The Government’s proposed changes to domestic tenancy laws, should not forget about working farming families who rent their land, the Tenant Farmers’ Association (TFA) has urged.
The Government’s plans to improve the security of tenure for residential tenants mean that domestic tenants can no longer be evicted without reason – but the TFA urges this should also be applied to the tenanted sector of agriculture.
Currently, landlords have the right to evict tenants with as little as eight weeks’ notice after a contract has ended.
TFA chief executive, George Dunn, said: “There is widespread agreement that the landlord-tenant system in agriculture provides opportunities for new entrants, enables entrepreneurship to flourish and provides liquidity to the land – which is the most fixed factor of production in agriculture.
“However, the sector has been affected adversely by short-term thinking from policymakers, landowners and those who advise them.”
85% of all new Farm Business Tenancies, which together now account for nearly half of the land farmed by tenant farmers in England and Wales, is let for terms of five years or less.
Few farm tenancies are let for periods of 10 years or more. And the average term on tenancies which include a house and buildings barely reaches 10 years.
Short-term leases hamper long-term planning
“With such short lengths of term, tenants lack the ability to plan long-term either in relation to their farming activities or their desire to take part in diversification and agri-environment schemes.
“Landlords are reluctant to use anything like the full extent of the legal flexibility available but have gained considerably from the legislation and it’s the associated tax benefits.
“With much higher demand than supply, landlords can offer short terms, for high rents at little risk and obtain, into the bargain, 100% Agricultural Property Relief from Inheritance Tax.
“By contrast, the short-term nature of tenancies is holding back progression, investment and sustainable land use,” said Dunn.
The TFA argues that the Government should be using its taxation policy to encourage longer tenancies. In particular, the TFA would like to see a change in the availability of Agricultural Property Relief from Inheritance Tax to landlords.
Currently, landlords are able to protect their let agricultural estates from Inheritance Tax regardless of the tenancy terms they offer. To my mind, we are not getting nearly enough value for such an important tax advantage.
“The TFA believes that if this relief was restricted only to those landlords prepared to let for 10 years or more, we would see more sustainable tenancies produced as a result,” said Dunn.
“Defra and the Welsh Government have recently opened consultations on legislative change for farm tenancies, but we really need the UK Treasury to think afresh about how it can use its fiscal levers to deliver longer-term farm tenancies,” said Dunn.
