3 Implementation of TRIG Reform Proposals
(a)Legislative Reform
1.37 This made three substantive amendments to the Agricultural Holdings Act 1986. It expanded the range of activities from which the relatives of a tenant could derive their income without prejudicing any rights to statutory succession to the tenancy; it removed restrictions on the eligibility of parties to a tenancy agreement for compensation for improvements or dilapidations at the end of the tenancy in circumstances where land has been added to the tenancy; and finally it made it easier to add land to a tenancy without voiding the existing tenancy and creating a new farm business tenancy.
Arbitrations under the 1986 Act are in future to be governed by the Arbitration Act 1996, bringing them into line with the regime applicable to arbitrations in relation to farm business tenacies. Three reforms were also made to the Agricultural Tenancies Act 1995. The rules governing compensation for improvements, and for the provision of intangible advantages (such as acquiring planning permission), were relaxed to allow landlord and tenant to agree in advance the quantum of compensation that would be paid. The rules on rent reviews were also relaxed to encourage the parties to agree their own terms, provided they do not provide for upwards only reviews in the agreement. And the upper limit of 24 months on notices to terminate a farm business tenancy was abolished. As noted above, this proposal was needed to provide flexibility by enabling the landlord to grant a series of ‘rolling’ tenancies of longer terms. These provisions are considered in detail in the Chapters below dealing with security of tenure and succession under the Agricultural Holdings Act 1986, and with farm business tenancies.(b)Code of Practice for Agri-Environment Schemes and Diversification
1.38 The legislative reforms proposed by TRIG, and subsequently implemented, were part of a composite package of reform measures that included – in addition to the legislative and fiscal initiatives discussed above – the introduction of a non-statutory code of practice for the consideration of diversification projects within farm tenancies.58 The Code of Practice was published by DEFRA in 2004.59 It is intended to apply where the parties wish to vary the terms of an existing agricultural tenancy in order to implement proposals to diversify into non-agricultural business uses of the land, or where the tenant wishes to enter into an agri-environment or conservation scheme.
It is therefore intended to assist landlord and tenant when considering proposals to, for example, amend the user clause in the tenancy to permit non-agricultural land use on the farm. Agricultural user clauses are often restrictively interpreted by the courts, by reference to the statutory definition in the tenancy legislation, and greatly restrict the tenant’s ability to unilaterally undertake environmental management.60 The Code of Practice will also apply where the parties are considering varying clauses relating to subletting parts of the holding (for example cottages for holiday accommodation), for permitting the erection or alteration of buildings on the holding, and generally for permitting diversification into both agriculture-related and non-agricultural activities. The Code stresses the importance of early consultation between landlord and tenant, prior to the application for any necessary consents (such as planning permission for buildings or alterations) and puts forward a five step approach culminating in a formal written agreement prepared by a suitably qualified professional (for example a solicitor or land agent). The written agreement should cover all matters having a bearing on the tenancy agreement, and where appropriate should include a waiver of the landlords powers under Case B of the Agricultural Holdings Act 1986 to serve notices to quit, together with any other rights that may detract from or negate the landlords grant of the consent.611.39 An Adjudication Scheme was established to support the implementation of the Code of Practice in cases where the parties to a farm tenancy cannot reach agreement on diversification proposals, and on the necessary changes to the existing tenancy required to implement them. The adjudicator’s decision takes the form of a recommendation to the parties, and is not legally binding on them. Annex 1 of the Code of Practice sets out eight grounds on which a Landlord may be justified in withholding consent to a tenant’s diversification proposals, and these will be important in resolving difficulties in adjudication on disputed diversification proposals.
The landlord will be justified in refusing consent in the following cases:•Where the project, in the reasonable opinion of the landlord, would substantially interfere with the quiet enjoyment of retained rights over the land. Most farm leases reserve sporting rights to the landlord, and increased public access following a diversification could be detrimental in this case, especially where sporting rights are of high value. Note, however, that the adjudicator will have to determining whether the landlord’s opinion of the likely impact is ‘reasonable’.
•Where the proposal, in the reasonable opinion of the landlord, is not considered viable. This ground for refusing consent goes the question of the tenant’s business plan, resourcing, and whether the project will provide sufficient financial return to make it a suitable investment for the tenant, or for both of the parties, to make. Viability is to be judged not only on financial criteria, but also by reference to whether the tenant has the necessary skills to carry out the proposal effectively.
