1 Compensation for New (‘relevant’) improvements
9.25 By virtue of s 64(1) the tenant is entitled to compensation for long-term improvements specified in Sch 7 and short-term improvements in Sch 8, Part 1. The measure of compensation is an amount equal to the increase, attributable to the improvement, in the value of the agricultural holding as a holding, having regard to the character and situation of the holding, and the average requirements of tenants reasonably skilled in husbandry.47 The listed improvements for which compensation is payable are largely agricultural in nature.
This could be of significance where diversification takes place, as improvements connected therewith may not qualify for compensation under Sch 7. This is the principal reason for the more flexible approach to tenant’s improvements taken by the Agricultural Tenancies Act 1995 in relation to farm business tenancies granted on or after 1 September 1995.(a)Long-term improvements requiring landlords consent
9.26 Schedule 7, Part 1 lists a number of major improvements that require the consent of the landlord, prior to execution, if compensation is to be recoverable on the later termination of the tenancy. These are: the making or planting of osier beds, water meadows, watercress beds, planting of hops, planting of orchards or fruit bushes, the warping or weiring of land, making of gardens, and (finally) the provision of underground tanks on the holding.
9.27 By virtue of s 67(1) the tenant is not entitled to compensation for a relevant improvement specified in Sch 7 unless the landlord has given his consent in writing to the carrying out of the improvement. The consent can be given by the landlord unconditionally ‘or upon such terms as to compensation or otherwise as may be agreed upon in writing between the landlord and the tenant’.48 The consent may be given in the tenancy agreement itself.
The Act does not require the landlords consent to be given before the improvements are executed by tenant, although a tenant would be ill advised to commence improvements without the landlords prior agreement.49 The parties can agree compensation, provided they do so in writing.(b)Improvements requiring consent of landlord or tribunal50
9.28 Part II of Sch 7 specifies a number of improvements in respect of which, if the landlord refuses consent, the tenant can apply to the First Tier Tribunal or the agricultural land tribunal (in Wales) for approval. Section 67(3) provides that, in the case of an improvement specified in Part 2, if the tenant is aggrieved by the refusal of his landlord to give consent, or is unwilling to agree to any terms subject to which the landlord is prepared to give that consent, he may apply to the tribunal for approval of the carrying out of the improvement. The tribunal has jurisdiction to approve the carrying out of the improvement, either unconditionally or upon such terms (whether as to reduction of compensation payable or other matters) as appear to them to be just. They may also withhold their approval if they feel this appropriate.51 So, for example in Barton v Lincolnshire Trust for Nature Conservation52 the landlord had sought to avoid the payment of compensation for improvements by imposing a condition on his consent, whereby the installation of a reservoir and irrigation system would be written off over 15 years. In a decision with potentially wide implications for valuation practice, the agricultural land tribunal gave its consent to the carrying out of the improvement in question subject only to conservation conditions, and rejected the suggested writing off condition as unreasonable.53
9.29 Where the tribunal give approval the landlord has the right, within one month of receiving notification of their decision, to serve notice in writing on both tribunal and tenant to the effect that he proposes to carry out the improvements himself.54 If the tribunal grant approval for carrying out improvements then, if no notice is served by the landlord indicating his intention to carry out the works himself, or (if such a notice has been served) the tribunal later determines that the landlord has failed to carry out the improvements within a reasonable time, the tribunal’s original approval has effect as if it were the consent of the landlord – with the result that compensation will be payable on later termination of the tenancy.55 Any terms subject to which tribunal consent was given have effect as if they were contained in an agreement in writing between landlord and tenant.56
9.30 The improvements covered by Sch 7, Part 2 are the most important which are likely to be encountered in practice.
They include the following:(i)The erection, alteration or enlargement of buildings, or making or improvement of permanent yards. Semble this would include buildings erected for a non-agricultural use connected with diversification of the farming enterprise.
(ii)Carrying out works in compliance with an improvement notice under Part 7 of the Housing Act 1985 or Part 8 of the Housing Act 1974.
(iii)Erection or construction of loading platforms, ramps, etc.
(iv)Construction of silos.
(v)Claiming of land.
(vi)Marling of land.
(vii)Making or improvement of roads and bridges.
(viii)Making or improvement of water courses, culverts, ponds, wells or reservoirs or of works for the application of water power for agricultural or domestic purposes, etc.
(ix)Making or removal of permanent fences.
(x)Reclaiming waste land.
(xi)Making or improving embankments and sluices.
(xii)Erection of wire work for hop gardens.
(xiii)Provision of permanent sheep dipping facilities.
(xiv)Removal of bracken, gorse, tree roots, boulders or ‘other obstructions to cultivation.’
(xv)Land drainage.
(xvi)The provision of electrical light and power.
(xvii)Provision of facilities for storage and disposal of sewage or farm waste, eg slurry.
(xviii)Repairs to fixed equipment.
(xix)Grubbing up of orchards or fruit bushes.
