4 Preservation of Agricultural Holdings Act Status: the Exclusions

3.26 The Agricultural Tenancies Act 1995 was not retrospective. Section 4 of the 1995 Act contains several exceptions preserving the status of ‘old style’ Agricultural Holdings Act tenancies for a limited category of tenancies granted on or after the 1995 Act came into force.

(a)Tenancies beginning before 1 September 1995

3.27 The 1995 Act is not retrospective. By virtue of s 2 of the 1995 Act, a tenancy cannot be a farm business tenancy if the tenancy began before 1 September 1995. A tenancy which is granted prior to 1 September 1995 will therefore be a tenancy of an agricultural holding – provided, of course, that it is a tenancy of land which is substantially agricultural⁵⁴- and governed by the Agricultural Holdings Act 1986. Conversely, a tenancy granted on or after 1 September 1995 cannot be a tenancy of an agricultural holding, except in limited situations set out in s 4 of the 1995 Act. The cut off date for the creation of ‘old style’ tenancies of agricultural holdings was therefore 1 September 1995. For the purpose of deciding when a tenancy begins, and hence whether if falls within the 1986 Act or the farm business tenancy regime, the relevant date is the date on which the tenant is entitled to go into possession⁵⁵ under the tenancy.

(b)Written Contracts entered into before 1st September 1995

3.28 The Agricultural Holdings Act 1986 will apply to a tenancy of an agricultural holding which was granted by a written contract of tenancy entered into before 1 September 1995, and which indicated (in whatever terms) that the 1986 Act is to apply in relation to the tenancy.⁵⁶ This will be the case even if the tenant did not go into possession (and hence the tenancy did not ‘begin’) until after that date.

(c)Tenancies by Statutory Succession

3.29 The 1995 Act protects the statutory rights of tenants who are granted a new tenancy, after 1 September 1995, by way of succession to an Agricultural Holdings Act tenancy under Part IV of the 1986 Act. This concession was necessary to preserve the legal rights of existing tenants with tenancies protected by the Agricultural Holdings Act 1986. Under the 1986 Act, the tenant of an agricultural holding enjoys succession rights, which enable certain close family members (ie their spouse, child or child of the family, brother or sister) to apply for succession to the tenancy on the death or retirement of the existing tenant.⁵⁷ Similarly, a tenant with a 1986 Act tenancy can nominate a successor to succeed him on his retirement at the age of 65. But for the saving provision in s 4 of the 1995 Act, the grant of a succession tenancy after 1 September 1995 would have resulted in the grant of a farm business tenancy to the successor, thus introducing an element of retrospectivity into the 1995 Act. The saving provisions are tightly drawn however, and a tenancy granted on or after 1 September 1995 will only remain within the 1986 Act if one of the following conditions applies⁵⁸:

(i)where the succession tenancy is obtained by virtue of a decision of the Agricultural Land Tribuna or First Tier Tribunal;⁵⁹ or

(ii)where it is granted by the landlord after a direction awarding a succession tenancy has been made by the Tribunal;⁶⁰ or

(iii)where the parties agree that there should be a succession tenancy.

3.30 The operation of the provision for agreed successions⁶² has proved problematic, owing in part to the obscurity of the definition of ‘agreed’ successions in s 4(2) of the 1995 Act. Although a tribunal direction should be unnecessary in cases of agreed succession, the effect of the original provision was to require an application to the agricultural land tribunal for succession on death, but not necessarily a tribunal order. There was also a question whether agreed succession on retirement⁶³ of the tenant was included.⁶⁴ The operation of the agreed succession facility has now been clarified as a result of reforms suggested by the Tenancy Reform Industry Group report.⁶⁵ Section 4(2) of the 1995 Act now provides that a tenancy will be treated as having been granted on an agreed succession ((iii) above) if it is granted to a close relative⁶⁶ of the previous tenant and either:⁶⁷

•It is granted (alone or jointly with other persons) to a person who was (or had become) the sole surviving applicant for a direction of an agricultural land tribunal for a tenancy, or

•It is granted, and begins, before the date of the giving of any retirement notice by the previous tenant. If no retirement notice has been given, it must be granted and begin before the death of the previous tenant.