•Where the implementation of the diversification proposal would be detrimental to the sound management of the estate of which the land forms part or of other land belonging to the landlord. This ground is concerned with situations where the proposal might prove detrimental to the business or investment of the landlord himself, or to that of other tenants on his estate.
•Where the proposal would cause the landlord to suffer undue hardship eg the loss of tax relief if let land is put to non-agricultural uses. The TRIGs proposals for the extension of agricultural property relief for IHT would, for example, remove a major problem in this regard if implemented.
•Where the implementation of the proposals would result in the holding ceasing to be agricultural in nature. Quite apart from the need to vary the user clause in the lease itself, the parties should bear in mind that the substantial use of the holding must remain ‘agricultural’ if the tenancy is to remain within the remit (and protection) of the Agricultural Holdings Act 1986, or in the case of a farm business tenancy the Agricultural Tenancies Act 1995.
The TRIG refrained from recommending a radical widening of the statutory definition of agriculture, as this would (they felt) blur the differences between business tenancies and farm tenancies and cause unnecessary legal uncertainty.62 The rules for establishing whether land use is substantially ‘agricultural’ for the purposes of the tenancy legislation are considered more fully in Chapters 3 and 5 of this work.63•Where the tenant is in material breach of the existing tenancy agreement and the matter has been brought to the attention of the tenant prior to the submission of a proposal for diversification. It should be noted that the tenant’s breach of the tenancy’s terms must be brought to the tenant’s attention before he has made an application for the landlord’s consent to diversification proposals under the Code. Moreover, the landlord must notify the tenant of alleged breaches of tenancy obligations in writing. He cannot bring in alleged breaches of the existing tenancy during later negotiations over diversification proposals unless there has been prior written notification of the matters alleged in accordance with the terms of the Code.
•Where the tenant has failed to adhere to the Code.
•Where the application is not materially different to a previously unsuccessful application. If the adjudicator rejects the tenant’s application for consent, he cannot make a further application for consent within two years if it is based upon a proposal substantially the same as the failed one. The only exception is where he makes an application that takes into account all the amendments suggested by the adjudicator in resolving the previous application.
1.40 The Code of Practice also sets out a number of grounds on which a tenant can object to diversification proposals put forward by the landlord.64 These largely mirror those set out above eg the tenant can object if his quiet enjoyment of the holding would be affected, where he would suffer undue hardship, where he did not consider it viable, where the landlord is himself in breach of the tenancy,65 or where the proposal would result in the tenancy ceasing to be agricultural (a fact that could severely affect the tenant’s security of tenure and other rights, for example, in the case of an agricultural holding).
The tenant can also object to a proposal if he considers that it would prejudice his rights – for example by fundamentally changing the tenancy agreement in such a way that it became governed by a different statutory code (such as the Landlord and Tenant Act 1954 Part II, which governs business leases). He can also object if the proposal would lessen his ability to earn income from the holding, or if it is contrary to an established plan for the existing or future viable use of the holding.(c)Further Reform
1.41 Further reform proposals have been considered in the period since the implementation of the first set of TRIG proposals in 2006. Of these, most notably the DEFRA Future of Farming Review contained a number of recommendations for tenancy reform in its 2013 Report. The Review noted, in particular, the disincentive effect of the existing farm succession law when considering the retirement of existing farm tenants, and also the impact of some of its technical rules on farm efficiency. The Review’s final report recommended66 inter alia that the requirement that a tenant have reached a minimum age of 65 before an application for succession on retirement can be made by a potential successor should be removed. And the rules on the ‘suitability’ of a potential successor to the tenancy should be revised to introduce higher and more focussed requirements as to business and environmental management skills in order to equip farm tenants for modern farming and its requirements. The Review also recommended that the range of potential successors be reviewed to more closely mirror modern social and familial relationships. None of these recommendations have been implemented.
1.42 However, TRIG has also continued its work and made further recommendations for reform in 2014. Following consultation by DEFRA, three significant changes were implemented in 2015:67
(i)The introduction of alternative dispute resolution (‘ADR’) for disputes under the Agricultural Holdings Act 1986.
