by Derek Wood
Parliament first gave security of tenure to tenant farmers in 1947. In 1976 it was enlarged to enable appropriately qualified members of a tenant’s family, on the tenant’s death, to enjoy a tenancy of the holding for two further generations. It has always been regarded as a matter of high policy by successive Conservative and Labour governments. In 1984 the Government decided to exclude (with certain exceptions) rights of succession to tenancies granted after July 12 1984 and to allow succession to take place on the tenant’s retirement.
That decision was taken only after lengthy discussions with representatives of all interests within the farming industry and the professions concerned with it. The discussions covered many facets of the relationship between landlord and tenant, particularly the assessment of farm rents. The Government was not willing to change the law at all until its proposals were broadly agreed in advance.
Even at that time no one called into question the basic principle that agricultural tenants should have security of tenure.
Interpretation of the Agricultural Holdings Acts by the courts has been informed by an awareness of the public importance of the system. The rationale of the legislation was explained by the House of Lords in Johnson v Moreton [0] AC 37; (1978) 247 EG 895. At p 52 Lord Salmon said:
During the last war, the submarine menace was such that it would have been virtually impossible to import into this country any more goods vital for our survival than we, in fact, did. Accordingly, it is extremely doubtful whether we could have survived had it not been for the food produced by our own farms. Even in 1947 when the Agriculture Act of that year was passed, food rationing was still in existence. It must have been clear to all that it was then and always would be of vital importance, both to the national economy and security, that the level of production and the efficiency of our farms should be maintained and improved. This could be achieved only by the skill and hard work of our farmers and the amount of their earnings which they were prepared to plough back into the land from which those earnings had been derived. A very large proportion of those farmers were tenant farmers. They were tenants because they did not have the necessary capital to buy land or they could not find any land which they wanted that was for sale — or for sale at a price which they could afford. In spite of sections 23 and 25 of the Act of 1923 which had put them in a somewhat better position than did the common law, the sword of Damocles was always hanging over their heads …
Accordingly there was no great inducement for these farmers to work as hard as they could, still less to plough money back into land which they knew they might well lose sooner or later.
The security of tenure which tenant farmers were accorded by the Act of 1947 was not only for their own protection as an important section of the public, nor only for the protection of the weak against the strong; it was for the protection of the nation itself.
Lord Hailsham, never to be outdone, said at p 59:
At least since the 1880s successive Parliaments have considered the fertility of the land and soil of England and the proper farming of it as something more than a private interest. Fertility is not something built up as the result of a mere six months’ activity on the part of a cultivator, which was all the period of notice given by the common law to the individual farming tenant, by whom in the main the land of England was cultivated then, as now, mainly under a yearly tenancy. It takes years (sometimes generations) of patient and self-abnegating toil and investment to put heart into soil, to develop and gain the advantage of suitable rotations of crops, and to provide proper drains, hedges and ditches. Even to build up a herd of dairy cattle, between whose conception and first lactation at least three years must elapse, takes time and planning, whilst to disperse the work of a lifetime of careful breeding is but the task of an afternoon by a qualified auctioneer. Even within the space of a single year the interval between seed time and harvest, between expenditure and return with all the divers dangers and chances of weather, pest or benignity of climate is sufficient to put an impecunious but honest cultivator at risk without adding to his problems any uncertainty as to his next year’s tenure.
In the circumstances Lord Hailsham found security of tenure to be “a public interest introduced for the sake of the soil and husbandry of England of which both landlord and tenant are in a moral, though not of course a legal, sense the trustees for posterity”.
Lord Simon and Lord Edmund-Davies agreed with these general sentiments. Lord Russell at p 73 made these observations:
So far as concerns the starting point of principle I do not consider that Parliament conferred this right upon tenant farmers exclusively for their benefit as individual citizens. It was plainly conferred for the public benefit. It is of immense importance to the economy that agriculture should be properly and diligently pursued, that tenant farmers who so pursue it by putting their energy and resources into the land should be encouraged to continue to do so by the knowledge that only in very special circumstances can they lose their occupancy.
The question raised in the case itself was whether an ingenious clause inserted into a 10-year lease of a farm in Warwickshire which, if successfully operated, would have prevented the tenant from claiming security of tenure, was legally enforceable. It was held void as being contrary to public policy. In a word, tenant farmers who enjoy the protection of the Agricultural Holdings Acts cannot bargain away their statutory rights.
