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Succession rules for AHA tenancies
The final part of the Agriculture Act 2020 (AA) came into force on 1 September 2024, when amendments to the succession rules for Agricultural Holdings Act (AHA) tenancies took effect. This follows recommendations from the Tenancy Reform Industry Group (TRIG), which advises Defra on agricultural tenancy legislation. The changes aim to improve agricultural productivity and ensure the eligibility of the most suitable applicants.
Rights to succeed: new rules
First, it is important to remember that not all AHA tenancies benefit from rights of succession. To do so, the tenancy must have been granted:
- on or before 12 July 1984 (noting that tenancies granted pre-1 March 1948 may be dealt with differently); or
- after 12 July 1984 but before 1 September 1995 (but only if the tenancy expressly says that Part IV of the AHA applies, or the First Tier Tribunal (Property Chamber orders that it applies).
If the tenancy was granted on or after 1 September 1995, then it can only benefit from rights of succession if it comes within one of the limited exceptions set out in Sections 4(1)(b) – (d) of the Agricultural Tenancies Act 1995 (which essentially preserve tenancies granted pre-1 September 1995).
Succession rules for AHA tenancies: “eligible” and “suitable”
To succeed to an AHA tenancy, a successor must demonstrate (among other things) that they are both “eligible” and “suitable”. To establish this, a range of rules and tests are employed, and the 2020 Act aims to simplify these requirements, with the main changes being:
- Minimum retirement age. Previously, the tenant had to be 65 or older before applying for succession on retirement. This requirement has been repealed, and an application can now be made at any age.
- Commercial unit test. The AA has repealed the requirement that the proposed successor cannot be an occupant (owned or tenanted) of another commercial unit of agricultural land. Nevertheless, it should be noted that other eligibility requirements, particularly the need for the successor to be a close relative of the tenant and to derive their main source of income from the AHA holding, are likely now more prominent.
- Suitability test. Some clarification on what is required for the suitability of a potential successor is provided by the catchily-titled Agricultural Holdings (Requests for Landlord’s Consent or Variation of Terms and the Suitability Test) Regulations 2021. A successor must now demonstrate that they can farm “commercially to high standards of efficient production and care for the environment”.
The suitability assessment might also encompass criteria such as the proposed successor’s:
- experience, skills and training in agriculture and business management;
- financial standing;
- health;
- character;
- the nature and condition of the agricultural holding; and
- whether, if the tenancy was on the open market, “a prudent and willing landlord could reasonably be expected to regard the applicant as among the candidates to whom they would be willing to grant the tenancy”.
These changes were designed to:
- simplify significantly the conditions tenants must meet; and
- further highlight the shift in emphasis within agricultural policy towards the environment.
Succession rules for AHA tenancies: Comment
These changes should be considered alongside the existing succession requirements, which have not been altered or repealed. Eligibility criteria, such as the livelihood test, remain in place. Therefore, a potential successor must carefully evaluate the operation and organisation of their farming enterprise. In each instance, whether the requirements are satisfied depends on the facts and circumstances. Consequently, professional advice should always be sought as early as possible.
Landlords might find the changes less favourable, as their ability to recover vacant possession on the current tenant’s death could be reduced. However, the statutory position is only part of the picture. Landlords can always make a commercial offer to the tenant to replace their AHA tenancy with a fixed-term Farm Business Tenancy (or similar). This approach may provide the landlord with peace of mind and a better Inheritance Tax position.
Finally, it is crucial to remember that strict statutory time limits for serving notices under the AHA remain in force. Therefore, neither landlords nor tenants should delay seeking professional advice in the event of proposed retirement or death.