Third party determination is now available as an alternative to arbitration under the 1986 Act68 eg in relation to rent disputes and/or compensation on quitting a holding.(ii)New model clauses for repair and maintenance of fixed equipment have been introduced under the 1986 Act. These will also have implications for tenancy obligations under farm business tenancies, which often expressly incorporate the model clauses into the tenancy agreement,69 and
(iii)Obsolete regulations dealing with compensation for tenant right and compensation under short term agreement under the 1986 Act have been repealed.70
(d)Issues for Future Reform
1.43 It was noted above that the TRIG rejected the widening of the definition of agriculture to encompass diversified non-agricultural land uses, fearing that this would be retrospective and affect the settled rights of both landlords and tenants, and also unsettle the market for let land in England and Wales. It is perhaps worth noting, however, that more radical reform has already been introduced in Scotland. The Agricultural Holdings (Scotland) Act 1991 was amended in 2003 so as to provide that environmental or conservation activities carried out by a tenant farmer are not breaches of the rules of good husbandry if carried out pursuant to an agreement entered into under any enactment by the tenant, or under the conditions of any grant paid out of public funds.71 A tenant can also appeal against a landlord’s refusal of consent to diversification, and the landlord’s grounds for refusal are limited by statute.
1.44 This simple reform would remove many of the problems associated with diversification into agri-environmental measures discussed above, and which continue to trouble English Law. It is not without its own problems however. The adoption of the Scottish reform model would abrogate the private rights of the parties, in the sense that the introduction of a publicly funded agri-environment scheme would automatically entitle a farmer to participate irrespective of tenancy restrictions to the contrary. The principal objections to this approach are, firstly, that it introduces an element of retrospectively in that the definition of agriculture could change after a tenancy has been concluded, thereby altering the land use envisaged by the landlord when letting the land. This objection carried considerable weight with the Tenancy Reform Industry Group, who backed away from recommending legislative change and instead recommended the adoption of a Code of Practice backed by an ombudsman scheme.72 A more fundamental objection, however, might be that in abrogating the private rights of the parties it enables the state to unilaterally alter the nature of farm tenancy agreements whenever a new agri-environment or publicly funded rural development measure is adopted. There are arguments for and against this approach, depending on whether one regards freedom of contract, or an approach grounded in pubic law and democratic accountability, as the more appropriate for regulating land use. As we have seen the first TRIG report drew back from suggesting radical reform on the public law model adopted in Scotland, and this was not considered in the subsequent TRIG recommendations. DEFRA has subsequently withdrawn public funding from the adjudication scheme on which the Code of Practice for farm diversification relies for its enforcement. This therefore remains an area of some difficulty in which further legislative reform may be appropriate in the future.
1See Powley v Walker (1793) 5 Term Rep 373; Onslow v –– (1809) 16 Ves 173; Horsefall v Mather (1815) Holt NP 7 (Tenants duty of good and husbandlike cultivation). Also Auworth v Johnson (1832) 5 C & P 239 (duty to keep buildings wind and watertight).
2Section 55 of the 1883 Act. Section 54 of the 1875 Act had previously entitled the parties to enter into and carry into effect ‘any such agreement as they think fit’.
3Ibid, s 33. At common law an annual tenancy of agricultural land would, previously, have been terminable on six months’ notice to quit.
4Sections 2, 3 and 4 of the 1906 Act. The Agricultural Holdings (England) Act 1883, s 1 made arbitration by a single arbitrator compulsory.
5Report to the Committee of Inquiry into the Acquisition and Occupancy of Agricultural Land (1979) Cmnd 7599.
6See Cmnd 7599, Table 5 at p 42.
7Cmnd 7599, paras 111 and 113.
8Cmnd 7599, paras 627, 629 and 630.
9Cmnd 7599, para 631.
10Cmnd 7599, para 633 ff.
11Cmnd 7599, para 637 ff.
12Cmnd 7599, para 651 ff.
13Cmnd 7599, para 642.
14Agricultural Holdings Act 1984, ss 1 and 2. The Act went further in this respect than the Northfield Committee suggested, the latter having drawn back from advocating the withdrawal of succession rights altogether.
15See further Chapter 8 para 8.72 et seq ff below.
16See Law Com No 153 ‘Report on the Consolidation of Certain Enactments relating to Agricultural Holdings’ Cmnd 9665 (Dec 1985).
17Agricultural Holdings Act 1986, s 102(2).
