Succession of agricultural tenancies – how to ensure your family can continue farming

Agricultural tenancies are very common, and often the tenancy enables the family to continue farming the land after the death or retirement of the tenant. Joseph Mitchell from Harrison Drury’s property litigation team provides an overview of the criteria that an applicant needs to meet if they are to to succeed an agricultural tenancy.

What sort of tenancy has succession rights?

To be eligible to succeed a tenancy, the tenancy will need to be an agricultural tenancy which started before July 12, 1984 and be protected by the Agricultural Holdings Act 1986. There are exceptions to this rule, including where the tenancy is protected by the Act but entered into after 12 July 1984 and the tenancy itself opts into succession rules or where the tenancy itself is a first succession.

It is possible to have two successions, so that three generations of the family can farm the land – the original tenant, and then a further two generations.

When can a tenancy be succeeded?

There are two occasions when a tenancy can be succeeded:

• On the retirement of the tenant.
• On the death of the tenant.

On retirement of the tenant the application to succeed the tenancy will need to be made within one month of the service of the retirement notice. The retirement notice will specify who is the intended successor.

On the death of the tenant the application must be made within three months from the date of death and there can be any number of potential applicants so long as they meet the close relative test. It is also possible for a tenant to nominate in their Will who they would like to succeed the tenancy and that person will take precedence.

What is the application process to succeed an agricultural tenancy?

An application has to be made to the First Tier Tribunal (Property Chamber) (Agricultural Land and Drainage). There are four criteria that will need to be met for an application to be successful:

1. Close Relative test: The applicant to succeed the tenancy is a close relative of the tenant. A close relative is a spouse, partner, sibling or child.
2. Livelihood Test: The applicant to succeed the tenancy derived the principal source of livelihood from the holding, or the wider holding that comprises the farm.
3. Commercial Unit Test: The applicant does not occupy land which by itself is economically viable for agriculture.
4. Suitability Test: The applicant is a suitable person to succeed the tenancy.

The importance of planning early for succession of an agricultural tenancy

The livelihood test forms most of the background information required in preparation of a succession application. It is important to note that the applicant will need to pass the test for five out of the last seven years to be successful.

This highlights the importance to plan well in advance for retirement from an agricultural tenancy. If you are planning to retire and seek to appoint a close relative to succeed your agricultural tenancy, Harrison Drury’s property litigation team can provide a succession planning review as part of the process to ensure that any proposed succession application is as strong and complete as possible.

Changes are being made to the way that the suitability test and commercial unit test operate, which will come into effect in September 2024. However, you currently need to show that you are suitable to succeed the holding by reference to farming background, health, finances and ability to comply with the tenancy agreement. The landlord is also entitled to put forward views about the suitability of the succeeding tenant to the tribunal.

The commercial unit test comes into play when applicant owns or occupies other land which must be declared as part of the application. If the other land generates enough income to support the wages of two agricultural workers, the commercial unit test could be failed. A comprehensive review of the land that the farming business occupies is therefore required.

Harrison Drury can assist both landlords and tenants with succession applications for an agricultural tenancy, as well as with planning for succession to ensure applicants present a strong case for being suitable to take over the tenancy. It is important to plan well in advance to ensure that the required information can be prepared and provided. Please contact Harrison Drury’s property litigation team on 01772 258321.