Introduction
1. The proposal for the Regulatory Reform (Agricultural
Tenancies) (England and Wales) Order 2006 was laid before the
House by the Department for Environment, Food and Rural Affairs
(Defra) on 30 March 2006.
2. The purpose of the Proposed Order is to amend
the Agricultural Holdings Act 1986 and the Agricultural Tenancies
Act 1995 in order to remove burdens on the landlords and tenants
of agricultural land and on persons appointed to arbitrate in
disputes between them.
3. The proposed Order would:
(Proposal 1)
- Expand the range of activities from which relatives of a tenant
of agricultural land could derive income without jeopardising
any rights of statutory succession to a tenancy;
(Proposal 2) - Remove
existing restrictions on the eligibility of parties to a tenancy
agreement for compensation for improvements (in the case of tenants)
or dilapidations[1] (in
the case of landlords) at the end of that tenancy;
(Proposal 3) - Bring the
provisions of the Agricultural Holdings Act 1986 relating to the
management of the arbitration of disputes over tenancies into
line with arbitration mechanisms of the Arbitration Act 1996;
(Proposal 4) - Amend statutory
provisions which govern the holding of rent reviews for agricultural
tenancies;
(Proposal 5) - Make it
easier to add new land to an agricultural holding which is subject
to a tenancy under the Agricultural Holdings Act 1986, without
that necessarily voiding the existing tenancy agreement; and
(Proposal 6) - Abolish
the upper limit of 24 months for a notice to quit a tenancy under
the Agricultural Tenancies Act 1995, so that indefinitely long
notice could be given.
4. Various related repeals and consequential amendments
would also be made by article 18 and Schedules 1, 2 and 3 to the
proposed Order.
5. The Department considers that the Agricultural
Holdings Act 1986 and the Agricultural Tenancies Act 1995 in their
present form have the effect of restricting the freedom of tenants
to diversify their business into non-agricultural activities and
also prevents parties to tenancies of agricultural land from otherwise
restructuring holdings to the advantage of tenants, landlords
and the protection and enhancement of the environment. The aim
of the RRO is therefore to create "a more modern legislative
framework which would encourage flexibility between parties and
encourage opportunities for tenant farmer diversification".
In particular, it is intended that there be greater equality of
operation as between tenant farmers and owner-occupiers in terms
of their freedom to restructure and diversify their businesses.
6. The Department views this objective in a context
of the historical development of agricultural tenancy legislation
since the Second World War: unlike the post-war period, there
is now no need to focus on increasing the quantity of food grown;
EU farm subsidies are less related to agricultural production;
diversification is an increasingly important part of ensuring
the sustainability of many farms; and there are growing demands
for land to be managed in a more environmentally sensitive way.
7. A series of Acts beginning with the Agriculture
Act 1947 were passed in order to protect tenant farmers and to
establish rights of succession to a tenancy where specified conditions
were met, thus allowing succeeding generations to apply for a
tenancy when the incumbent tenant retired from farming, or died.
8. The Agricultural Holdings Act 1986 ("the
1986 Act") provides for rights of statutory succession in
respect of tenancies granted before 12 July 1984, provided certain
criteria are met, including that the successor has gained the
major part of his income from agricultural work on the holding
in the years immediately prior to application for succession.
It also provides detailed machinery for rent reviews and related
arbitration procedures. It establishes an Agricultural Land Tribunal
to examine disputes between landlords and tenants relating to
contested statutory succession and notices to quit.
9. In 1991 the Government undertook a public consultation
on proposals further to reform and simplify agricultural tenancy
legislation against the context of continuing decline in the availability
of agricultural land to let. These proposals were jointly developed
by the Government in association with a body representing agricultural
landowners and tenants called the Tenancy Reform Industry Group
("TRIG"). Discussion between the Government and this
Group led to the Agricultural Tenancies Act 1995 ("the 1995
Act"), which established Farm Business Tenancies. These tenancies
permit tenants to diversify away from agriculture within the terms
of their tenancy without the tenancy needing revision.[2]
The Act also simplified the statutory dispute resolution machinery.
10. In 2001, the Defra commissioned Plymouth University
to investigate how far the 1995 Act had succeeded in meeting its
declared objectives:
- to encourage more lettings;
- to increase opportunities for new entrants;
- to promote economic efficiency by making the
market for rented land more flexible and responsive to market
forces.
11. The conclusion of the research was that the 1995
Act had not been successful in achieving the second and third
objectives, largely because tenancies were too short for tenants
to be encouraged to commit to long term investment.
12. In November 2002, the Government "re-convened"
TRIG with an expanded membership to consider recommendations for
legislative reform from the Plymouth University study and from
the Government's own Policy Commission on the Future of Farming
and Food, which was established to report on lessons from the
Foot and Mouth disease outbreak in 2001. TRIG reported in June
2003 and the Government accepted its recommendations for legislative
reform, which are enshrined in this RRO proposal.
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