The decision in Johnson has been followed twice by the Court of Appeal. In Featherstone v Staples [6] 1 EGLR 6; (1986) 278 EG 867 landlords had, through the means of a wholly-owned company, entered into a farming partnership with two working farmers, and they granted a tenancy of the holding to the firm. The landlords’ company was a sleeping partner, but there were provisions in the partnership documents which purported to enable the company to prevent the firm from claiming security of tenure in the event of the service of a notice to quit. The provisions were held to be void.
In Gisborne v Burton [8] 2 EGLR 9; [1988] 38 EG 129 the landlord had attempted to exploit the well-known weakness in the law relating to subtenancies. A subtenant of an agricultural holding has no security of tenure against the freehold owner when the head tenancy has come to an end. Accordingly, the landlord granted a head tenancy to a nominee (his wife); and she granted a subtenancy to the farmer who was to cultivate the holding. When a notice was served to determine the head tenancy it passed unchallenged, and it was said that the farmer, as a mere subtenant, was bound to vacate. By a majority the court held that the interests of the farmer could not be bargained away by a transaction of such transparent artificiality.
Not all contractual arrangements made between landowners and farmers for the working of the land attract security of tenure. The Acts themselves have always recognised that seasonal grazing and mowing agreements should not be protected. They have also empowered the minister to give his consent to the grant of an unprotected tenancy in limited situations. In addition, it has been established since the decision of the Court of Appeal in Gladstone v Bower [0] 2 QB 384 that, because of the particular way in which the relevant provisions of the Acts are phrased, a new tenancy granted for a fixed term of between 12 and 24 months will not be protected. Alongside these arrangements, landowners and their advisers have exercised their ingenuity to develop alternatives to a fully protected letting. Limited partnerships, sharefarming and agricultural contracting are particular favourites.
The decisions which I have discussed above have sent more than a frisson of anxiety through the legal community. How many more of their long-cherished schemes are going to be overwhelmed by the same public policy considerations which were so eloquently described in Johnson, and will be held, after all, to create protected tenancies? I do not propose, in this paper, to enter into the legal niceties of any of these alternative schemes, and give an opinion as to which are more and which are less likely to fall to the axe which has been so finely honed by the judges. I do, however, make this general observation about all of them: their unifying characteristic is that they are for the short term. They place the burden of the care, cultivation and improvement of the land in the long term upon the shoulders of the owner of the land. The farmer’s interest is limited to the short-term profitability of the business activity which he currently carries on. If the underlying quality of the holding fails to match his present expectations, he will simply move on.
As the law stands at present, the existing contractual set-up is polarised between two extremes. On the one hand there is the fully protected tenancy, in many cases extending into a second and third generation within a family, with its statutory regime for rent review in accordance with a special formula every three years, and attracting full compensation at the eventual termination of the tenancy. On the other hand there are the short-term business arrangements imposing the whole burden of long-term management and improvement upon the owner.
Since 1980 dramatic changes have taken place in the economy of the countryside. Instead of a food shortage we have a food surplus. Farmers are being actively encouraged to diversify into other types of business, particularly leisure and recreation, to broaden their commercial base. Perhaps it is too early to say that our national security is less at risk than previously, but many think that recent events in Eastern Europe have already had that effect. Have we, in the light of these changes, reached a stage when we can introduce more flexibility into the system?
Some criticisms
I look upon that system purely as a lawyer, and from that point of view it is tempting to make some easy criticisms. First, there is the manner in which it operates. It requires any landlord who wishes to bring a tenancy to an end to serve a notice to quit of not less than 12 months’ duration (with certain exceptions). Second, it defines a relatively narrow set of circumstances in which, alone, the notice to quit can operate. The reason why it takes this form is purely historical. From early times the traditional method of letting land was from year to year, the tenancy traditionally beginning either after harvest, at Michaelmas, or at the beginning of the growing season, on Lady Day. The centuries-old rule of common law was (and still is) that such a tenancy can be terminated by the landlord on not less than six months’ notice, expiring on any anniversary of the tenancy. The notice can be given at any time during the tenancy, after one or 51 years. On the expiration of the notice, before statute intervened, the tenant was bound to vacate, irrespective of the length of time he had been there — and he might or might not have a claim for compensation for improvements, tenant-right and other similar matters, according to the custom of the country.
