Development land - terminating agricultural tenancies

Developers and promoters will want to ensure that vacant possession of a site can be obtained before incurring planning expenses.  Agricultural tenancies can be difficult to terminate depending on the type of tenancy in existence, the development proposals and the attitude of the tenant.

Here are some important points to consider:

1 Timing

Landowners should consult with their professional advisers at the outset so that the timing of determining any tenancy agreement can be factored into a development/promotion or option agreement.

2 Establish the type of tenancy with which you are dealing

Your legal adviser will be able to advise you on whether you have an Agricultural Holdings Act 1986 (AHA) tenancy which provides security of tenure for the tenant and can only be terminated in limited circumstances or a Farm Business Tenancy (FBT) created under the Agricultural Tenancies Act 1995 which offers limited security of tenure.

3 Ensure the right approach is adopted when dealing with these tenancies

AHA – a Case B Notice to Quit can be served on the tenant once planning permission has been obtained.  Outline planning permission will suffice but bear in mind the tenant can challenge the validity of the notice via arbitration.  

The land does not have to be for the landlord’s own use and 12 months’ notice must be given to the tenant.  The whole of the holding must be included in the notice unless the tenancy provides for part to be determined or the development falls within one of the limited exceptions set out in s31 of the AHA 1986.

FBT – determining a FBT will depend on the length of its term and whether it has a break clause:

a)      FBTs for 2 years or less expire on the term date so no notice is required

b)      FBTs in excess of 2 years can be terminated on 12 months’ notice

c)       A FBT with a break clause can be determined in accordance with its terms

4 Beware of planning conditions

Planning permission may be granted subject to pre-commencement conditions or reserved matters and these situations may pave the way for the tenant to challenge the landlord’s validity to proceed with the development.

5 Forfeiture could be an alternative

If the tenant can be found to be in breach of a term of the tenancy and the AHA has an express right of forfeiture the landlord could forfeit the tenancy if it finds itself unable to lawfully terminate the tenancy.

6 Could surrender be an alternative?

If a notice to quit cannot be served is there a deal to be done with the tenant to persuade it to leave?  Most people have a price with which they can be bought!

7 Keep quiet

Resist the urge to discuss the position with the tenant until you have obtained professional advice and are certain of the way forward, otherwise, you could damage your legal/negotiating position – forewarned is forearmed.