(xx)Planting trees (otherwise than as an orchard) and bushes (other than fruit bushes) eg planting trees that form screening.57
(c)Deemed consent of landlord
9.31 In some situations, the landlord is deemed to have consented to the provision of n improvement:
(i)Sub Tenancies
By virtue of s 68(2), where a sub-tenant obtains a tribunal direction requiring his immediate landlord to carry out an improvement that requires the provision of fixed equipment,58 the requirement for landlord’s consent to the improvement59 will not apply to bar a claim for compensation by the immediate landlord against his superior landlord in respect of that work. This protects the position of the immediate landlord who has carried out the improvement, and enables him to claim compensation, in turn, from the superior landlord of the holding.
If the sub-tenant himself carries out the improvements, the immediate landlord having failed to comply with a tribunal direction, the latter’s position is similarly protected by a provision deeming the work to have been carried out by the immediate landlord for the purposes of his claiming compensation in turn under the 1986 Act.60(ii)Hill Farming Improvements
By virtue of s 68(3) the landlord’s consent to the implementation of a hill farming land improvement scheme, pursuant to the Hill Farming Act 1946, shall be taken as consent to the carrying out of improvements executed thereunder by the tenant, for the purposes of claiming compensation for improvements under the 1986 Act. Agreement as to compensation is likewise enforceable in the same manner as if made in compliance with s 67(2). Improvement grants paid under the 1946 Act are to be taken into account, when calculating compensation on quitting, as if it had been a benefit allowed to the tenant in consideration of executing the improvements.
(iii)Housing Improvements
The requirements of the landlord’s prior consent to improvements are dispensed with if the work concerned is carried out in compliance with an improvement notice or undertaking given under Part VII of the Housing Act 1985 or Part VIII of the Housing Act 1974. Compensation on quitting can be claimed for such improvements notwithstanding the absence of prior landlord’s consent.61 Financial contributions by third parties towards the cost of the improvements must be taken into account when assessing compensation.
(d)Successive Tenancies
9.32 As noted above, the tenants claim for compensation for improvements can, where he has been in possession under successive tenancies of the same holding, be postponed until the he quits at the end of his tenancy. Accordingly, by virtue of s 69 of the 1986 Act compensation for relevant improvements can be claimed by the tenant, notwithstanding that the improvements concerned were made during an earlier tenancy of the holding other than the one at the termination of which he quits the holding.62
9.33 As originally framed, s 69 only operated to preserve the tenant’s claim where successive tenancies were granted to the same ‘tenant’ and related to the same ‘holding’.
It would not apply if the boundaries of the holding had been altered by the addition of extra land following an express surrender and regrant of the tenancy. Neither would it apply where an implied surrender and regrant was triggered by the addition of land to the original tenancy.63 In this situation the tenant would have to exercise his right to compensation for improvements on termination of the original tenancy, or lose it, as it would be inapplicable at the end of the successive tenancy. The Regulatory Reform (Agricultural Tenancies) (England and Wales) Order 200664 amended s 69 to preserve the tenant’s claim for compensation for relevant improvements where there is an implied surrender and regrant, but only: (a) where the surrender and regrant is triggered by the addition of land to the tenancy65 (not where the identity of the tenant has changed); and (b) where the tenancy was granted on or after 19 October 2006.66 As with the similar provisions now governing the Landlord’s claim for dilapidations67 it is therefore now necessary to distinguish;•Claims for compensation on the termination of tenancies granted before 19 October 2006. Where a tenancy has been granted successive to an earlier tenancy the rules applicable prior to the 2006 Order will apply. If there has been an express or implied surrender and regrant, therefore, any claim for compensation must be made on termination of the first tenancy, and will be inapplicable on termination of the successive tenancy.
•Claims for compensation on the termination of tenancies granted on or after 19 October 2006. The rules in the 2006 Order will apply to preserve claims for compensation where a succession tenancy has been granted or where there has been an express or implied surrender and regrant following the addition of land to the tenancy. In this case, s 69, as amended, applies to preserve the tenant’s claim where the he has remained on the holding ‘or in any agricultural holding which comprised the whole or a substantial part of the land comprised in the holding’68 during successive tenancies.
The successive tenancy may be granted impliedly (for example by the addition of land to the existing tenancy) or expressly using the facility in s 4(1)(g) Agricultural Tenancies Act 1995.69 This provision preserves the status of agricultural holdings where the successive tenancy expressly states that the 1986 Act is to apply to it, and the amended s 69 preserves the tenants claim for compensation where the original 1986 Act tenancy comprised a ‘substantial’ part of the current tenancy determined by reference to either area or value.709.34 The provisions protecting the tenant’s claim for compensation on termination of successive tenancies only apply: (i) to claims for compensation for ‘relevant’ improvements, ie long-term improvements that will have received either the landlord’s or tribunal’s consent prior to execution; and (ii) to claims for compensation of ‘old’ improvements begun before 1 March 1948.71 They do not apply to protect the tenants claims for short-term improvements, tenant right, high farming or disturbance where successive tenancies are granted. These claims are discussed below.