Agricultural landlords and tenants: a match made in heaven? Perhaps not, according to Baroness Rock’s report on the need for a thriving agricultural tenanted sector in England (The Rock review: Working together for a thriving agricultural tenanted sector, October 2022). Rock found many examples of high-handed behaviour in the sector by landlords, tenants and their professional advisers.
Two recommendations arose from this. Firstly, the industry should agree a code of practice to guide the relationship between landlords and their tenants, and the conduct of their advisers. Secondly, the Department for Environment, Food and Rural Affairs should create a new tenant farming commissioner for England. Defra has recently undertaken a selective consultation about the introduction of a commissioner for England.
Defra asked the new Farm Tenancy Forum, led by rural chartered surveyor Julian Sayers, to prepare a new code of practice for England. The FTF set up an expert working group – some groundwork having already been undertaken by the Royal Institution of Chartered Surveyors – which includes representatives of landowners (the Country Land and Business Association), tenant farmers (the Tenant Farmers Association), farmers (the National Farmers’ Union), chartered surveyors and agricultural valuers (RICS and the Central Association of Agricultural Valuers), the Agricultural Law Association and institutional landowners. The group is chaired by chartered surveyor Matthew Morris of the Duchy of Cornwall estate.
The FTF has authorised wider industry consultation on the draft Agricultural Landlord and Tenant Code of Practice for England. It is hoped the code will come into effect as soon as April this year.
The draft code
The draft code is a relatively short document, just four or five pages. No attempt is made to explain the law of agricultural tenancies in England. This is different from the Scottish tenancy code, which does offer extensive narrative on the law itself, and is published in several different sections.
The draft code includes a series of statements about what landlords, tenants and their advisers should (or should not) do. These are meant to be minimum standards. Underpinning the code are three principles of clarity, communication and collaboration. Structured around key events in the lifetime of most tenancies, the code covers:
- Grant of tenancy, tenancy selection and agreement of terms. Tenancy terms should no longer be offered on the basis of “take it or leave it”.
- Routine engagement should be a feature of all tenancies, although it is for the parties to agree what this will look like. The important thing is to keep in touch outside the normal round of rent reviews and notices.
- Rent should be paid on time and landlords should consider carefully the circumstances of any tenant who has difficulty in paying the rent in full and on time.
- Rent reviews should start in good time – negotiations are too often left too late. The party initiating the review should propose a timetable for negotiations.
- Repairs and improvements should be a topic of regular discussion and review.
- Consent for new initiatives by tenants should not be withheld automatically or unreasonably, although taxation status, impact on capital value and longer-term estate plans may all count as reasonable grounds for refusal.
- Behaviour at the end of a tenancy, whether it is terminated, renegotiated or renewed.
The draft code recognises that disputes will still arise from time to time, and therefore urges the parties to stick with the code’s principles of clarity, collaboration and communication. Dispute resolvers are invited to have regard to conduct under the code when considering an award of costs.
Professional conduct
The code also contains a section on the role of professional advisers and agents. This is important, because they were seen as being a large part of the problem in the Rock review. The code urges landlords and tenants to seek proper professional advice. Advisers are encouraged to make their clients aware of the code and to encourage compliance – to the point of perhaps declining instructions where a client chooses wilfully to ignore the code. Complaints and other redress procedures should be made freely available to both parties to a tenancy, whether they are the client or not. This is an important practical measure in ensuring that complainants can engage with the RICS professional standards department for example.
One formality at the end of an agricultural tenancy is the agreement of compensation to the outgoing tenant for improvements and residual benefits (for example, unspent fertiliser which has been spread, or established crops which transfer to the new tenant), offset of course by dilapidation claims. It has been common practice on some farms for one valuer to represent both the landlord and the incoming tenant in these negotiations – because the incoming tenant will often be picking up the bill for the improvements and the responsibility for correcting the dilapidations. This can, however, be a conflict of interest as the interests of landlord and new tenant are rarely precisely aligned, and it is a relationship in which the upper hand definitely lies with the landlord. The draft code proposes that all three parties (landlord, outgoer and incomer) should be represented separately in these situations.
Will it bite?
At this stage, the proposed code is a voluntary arrangement agreed within the industry. Scotland’s code has a legal footing and a tenant farming commissioner to supervise it. Early experience in Scotland is that the legal procedures have never been invoked, but the fact they are there and under the supervision of a commissioner has brought a leavening of sense to otherwise stormy negotiations. There are, however, signs that the RICS may adopt the new code as a professional statement, at least binding chartered surveyors to its terms.
Charles Cowap is the lead author of the draft Agricultural Landlord and Tenant Code of Practice for England