3 Frequency of Rent Review
3.118 As explained above, the 1995 Act retains the notion of three yearly reviews, as under the Agricultural Holdings Act 1986, but allows the parties much greater freedom to adopt agreed review dates and review periods.
Following reforms introduced by the Regulatory Reform (Agricultural Tenancies) Order 2006 the parties can also opt to have reviews conducted by an independent expert rather than an arbitrator, where this is provided for in the tenancy agreement. Three yearly reviews are retained as a fall back, where the parties have not agreed in writing an alternative basis for review periods or dates of review. This is the case whether or not the parties have also excluded the statutory rent review formula.(a)Agreed Review Period or Dates
3.119 The parties may agree that the rent is to be, or may be, varied as from a specific date(s), or at specified intervals, which may be more or less than the three yearly intervals otherwise provided for (see below). Alternatively, the parties may agree that the review date is to be a specified date or dates eg specified quarter days during the term of the tenancy. In both cases the agreement must be made in writing if the statutory review periods are to be excluded. If this is the case the ‘review date’, from which a rent review can be activated by serving notice to trigger a review, will be the agreed date. Notice of not less than 12 and not more than 24 months ending on the review date will have to be given to activate a review.231 The written agreement needed to exclude the statutory review periods will usually be in the tenancy agreement, but need not necessarily be. The parties can use this facility to stagger rent reviews at varying periods (other than every three years) or allow for periods without review eg where a tenant undertakes to make a substantial investment in improvements or husbandry in the early years of the tenancy, or where there is a very high initial rent.
(b)Statutory Review Periods
3.120 If the parties fail to make contractual provision for reviews, the 1995 Act provides a fall back whereby reviews can take place every three years, but not at shorter intervals. If the parties have not agreed in writing the dates or periods of review, then the ‘review date’ must be an anniversary of the beginning of the tenancy ie the date on which the tenant was entitled to go into possession.232 The three yearly period runs from one of the following233:
•The beginning of the tenancy, or
•Any date as from which there took effect a previous direction of an arbitrator as to the amount of the rent. This would include an award of a standstill rent by the arbitrator. The same rule applied under the 1986 Act rent provisions, or
•Any date as from which there took effect a previous determination as to the amount of the rent made, otherwise than as an arbitrator, by a person appointed by agreement of the parties. The parties may, under the 1995 Act, appoint an independent expert to determine the rent, otherwise than as an arbitrator. It they do so, his decision will trigger the three year cycle, and prevent a further review for three years. Again, the award of a standstill rent by the independent expert will trigger the 3-year review cycle, and
•Any date as from which there took effect a previous agreement in writing between the landlord and tenant as to the amount of the rent. This is a new provision, which does not apply in rent reviews under the 1986 Act. If the parties agree an increase or reduction in the rent, for example following a surrender of part of the holding234 or the provision of new fixed equipment by the landlord, this will start time running afresh and bar a review for three years. The 1986 Act contained detailed provisions discounting minor variations in rent consequent upon eg the provision of fixed equipment when operating the three-year review rule.235 The 1995 Act contains no corresponding provision.
The parties will therefore have to exercise care when agreeing minor variations of rent, to ensure that it does not trigger time running afresh under the three-year rule. The 1995 Act gives greater flexibility, however, and the parties can simply agree the next review date when varying the rent, or alternatively that the next review date is to remain unaffected by the variation. Providing they record this in their written agreement, they are permitted to do so by s 10, as explained above, and are simply agreeing the periods of review as allowed for under the Act.(c)Severance of Reversion
3.121 Where the freehold reversion is severed this will have no effect on any farm business tenancy to which it is subject. There will still be one tenancy, but the freehold will be severally vested in more than one landlord.236 This will make it more difficult to initiate a rent review, as landowners with a share in the collective reversion on the tenancy will have to join in serving statutory review notices. The new landlords may, following severance and sale of part of the reversion, therefore offer to enter into new tenancy agreements creating different tenancies of the severed portions of the farm. Section 11 of the 1995 Act contains special provisions to ensure that such an arrangement leaves the three yearly rent cycle unaffected. Provided that the new tenancy arises between;
(i)The person who immediately before the beginning of the tenancy was entitled to a severed part of the reversionary estate in the land comprised in a farm business tenancy in which the land to which the new tenancy relates was then comprised, and
(ii)The person who immediately before that date was the tenant under the original tenancy, and
(iii)The rent payable under the new tenancy represents merely the appropriate proportion of the rent payable under the original tenancy before the freehold was split then the creation of a new tenancy at a proportionate rent doe not affect the three-year rent cycle.
Landlord and/or tenant will be entitled to trigger a review in the normal way three years after the last determination of rent or agreement (as to which see above). The parties do not have to wait a full three years before a review can take place. It is, of course, open to them to stipulate new review dates or review periods when agreeing the new tenancy, as allowed for in s 10 (above). Note that although the saving provision in s 11 is straightforward, the terms of the section must be scrupulously adhered to if a new three-year cycle is not to be triggered, effectively barring review for three years after the severance. If, for example, the parties take the opportunity to add additional tenants to the new farm business tenancy (eg the tenant’s son) the saving provision will be inapplicable, as the new letting will not be to the same tenant as the original letting. In such cases, therefore, the parties will need to be aware of the need to expressly stipulate the review dates or review periods in the new tenancy agreement.237