Parliament first became interested in the position of tenant farmers in 1875 when, by the Agricultural Holdings (England) Act of that year, a statutory code of compensation was introduced. The similarly named Act of 1883 extended the common-law period for a notice to quit from six to 12 months, unless the parties otherwise agreed, but did nothing to interfere with the precarious concept of the letting.
Tenancies for fixed terms also continued to be granted, but they were the exception. Under the common law applicable in England and Wales (but the position is different in Scotland) such tenancies automatically expire at the end of the period without the service of a notice to quit. By the Agriculture Act 1920 fixed-term tenancies were pressed into the ancient mould of yearly lettings. In those cases, too, landlords now had to serve 12 months’ notice expiring on the last day of the fixed period, or any anniversary thereafter.
It was, of course, of some assistance to farmers to be given one full growing season’s notice to quit, rather than a half-season’s; but the Acts of 1947 and 1948 were the real turning-point. Parliament did not, however, ask itself whether the ancient idea of a tenancy from year to year terminable upon 12 months’ notice on any anniversary was a suitable model for the future. It took the system as it found it, and simply required that any such notice to quit had to be submitted, at the beginning, to the minister, but later, and more significantly, to the Agricultural Lands Tribunal for approval, which approval could be given only in very limited circumstances. Special cases were identified in which it was possible for the landlord to avoid a reference to the minister or tribunal; but an attempt to rely upon one of those special cases might itself land the parties in front of an arbitrator.
My first criticism I have already foreshadowed. It is that security of tenure has been engrafted on to a pattern of land holding which was becoming outmoded, and as we approach the end of the 20th century certainly is now. Yet, by a paradox, the greater the degree of protection accorded to it, the more entrenched the tenancy from year to year has become.
My second criticism is directed at the extreme clumsiness of the scheme. It is full of technicalities and traps for the unwary. Notices to quit must specify in particular terms whether the case is being removed from the jurisdiction of the tribunal, and wrong wording or faulty drafting may be fatal. The tenant has to mount his challenge by way of counternotice within strict time-limits, and again the form of the counternotice is critical. There is then the absurdity of alternative procedures. Landlords who have, or believe they have, grounds for obtaining the consent of the tribunal, and in addition grounds for removing the case from the jurisdiction of the tribunal, have to subject themselves and their tenants to two sets of proceedings, with double expenditure. Finally, there is the special case of the tenant who is accused of being in breach of his repairing obligations. There the parties first have to go in front of the arbitrator to ascertain whether any such breach has been established. Then, if it has been, the matter can be referred to the tribunal for a decision as to whether, in all the circumstances, it is fair that the notice to quit should take effect.
I compare this system with the streamlined operation of the Landlord and Tenant Act 1954, which confers security of tenure upon tenants of business premises generally, other than tenants of agricultural holdings. This Act, which is operated daily between countless landlords and tenants of business premises up and down the country, is generally recognised by the business and property investment community to be one of the more successful pieces of legislation in this branch of the law. It starts from the premise that most leases of commercial property are granted for a fixed term of years. Security of tenure for a business tenant, who is not a farmer, means that when his current tenancy comes to an end he can obtain a renewal unless the landlord can show grounds for opposing the grant of a new tenancy. The grounds are familiar and have been proved by experience to be acceptable to commercial landlords and tenants: serious default by the tenant in the performance of his obligations, the availability of alternative accommodation, redevelopment or substantial refurbishment of the premises, or the intention of the landlord to occupy the premises for a business of his own. All matters arising between landlord and tenant on the termination of a tenancy are dealt with before a single tribunal — the High Court or (if the property has a relatively lower rateable value) the county court. The judge will decide whether any grounds asserted by the landlord for opposing the grant of a new tenancy are made out. If they are not, then in default of agreement between the parties the court will determine the duration of the new tenancy, its terms and the rent payable, which is assessed in accordance with a formula based upon open market value.