18See s 2(3)(a) of the 1986 Act (‘grazing or mowing (or both)’). Under the original provision, agreements ‘for grazing or mowing during some specified period of the year’ were exempted, leading to the argument that grazing only, and mowing only, were the situations envisaged.
19See ibid, s 68(2)(b).
20Ibid, s 85(1) and (3) (previously ss 71 and 73 of the 1948 Act).
21Ibid, ss 88 and 93.
22Gladstone v Bower [1960] 2 QB 384, CA. See below para 5.11 et seq ff.
23Section 10(1) of the 1986 Act.
24For doubts as to the effectiveness of contracting out see Lord Hailsham in Johnson v Moreton [1980] AC 37 at 59–60, HL. Note also that contracting out of the right to freedom of cropping and disposal of produce, conferred by s 14, is expressly banned (s 15(1)).
25See the ambiguous phrasing of s 67(2), providing for the landlord’s consent to improvements to be given unconditionally ‘or upon such terms as to compensation or otherwise as may be agreed upon in writing’ between the parties. (Italics added.)
26[1990] 1 QB 976 CA.
27See Agricultural Holdings (Amendment) Act 1990, s 1, and further Chapter 7 para 7.56 et seq below.
28Agricultural Holdings Act 1986, ss 15 and 16.
29See ibid, s 6 and Sch 1, and Chapter 6, para 6.06 et seq below. Incorporation by arbitration is, even then, not automatic; it must be ‘reasonable and just’ between the parties (s 6(2)(b)).
30See ibid, s 8.
31See ibid, s 26 as to service of notices claiming security of tenure, and Chapter 7, para 7.15 et seq below. Cf Rent Act protection, which accrues (even after expiry of the contractual tenancy) while, and so long as, a residential occupier occupies a dwelling as a residence (Rent Act 1977, ss 1 and 2, Housing Act 1988, s 1(1)).
32Protection under the Rent Act legislation is based on the status of the residential occupier, without the need for service of notices claiming statutory protection; Rent Act 1977, ss 1 and 2 Housing Act and 1988, s 1.
33Agricultural Holdings Act 1986, s 2. Cf Landlord and Tenant Act 1954, s 24.
34See Agricultural Holdings Act 1986, Sch 3, Cases F and G. Cf the Rent Act statutory tenancy, which confers merely a personal right of occupation (a ‘status of irremoveability’), and not a contract of tenancy vesting in rem; Rent Act 1977, s 2, Jessamine Investment Co v Schwartz [1978] QB 264 at 277, CA; Lloyd v Sadler [1978] 2 All ER 529 at 537, CA.
35See Landlord and Tenant Act 1954, s 25.
36Above para 1.11.
37See the Report of the Committee of Inquiry into the Acquisition and Occupancy of Agricultural Land (1979) Cmnd 7599, esp Table 5 at p 42.
38Agricultural Tenancy Law – Proposals for Reform (Joint Announcement by the Agriculture Departments) Ministry of Agriculture, Fisheries and Food,1991 (MAFF release 45/91).
39See Agricultural Land Tenure in England and Wales (RICS,1990) by Winter, Richardson, Short and Watkins, esp Tables 2.3 and 2.4 at pp 13–14, for research findings on the proportion of short term lettings and partnership arrangements utilised in practice, and in what circumstances.
40Quoted during committee proceedings on the 1995 Act. See Parl Debs (HC) Standing Committee A, 23 Feb 1995, Col 42. Fixed terms of between one and two years are outside the security provisions of the Agricultural Holdings Act 1986 – see Gladstone v Bower [1960] 2 QB 260.
41Agricultural Tenancy Reform (joint industry agreement of the Country Landowners Association, National Farmers Union, Tenant Farmers Association and National Federation of Young Farmers Clubs,1993 ). And see MAFF release 436/1993.
42For an assessment of the 1995 Act as a tool for reviving the rented sector per se see Bright, (1995) Conv. 445.
43See J Bishop, (1996) Conv. 260 for an assessment of the impact of farm business tenancies on environmental land management.
44See MAFF statistics quoted in Rural England – A Nation committed to a living countryside (1995) Cm 3016, Fig 11, and p 49.
45See Planning Policy Statement 7 Sustainable Development in Rural Areas (2004) at paras 17, 19, 28, and further Chapter 12, para 12.06 below.
46See ss 10 and 11 of the Agriculture Act 1947.
