1 Right to a written tenancy

6.06 Section 6 of the 1986 Act provides that where there is no written agreement embodying all the terms of the tenancy (including the model clauses), or such written agreement as exists does not contain all the matters enumerated in Sch 1 of the Act, then either party can request the other to enter into an agreement in writing specifying all the terms of the tenancy and containing provision for all the Sch 1 matters.

(a)Schedule 1 terms

6.07 Schedule 1 lists nine matters for which provision must be made in tenancy agreements, and in the absence of which arbitration can be demanded to secure their inclusion. These include the names of the parties, particulars of the holding with a sufficient description (by reference to a map or plan) of fields and parcels of land to enable its extent to be identified, the term for which the holding (or different parts of it) are agreed to be let, the rent reserved and dates on which it is payable, the incidence of liability for rates and drainage rates and a covenant by the tenant to return to the holding the full equivalent manurial value of crops destroyed, should harvested crops grown for consumption on the holding be destroyed by fire. The agreement should include a covenant by the tenant to insure all dead stock, and all harvested crops grown on the holding for consumption on it, against damage by fire.

6.08 Perhaps the most important of the Schedule 1 terms is the statutory covenant against alienation⁷ viz. a covenant by the tenant not to assign, sublet or part with possession of the holding or any part of it without the landlord’s consent in writing. If the tenancy agreement is oral, or is in writing but without a covenant against alienation, the landlord can serve notice under s 6 requesting its inclusion, and secure this by arbitration (if necessary). It might be noted, also, that Schedule 1 makes no provision for securing the inclusion of a number of clauses of considerable importance in modern agricultural tenancies, eg clauses dealing with basic scheme payments, with agri-environment schemes that the tenant may wish to participate in, or for conservation covenants.

(b)Arbitration as to terms

6.09 If no agreement is reached, the party serving the request can seek agreement as to the appointment of an arbitrator to settle the terms of the tenancy, and in default of agreement s/he can apply to the President of the RICS for the appointment of an arbitrator. The arbitration will then proceed under the arbitration code in the Arbitration Act 1996.⁸ It should be noted that arbitration can only be requested by the party that served the notice triggering the procedure for securing a written tenancy agreement. The landlord or tenant having this right (as the case may be) can also now refer the matter to third party determination under the 1986 Act as amended, as an alternative to arbitration.⁹

6.10 The arbitrator’s jurisdiction is circumscribed. By virtue of s 6(2) his function is three fold:

•His primary function is to find and specify the existing terms of the tenancy, subject to any variation agreed between landlord and tenant.

•Then, in so far as the existing tenancy (as varied) neither makes provision for nor makes provision inconsistent with the matters specified in Sch 1, he must make provision for all those matters having such effect as may be agreed between the parties or, in default of agreement, as appears to the arbitrator to be ‘reasonable and just between them’.

•The arbitrator can also include any further provisions relating to the tenancy that may be agreed between landlord and tenant. If the arbitrator considers that, because of any provision made in his award, it is equitable that the rent should be varied, then he can vary it accordingly.¹⁰

6.11 The arbitrator’s award as to terms takes effect as if the terms and provisions specified in the award were contained in a written agreement between the parties.¹¹ They take effect by way of variation of the tenancy agreement previously in force, as from the making of the award or such later date as may be specified in it.¹² The making of an award, being merely a variation of the existing tenancy, will not invalidate a prior notice to quit served by the landlord.

(c)Covenant against alienation

6.12 Unless restricted by the terms of the lease, it is a basic incident of the tenant’s leasehold interest that he has the right to assign or sub-let without reference to the landlord.¹³ Where the tenancy is in writing, this right will commonly be restrained by the inclusion of either an absolute, a fully qualified, or a qualified covenant against assignment and sub-letting. The tenant’s common law right to assign furnishes a strong incentive to use the statutory machinery and have the tenancy reduced into writing.

