2 The Agriculture Condition
3.10 The first avenue to create a farm business tenancy is intended for use where substantial diversification is not intended, and the tenancy is to be limited to farming. Where the notice facility is not used (see below), a farm business tenancy can only arise if the agriculture condition set out in s 1(3) of the 1995 Act is satisfied.
The agriculture condition requires the character of the tenancy to be ‘primarily or wholly’ agricultural if it is to be a farm business tenancy.20 This requirement is assessed by having regard to the terms of the tenancy (eg does it prohibit non agricultural use?), the use of the land comprised in the tenancy, the nature of any commercial activities carried on that land, and ‘any other relevant circumstances’. The agriculture condition must be satisfied at the time when any issue as to the holdings’ legal status arises, with the result that the tenancy can move in and out of the farm business tenancy code if the predominant land use of the tenant changes. If the agriculture condition ceases to be satisfied at any time, this will take the tenancy outside the farm business tenancy regime. But if non agricultural use later ceases, and substantial farming is resumed such that the condition again becomes satisfied, then the tenancy will move back into the 1995 Act regime. The tenancy can move in and out of the 1995 Act as the user of the land alters. It should be noted that the requirement that the use be ‘primarily or wholly agricultural’ makes little concession to non-agricultural business use. Any non-agricultural business use that is not de minimis will, therefore, take the tenancy out of the 1995 Act, unless the notice facility (above) has been used to create the tenancy.3.11 For these reasons, in practice most lettings will use the notice facility to create a farm business tenancy. The agriculture condition will usually only be relevant where there is an informal letting (perhaps oral) where notices have not been served, or there is a short term arrangement confined to agricultural user (eg sale of grass keep), or where defective notices been served which fail to create a farm business tenancy under the notice provisions discussed below.
3.12 Where the agriculture condition applies, subsequent farm diversification will raise similar issues of tenancy status as apply to tenancies covered by the 1986 Act. Paradoxically, however, the scope for diversification under this type of farm business tenancy will be less than under a 1986 Act tenancy. By virtue of s 1(3) of the 1995 Act, the character of the tenancy must be wholly or primarily agricultural for the farm business tenancy regime to be applicable. Cf. in cases like Short v Greeves21 and Weatherall v Smith22 under the 1986 Act, the issue was whether the substantial user had ceased to be agricultural. On similar facts under the 1995 Act, where the tenancy is at the outset a farm business tenancy, the courts will have less scope to apply a generous interpretation. The protection of the 1995 Act will cease to apply as soon as diversification results in the primary use of the land let ceasing to be agricultural. The 1995 Act, moreover, retains the somewhat limited definition of ‘agriculture’ used in previous farm tenancy legislation.23 This limits the scope of the agriculture condition to traditional farming activities such as livestock breeding, dairy farming and the use of land as grazing land. It does not recognise the wider ‘stewardship’ role expected of the farming community under environmental protection measures, set aside or the agri-environment schemes introduced as part of the reform of the common agricultural policy.
3.13 In these circumstances, diversification could have serious consequences for the landlord, as the tenancy could move into the business tenancy code (the Landlord and Tenant Act 1954) if substantial business user is being undertaken on the former holding at the time when the court is asked to assess its legal status. This will confer renewal rights on the tenant under the 1954 Act, the more generous provisions of which will apply to the tenant’s benefit. For this reason alone, if the agriculture condition were to be used, it would be advisable to include stringent user conditions in the farm business tenancy prohibiting non-agricultural use.
If this is done, s 1(8) assists the landlord by providing that any user by the tenant in breach of covenant is disregarded in assessing the legal status of the tenancy, unless the landlord has acquiesced or consented to the breach in question. Where an informal arrangement has created a farm business tenancy, however, it may be possible for a small degree of diversified non agricultural business use to take the tenancy out of the 1995 Act – leaving the anomalous position where what remains is in substance a farm letting, but is governed by the business tenancy legislation, not the farm tenancy rules. In contrast, where the notice facility has been used (see below) a tenancy that has ceased to have any realistic agricultural function will remain a farm tenancy under the 1995 Act, and will not become a business tenancy. Where the landlord does not use the notice provisions, more particular care will have to be taken to avoid creating a business tenancy than was formerly the case.