47The rules can be enforced under (for example) Case C (certificate of bad Husbandry) and D (breach of tenancy) in Sch 3 to the Agricultural Holdings Act 1986. This is discussed in further detail in Chapters 6 and 7 at para 6.23 and para 7.67 ff below. And see generally Rodgers, Agricultural Tenure, Land Use and Conservation in the United Kingdom, Chapter 9 in (Brussaard and Grossman eds.) Agrarian Land Law in the Western World (CABI, 1992).
48Whitehead, Errington, Millard and Felton ‘An Economic Evaluation of the Agricultural Tenancies Act 1995, Final Report’ (University of Plymouth 2002) (Research Report prepared for DEFRA and NAWAD). See especially Chapter 3 for the research findings on the characteristics of farm business tenancies, and chapter 7 for the report’s conclusions and recommendations.
49See ibid at Table 3.3 and 3.4.
50Ibid at para 7.13.
51See ibid at para 7.17.
52Ibid at Table 3.9 at p 27.
53Its first set of recommendations were implemented by the Regulatory Reform (Agricultural Tenancies) (England and Wales) Order 2006, SI 2006/2805.
54These were set by the Department of the Environment Food and Rural Affairs, who sponsored the group’s work: see the Tenancy Reform Industry Group Report (TRIG), Final Report (DEFRA 2003) at para 2.2.
55See Tenancy Reform Industry Group Report (TRIG), Final Report (DEFRA 2003) at para 2.3.
56An executive summary of the TRIG proposals is given in para 1.1 of the Tenancy Reform Industry Group Report (TRIG), Final Report (DEFRA 2003). The detailed recommendations are discussed in paras 4.2.1–4.3.3 ibid.
57See ibid at para 1.1.8 (executive summary) and paras 5.2–5.6.
1The Regulatory Reform (Agricultural Tenancies) (England and Wales) Order 2006, SI 2006/2805. And see the House of Commons Regulatory Reform Committee, Proposal for the Regulatory Reform (Agricultural Tenancies) (England and Wales) Order 2006, Sixth Report of Session 2005/6.
58See Tenancy Reform Industry Group Report (TRIG), Final Report (DEFRA 2003) at paras 6.1–6.3 and Annex 1.
59Code of Good Practice for agri-environment schemes and diversification projects within agricultural tenancies (Department of Environment Food and Rural Affairs, 2004).
60See for example Jewell v McGowan [2002] 3 EGLR 87 (open farm activities).
61See the Code of Good Practice for agri-environment schemes and diversification projects within agricultural tenancies (Department of Environment Food and Rural Affairs, 2004) at pp 4–8. For Case B in Sch 3 Agricultural Holdings Act 1986 see Chapter 7 below.
62See the Tenancy Reform Industry Group Report (TRIG), Final Report (DEFRA 2003) at para 6.2.
63see Chapter 3 (farm business tenancies, para 3.10) and Chapter 5 (agricultural holdings, para 5.15) below.
64See Annex 2 to the Code of Good Practice for agri-environment schemes and diversification projects within agricultural tenancies (Department of Environment Food and Rural Affairs, 2004).
65As with tenant’s alleged breach, this must be brought to the attention the landlord by written notice before the application for consent is made.
66See The Future of Farming Review Report (Department of Environment Food and Rural Affairs, July 2013) at paras 5.61–5.64, available at: www.gov.uk/government/uploads/system/uploads/attachment_data/file/211175/pb13982-future-farming-review-20130709.pdf.
67See further the DEFRA Consultation Document on the TRIG proposals (July 2014), available at: https://consult.defra.gov.uk/ahdb-sponsorship-and-agricultural-tenancies/consultation-on-modernising-agricultural-tenancies/supporting_documents/Consultation%20document.pdf.
68Introduced by the Deregulation Act 2015.
69Implemented by the Agriculture (Model Clauses for Fixed Equipment) (England) Regulations 2015, SI 2015/950. See further Chapter 6, para 6.75 et seq below.
70By the Agriculture (Calculation of Value of Compensation) (Revocations) (England) Regulations 2015, SI 2015/327. See below Chapter 9, para 9.40.
71Agricultural Holdings (Scotland) Act 1991, section 85(2A) and (2B) as amended by section 69 of the Agricultural Holdings (Scotland) Act 2003.
72See Tenancy Reform Industry Group (TRIG) Final Report, DEFRA 2003 at para 6.2 and Annex 1.