With tenant-landlord dilapidation disputes reaching a nine-year high, the Tenant Farmers Association has recently come forward to warn people of the potential issues that can occur upon the conclusion of a tenancy agreement.
Used to describe the depreciation in the value of a farm holding (or at the end of any tenancy), dilapidations can come as a result of a tenant not upholding their maintenance and repairing obligations, or where items need to be replaced due to damage caused by the tenant.
In both cases, the tenant’s actions have resulted in value being lost and dilapidations are used as a way for the landlord to claim compensation, with some of the most common examples being missing gates, damaged fencing and untidy hedgerows.
Whilst on the face of it, dilapidations seem like a fair and logical way for landlords to protect the long-term value of their land, the recent increase in claims has raised questions around the severity and strictness of certain clauses, with some landlords seeing it as an opportunity to impose unnecessary charges. In light of this news, what should tenants watch out for and what action can landlords take to prevent delays or further issues?
The different types of tenancy
It’s important to remember that dilapidations are handled differently based on the type of tenancy that is in place – if the individual has an Agricultural Holdings Act (AHA) 1986 tenancy, then there is a specific process that must be followed.
Under Section 83 of this Act, the landlord must provide the tenant with a written notice within two months of the agreement’s conclusion and claims must be settled within eight months before the case goes to arbitration. Typically, compensation will then be calculated based on the reasonable cost of rectifying any damage or deterioration. Examples of which could include repairing and clearing ditches, repairing fencing and replacement of any gates.
However, the situation is a lot less clear for those individuals with a farm business tenancy (FBT), as the 1995 Agricultural Tenancies Act under which they are granted makes no provision for dilapidations. Instead, both parties must include their own carefully worded clauses to specify how repairs disputes should be resolved.
Unfortunately, this approach can lead to grey areas with each agreement different in the sense that it contains its own set of uniquely worded clauses. In some serious cases, landlord’s agents have put together claims of tens of thousands of pounds – unreasonable claims that tenants have been forced to fight in the courts due to a lack of contractual clarity.
Mitigating the risks appropriately
For those in the process of securing an FBT, there are a number of important steps that should be taken to mitigate the risks associated with post-termination dilapidation claims. The first is to double check the wording thoroughly as some landlords will try and insert terms that benefit them once the tenancy ends.
‘Put and keep’ clauses have become increasingly popular in agreements for farms where there has been little or no investment in recent years, as it requires the tenant to first put the holding into a good condition and keep it that way. Of course, this can be a huge burden for some tenants and landlords will really push the envelope at the end of the tenancy to enhance the land. However, the extent of this clause can be managed through the use of careful wording, such as ‘reasonable endeavors’ to prevent excessive demands.
The Tenant should negotiate that a schedule of condition is added to the lease to limit the repairing obligation. This schedule will detail the current state of the holding to be used as a point of reference upon the conclusion of a tenancy agreement.
Finally, tenants should always seek professional support before signing an agreement so that specialists can check the various terms and conditions – this will give you peace of mind that everything is in order and that there will be no nasty surprises come the end of the tenancy.
Landlords must be proactive
Whilst there have been some well-documented examples of landlords manipulating the system by using carefully worded clauses to win significant dilapidations claims, there are others that have genuinely suffered detriment as a result of a tenant’s behaviour.
Of course, cases like these demonstrate why it is so important to spend time drafting a carefully worded agreement, inserting clauses and provisions that ensure your land is protected. Achieving this relies on proactivity, as steps must be taken at the very outset to ensure the agreement covers all the key bases.
It is for this reason that many landlords choose to seek legal support early in the process, ensuring no stone is left unturned and that all terms are correctly worded. Doing so also helps prevent any unnecessary delays and the potential for litigation, both of which can be extremely costly.
Whatever the situation or circumstances may be, it is always best practice to ask an experienced legal team for advice and support, as it helps relieve a significant amount of stress and pressure, whilst guaranteeing adequate security throughout.
Seek legal advice before it’s too late…
Repairing obligations are one of the most difficult areas in landlord and tenant law, as every tenancy is different and claims cannot be dealt with through a ‘one size fits all’ approach.
Even for those individuals with an AHA tenancy where fallback provisions exist, there is still the potential for things to go wrong if care is not taken. Even if a landlord has failed to keep up with their own repairing obligations, they can still pursue dilapidations if the tenant fails to meet theirs.
Examples like these demonstrate why it is so critical for tenants and landlords to seek legal advice from the outset, taking steps to create thorough agreements with clauses that ensure no problems occur later down the line.
If you’d like support reviewing or creating a tenancy agreement, then contact our in-house team of experts and book a consultation.