(i) Statutory bar pending arbitration

6.13 Where the tenancy does not contain a covenant against alienation the landlord can request that the tenant enter into a written agreement containing all the Sch 1 matters. If he does so, s 6(5) provides that the tenant may not, without the landlord’s consent in writing, assign, sub-let or part with possession of the holding or any part of it during the period while the determination of the terms of the tenancy is pending – unless, of course, the oral tenancy expressly permits assignment and subletting.¹⁵ The intention is to prevent avoidance of the statute by a tenant assigning his interest after service of a request and before the arbitration. The statutory bar on assignment commences with the date of service of the landlord’s request for a written tenancy, and ends with the date on which an agreement is concluded or the arbitrator’s award is made.¹⁶ It should be noted that a s 6 notice served by the tenant, requesting a written agreement, does not introduce the interim bar on alienation pending an arbitration – it applies only where the s 6 notice has been served by the landlord¹⁷.

6.14 There is no time limit for the arbitrator’s appointment, and there is a question whether the statutory bar on assignment will remain operative indefinitely after service of the landlord’s request for a written tenancy agreement. The principal reason, from the landlord’s perspective, for serving a s 6 notice is often to secure the statutory bar on assignment and subletting, and in many cases no further action may subsequently be taken to settle the terms of the tenancy.

6.15 Section 6(5) provides that any transaction that breaches the statutory bar shall be void. The bar applies to both subletting and assignment, and any transaction in breach of its terms will have no effect on the leasehold relationship between landlord and tenant. In particular, the tenant will remain liable in law on the covenants in the lease and for rent. By rendering a transaction in contravention of the statutory bar void, the 1986 Act reverses the normal common law rule that, though a breach of tenancy by the assignor, assignment in breach of covenant does vest a leasehold interest in the assignee (or sub tenant as the case may be).¹⁹

(ii) Inclusion of statutory covenant

6.16 If the parties cannot agree the terms of an alienation covenant the arbitrator must include the statutory covenant in his award or, exceptionally, such covenant ‘as appears to the arbitrator to be reasonable and just’ between the parties.²⁰ Section 19 of the Landlord and Tenant Act 1927 normally requires that a landlord’s consent to assignment and/or subletting cannot be unreasonably withheld: but it does not apply to agricultural holdings.²¹ The landlord’s consent to assignment can therefore be withheld for any reason, whether ‘reasonable’ or not. Where the statutory covenant is included, either by agreement or arbitration, it follows that the tenancy becomes effectively non-assignable.

6.17 In most cases the statutory clause will be incorporated without modification, but the parties may in some cases wish to modify it eg by making the covenant ‘fully’ qualified and expressly providing that the landlords consent to an assignment or subletting must not be unreasonably withheld. If the parties agree the inclusion of a fully qualified covenant (‘such consent not to be unreasonably withheld’) the guidelines developed in the general law and approved in International Drilling Fluids Ltd v Louisville Investments ( Uxbridge) Ltd²² will become relevant to assess the reasonableness of any refusal by the landlord of licence to assign or sublet.²³ In such a case, it has been held that the effect of s 19 of the 1927 Act is to enable the landlord to stipulate reasonable conditions for granting consent, including the payment of a fee.²⁴

6.18 Further, if a fully qualified covenant is agreed, the landlord will be subject to the statutory duties in the Landlord and Tenant Act 1988 as to how he exercises his discretion to give or refuse consent. Where this is the case, and the tenant makes a written request for consent to assign or sublet, the landlord is under a duty to give consent within a reasonable time (unless it is reasonable or him to refuse) and to serve on the tenant a written notice of his decision specifying any condition to which the consent is subject, or (if consent is refused) the reasons for withholding it.²⁵ This places the burden on the landlord to prove he is acting reasonably,²⁶ and breach can result in an award of damages in civil proceedings against the landlord.²⁷ This makes it highly inadvisable to vary the terms of the statutory covenant against alienation provided for in Schedule 1 to the 1986 Act – to which these additional rules do not apply, unless there are exceptional circumstances justifying the agreement of a fully qualified covenant.