In 2022, the Rock Review was undertaken to investigate how tenant farmers could be better supported to ensure a resilient agricultural tenanted sector for the future. Within it, the review’s recommendations pinpointed areas of concern that the Government should address to ensure tenant farmers were not disadvantaged long-term.
The review was commissioned by the Government with two key objectives – to explore how the new government financial schemes could be made accessible, open and flexible and to explore longer term changes that would help achieve a strong tenanted sector.
In response to this investigation, it seems the first steps to addressing the concerns highlighted have been made, with the Government recently announcing a new code, the Agricultural Landlord and Tenant Code of Practice for England, which has been founded on three key principles; clarity, communication and collaboration.
In this article, we shall detail the code’s most important points, helping our clients gain a better understanding of what it hopes to achieve and the impact this will have on the sector moving forward.
The review’s findings
The review found that an open and collaborative approach between tenants and landlords was not the norm when it comes to Farm Business Tenancies (FBTs). In practice, off the shelf standard forms are often used without the flexibility that they were designed to deliver.
It also found that the average length of FBTs was less than four years, this is driven to some extent by the uncertainty of what public schemes will pay, who can enter such schemes and who they will target. In addition, the review found that the current tenancy legislation and tax incentives did not align with the Government’s policy of farmers delivering long-term environmental benefits and that changes are required to the current tenancy legislation and tax incentives to allow landlords and tenants to thrive and access future schemes.
Tenant farmers have a high level of reliance on government support. Without access to this support many tenanted businesses run the risk of financial hardship. The report suggested that long-term tenancy agreements would be beneficial to the tenant allowing them to access payments that require longer-term agreements.
Upon completion of the review, a number of key concerns were raised that were to be addressed as a matter of urgency. These included:
- Improving the tenant-landlord relationship
- Ensuring the growth and viability of businesses in the tenanted sector
- Preventing tenant farmers from going bankrupt
- Minimising the loss of land from the tenanted sector
- Reducing scheme complexity whilst ensuring flexibility and access for tenants
- Public support for permanent land use changes, including tree planting and the creation of habitats
Ultimately, the review concluded that the tenant-landlord relationship should be mutually beneficial, stating that both sides thrive when they are both successful. As such, both parties needed to work together to ensure a bright future for food production, security and the wider environment.
What does the code cover?
The announcement of this new code appears to show the Government’s intent to take the findings of the review seriously and implement a strategy to help address the concerns outlined.
Throughout the code, the term ‘should’ is used to describe the minimum standards expected of landlords, tenants and their professional advisors unless there are reasons to suggest otherwise. As such, the code is voluntary, with landlords and tenants bound by the terms of their agricultural tenancy agreements and forced to work within an existing framework of law and regulation. The code does not replace or replicate these minimum legal obligations and does not extend the law or create new legal obligations to be contended with.
Instead, the code seeks to foster improved working practices in the interests of a thriving agricultural tenanted sector and professional advisors will be bound by their professional duties to their clients – the code seeks to move the industry beyond these minimum requirements.
Given its voluntary nature, there will be some uncertainty surrounding enforcement with many people wondering how compliance can be achieved if there are no ‘teeth’ to back it. There is a parallel with the lease code for commercial property, which again whilst voluntary, has over time seen some uptake by landlords and tenants due to the benefits compliance delivers in terms of transactions and efficiency. The financial benefits to the parties have therefore resulted in a ‘voluntary’ code becoming widely used within the sector, which may also happen here.
Furthermore, if a dispute arises between a landlord and tenant in an agricultural relationship, it is likely that any arbitrator, mediator our court will take into account the code’s provisions and how it should be applied to the dispute at hand.
Whilst this is a positive step forward meaning that important conversations are being had, due to the code’s voluntary basis, it relies on the parties agreeing to comply with the recommendations. It may be argued that the current legislations needs to be revised to incorporate the recommendations of the code to enable it to have a real and tangible impact. The Rock Report highlighted that there have been “no major legislative change to update the tenant sector in England for the past 27 years. The world, county and farming has move on significantly in that time. If the government wants to transform agriculture, it will need to support the transformation of the tenanted sector”.
Legal support may be needed…
Dealing with a wide range of matters from routine communication between landlords and tenants, the payment of rent and rent reviews, termination and renewal and general disputes, the code promises to address many of the key findings that came from the Rock Review.
Of course, time will tell how effective the code is and whether or not it is widely adopted. In any case, it is still a positive development for the industry as the Government has shown a willingness to take the review’s findings on board and act accordingly.
For those landlords and tenants that are still somewhat confused by the details of the code and what it entails, we can offer advice to ensure that any future transactions comply with the code, whilst reworking existing arrangements and relationships to achieve compliance.
Similarly, if there are any ‘sticking points’ that may cause future problems, then our team of experienced agricultural legal specialists will work with you to iron these out.
