2 General Partnerships

5.84 As we have seen, to have been converted into a yearly tenancy by s 2 of the 1986 Act, a licence granted before 1 September 1995 must have conferred on the licensee an exclusive right of occupation as against the licensor and any other person claiming under him.

5.85 Before 1 September 1995, the implications of creating a full tenancy with statutory security of tenure meant that partnerships afforded an attractive alternative medium for running farm businesses. The introduction of farm business tenancies from 1 September 1995 gave the landowner greater flexibility, and removed the danger of unwittingly creating a ‘secure’ tenancy. However, there may still be sound business, fiscal or family reasons for using a partnership instead of a tenancy to allocate occupation rights. The disadvantages of such partnership arrangements include personal unlimited liability for all partnership debts,¹⁹⁰ and the necessity of being involved in running the partnership’s affairs. Because of these disadvantages, some may enter into ‘sham’ partnerships whereby, under the guise of a partnership deed, land is let to a working farmer (described as a partner) who undertakes all financial liability and agrees to pay a fixed or fluctuating return to the owner. Such an arrangement does not constitute a ‘business carried on in common with a view to profit’ within the meaning of s 1 of the Partnership Act 1890, and is in substance merely a tenancy disguised as a partnership.

5.86 The majority of partnership arrangements are, however, bona fide and represent a useful vehicle whereby a land owner who does not wish to farm himself can provide capital, and give responsibility to a farmer, without creating an agricultural holding.¹⁹¹ The types of partnership encountered in practice, and the degree of security they offer the farmer, vary enormously. In a general farming partnership, the owner will enter into partnership with a farmer, both parties providing working capital, and the profits will be split accordingly, taking account of the distribution of management responsibilities to each partner. The non-landowning partner will have either an express or implied licence to enter the land for the purposes of the partnership business.

5.87 A variant of this arrangement, once favoured by some institutional landowners, is to let land at a full rent to a partnership between a wholly owned subsidiary and a working farmer. Yet another common form of partnership is the family farming partnership; (typically) the farmer’s son becomes a partner in the family business and sometimes the partnership will take a tenancy of the farm. Under the 1986 Act this type of partnership caused problems with regard to statutory succession rights, and security of tenure generally, especially if the landowner was himself a partner/tenant. The son will often then play an increasing role in the business prior to the father’s death. To avoid problems with future succession rights, in the case of 1986 Act tenancies, the partnership deed should expressly negative the creation of a licence to enter the land in members of the partnership other than the tenant.¹⁹² All these forms of partnership are perfectly legitimate and will not have created a tenancy of an agricultural holding.

5.88 A farmer may lease land to a partnership consisting of himself and his co‑partners, especially where the business is a family partnership. This arrangement gives rise to difficult legal problems, for at common law it is clearly established that a person cannot let land to himself alone, and neither can he enter into a covenant with himself. In Rye v Rye¹⁹³ the House of Lords reaffirmed this position, but left open the question whether a person could let land to himself and others. If the tenancy was granted before 1 September 1995, the issue is complicated by the fact that various notices must be served to claim security of tenure and other rights under the 1986 Act.¹⁹⁴ A recalcitrant landlord could, therefore, in his capacity as partner, effectively block the service of the requisite notices. It is clear, however, that a tenant can in limited circumstances compel his landlord/partner to join in the service of an effective counter notice to claim security of tenure,¹⁹⁵ with the result that the landlord/partner will not be able to block the claiming of statutory rights by the partnership. In other cases the tenants will have partnership authority to serve notices on behalf of the whole partnership.¹⁹⁶ There cannot, therefore, be any practical objection to the validity of partnership arrangements of this sort.