There are two other relevant features of the scheme for business tenants which I would like to mention. First, business tenants, upon quitting, may in certain circumstances be entitled to compensation for improvements and compensation for disturbance, although the system is far less developed and much less sophisticated than that available to tenant farmers. Second, although the provisions of the Act itself make it perfectly clear that it is impossible for tenants to contract out of the protection of the Act, a procedure is laid down whereby both parties can apply to the court and obtain an order directing that the provisions of the Act shall not apply. The availability of this procedure is severely criticised in some quarters, because judges find it difficult, if not impossible, to refuse an application to contract out when it is presented (as it has to be) by both parties jointly, and cannot know what market pressures were exerted against the tenant inducing him to give up his statutory rights.
There are some obvious differences between the circumstances of agricultural tenants and those of other business tenants. A great many agricultural tenants have their home on the farm. It is the centre of their family life as well as their place of work. Closely connected with that is the fact that the business of a farm is often a family business which involves husbands and wives, their parents and their children. Again, compared with a great many business tenants (but by no means all of them) improvements are planned over a relatively longer term. They may be written off over as many as 20 or 25 years as opposed to five or 10. Again, it is almost impossible for farmers, especially nowadays, to find somewhere else to carry on their business if they have to leave their present holding. That is a problem with which a great many other business tenants do not have to grapple. Clearly, for all these reasons, the establishment of a business on a farm is not something which can be lightly undertaken and, once it is there, it cannot be so easily moved elsewhere.
The future
Nevertheless, despite these many differences, I believe that it is still appropriate for us now to ask the question whether agricultural tenants should be treated, under our law, in a manner which is so markedly different to the approach adopted by the owners and managers of other types of business. Since the commercial distinctions are now being blurred, should the legal distinctions be modified as well? I have these suggestions to make.
First, to revert to what is perhaps the most important difference of all between agricultural and other business tenants, I question whether it is right that the same degree of protection should be accorded to tenants who do not live on the holding as to those who have their home there. Should a tenant be as indissolubly linked to bare land as he is to his homestead?
Second, is there not merit in developing a system of fixed-term tenancies whereby the whole position of the letting can be reviewed at set intervals, but in the meantime it remains undisturbed? As we can see from the example of the Landlord and Tenant Act 1954, such a system does not mean that there is any loss of security of tenure. The tenant can be ousted at the end of his fixed term if — but only if — the landlord has special statutory grounds for opposing the grant of a new tenancy. But during the term the tenant is safe. Agricultural tenants, by contrast, are at risk of receiving 12 months’ notice to quit at any time, provided that the landlord can fortify himself with statutory grounds for making it stick. Whether the annual exposure of an agricultural tenancy to the risk (however remote) of a notice to quit has inhibited investment is a question which has never been explored.
Under the fixed-term regime applicable to other types of business tenancy, the terms of the tenancy can be reviewed and modernised at the end of the term and, if there is to be a new lease, a view can be taken of the further period for which it is appropriate that the tenant should be given his next secure period of occupancy. Once that period is fixed, it cannot be attacked again until it comes to an end. Any change here would of course require careful consideration of the grounds upon which a new letting might be opposed. The particular grounds for refusing a new tenancy under the Act of 1954 might not be fully applicable in the case of tenancies of farmland.
Third, is it possible to develop an effective method of contracting out? As I have mentioned, the judicial proceeding available under the Act of 1954 is imperfect and I do not recommend that it should be followed. If the burden is too great for the minister to bear, is it possible for Parliament to lay down criteria which would enable a tribunal to investigate the full merits and decide whether in any given case contracting out would be appropriate?
Fourth, the present system for resolving disputes over security of tenure is seriously flawed by technical and arbitrary rules which are capable of cheating both landlords and tenants of their substantive rights; and the existence of two alternative procedures leading to two quite different types of hearing before either tribunal or arbitrator — or, in one nonsensical case, both — is clumsy and difficult to justify even on grounds of expediency. Is there not a strong case for developing a single but flexible type of process for the resolution of all disputes between landlord and tenant on the termination of a tenancy, including all questions of notice to quit, the renewal of tenancies, the grant of new tenancies to statutory successors on the retirement or death of the tenant, and all the other traditional claims?
The changes which are taking place in the rural economy have created a new business climate which is diverging more and more from the circumstances of 1947 and 1948. I do not think that security of tenure of agricultural holdings can be abolished on any significant scale. I am convinced, however, that it needs to be reorganised to suit modern circumstances. If it becomes fossilised it will lose the confidence of landlords and tenants, and that will have a detrimental effect upon the entire system of letting.
