alnwick and Newcastle and specialises in agricultural legal matters, highlights the implications of the new agricultural tenancy legislation relating to succession, due to come into force later this year:

“One of most significant amendments to the legislation concerns succession where a tenant has diversified into a non-agricultural activity,” said Mr Thompson.

“Many farm businesses have diversified in order to survive and this has been recognised in the new legislation.

“Obtaining your landlord's permission for a diversification project, however, is key and you should also try and negotiate succession as early as possible.

“At present there is 100pc relief against inheritance tax for some agricultural land even in cases where the owner does not farm it.  That exemption does not apply to land that is being used for non-agricultural activities.  A landlord, who agrees to a tenant carrying out non-agricultural activities, obviously has to take this into consideration.”

Mr Thompson added: “Another important change in the new tenancy legislation is that Schedule 11 to the Agricultural Holdings Act 1986, which sets out an arbitration code unique to that act, has been removed and normal arbitration rules under the Arbitration Act 1996 now apply.

“One of the problems with the 1986 Act concerned the grant of succession tenancies by agreement.   As a result, successors often had to apply to the Agricultural Lands Tribunal, even when the landlord had agreed to a new tenancy.  The amended legislation will remove this requirement.

Mr Thompson concludes: “These changes are intended to deal with particular issues of the 1986 Act which have been shown to cause problems in practice, and are intended to facilitate tenancy succession, particularly where tenants diversify into non-agricultural activities.”

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