3.31 It follows that, provided the successor is a ‘close relative’ of the deceased or retiring tenant, a tenancy granted by agreement will in most situations now remain within the 1986 Act. There is no requirement that the agreement be recorded in writing, although a counsel of caution would dictate that this be so, and that the tenancy itself contains a recital of the terms of the agreement.

(d)The Evesham Custom

3.32 The Agricultural Holdings Act 1986 will continue to apply if a tenancy is created by the acceptance by the landlord, in accordance with the ‘Evesham Custom’, of a new tenant who takes on the terms and conditions of the previous tenancy.⁶⁸ This exclusion from the 1995 Act was required to ensure the continued application and working of the ‘Evesham Custom’, which has grown up to regulate the compensation rights of tenants of market gardens.⁶⁹ The outgoing tenant is entitled to transfer the holding to a new tenant, provided the landlord is willing to accept the new occupant as tenant. In this event the incoming tenant makes a payment to the outgoer for the tenancy rights, which represents the compensation due to the latter for improvements made to the holding, and also a premium for the grant of the tenancy.

(e)Implied Surrender and Regrant

3.33 If the parties to an existing tenancy vary the terms of the tenancy – for example by adding additional land – this may trigger an implied surrender and regrant of the tenancy by operation of law.⁷⁰ If the regrant takes place after 1 September 1995, moreover, the effect would be to remove the tenant’s security of tenure without the parties intending, or realising, that this had happened. To avoid this possibility, s 4(1)(f) of the 1995 Act provides that the 1986 Act will continue to apply to a tenancy which is granted to a person who was, immediately before the grant of the current tenancy, the tenant of the holding, or of any holding which comprised the whole or a substantial part of the current holding, under a tenancy in relation to which the 1986 Act applied.

3.34 Unfortunately, the application of the saving provisions for surrender and regrant caused considerable confusion following the introduction of the 1995 Act. In particular, it was unclear whether s 4(1)(f) applied solely to situations of unwitting surrender and regrant where the parties were unaware that they were creating a new tenancy.⁷¹ Where landlord and tenant expressly agreed to add small parcels of land to an existing tenancy, therefore, it was common practice after 1995 to create a farm business tenancy of the new land, however small in extent, in order to preserve the status of the principal tenancy under the Agricultural Holdings Act 1986.

•In cases of implied surrender and regrant. Where a tenancy under the Agricultural Holdings Act 1986 existed over the whole or a substantial part of the relevant holding, and an agreement between landlord and tenant (other than a new tenancy) gives rise to an implied surrender and regrant, the 1986 Act will apply to the new tenancy.⁷² This would be the case for example, where a small parcel of additional land is added to the original holding. ‘Substantial’ is defined to mean either substantial in terms of area or in terms of value.⁷³ Whether the original holding comprises a ‘substantial’ part of the new holding will, in all cases, be a question of fact.

•Where there is an express grant of a new tenancy comprising a substantial part of the land previously held under an Agricultural Holdings Act 1986 tenancy. Where the tenant previously held a tenancy of all or a substantial part of the holding under the Agricultural Holdings Act 1986, and enters into a new tenancy of the holding that expressly provides (in whatever terms) that the 1986 Act is to apply to it, then the new tenancy will be within the Agricultural Holdings Act 1986.⁷⁴ This new exception is not a surrender and regrant of the prior tenancy, but rather provides for an express grant of a new tenancy of the holding. As in cases of implied surrender and regrant (above), the original 1986 Act tenancy must have comprised a substantial part of the new holding, either in terms of area or value.

3.35 One area of difficulty remains. The new tenancy must be granted to the person who was, immediately before the surrender and regrant, ‘the tenant’ of the holding under the 1986 Act.