Farm rents are falling but need to come down more

The Tenant Farmers Association has produced evidence showing reductions in farm rents are occurring but that there is a need for these to go further.

TFA Adviser Katy Fox said “Analysis of rent settlements on Agricultural Holdings Act tenancies in the year to April 2016 and referred to the TFA’s Rent Databank, shows downward movement across most sectors of the industry”.

“Rents in the dairy sector have seen the largest decreases which reflects the current difficulties in that sector. The TFA is aware of a number of reviews on dairy farms that have yet to be settled and where the reductions that tenants are pressing for are clearly justified,” said Katy.

The evidence has been put together in an article which also points to reductions for Farm Business Tenancy (FBT) reviews.

“Again rents in the dairy sector have seen the largest downward movement since 2015 but it is FBT rents in the arable sector that have seen the strongest downward movement over the last three years with decreases of 15% on average for rent settlements reviewed in the year to April 2016,” said Katy.

“There has been strong resistance from landlords to any rent reductions and the cost of going to arbitration has also had a dampening effect on rent review activities originating from tenants. However where tenants are arguing their case reductions are being achieved and there is no reason, if current market conditions prevail, that these reductions should not become more frequent and deeper,” said Katy.

“Commodity prices have dropped substantially since three years ago and volatility in output and input prices should be taken into account when settling rents. Too often we are seeing this information being ignored by landlords who instead rely on comparable rents. It is vital that all relevant factors are looked at,” said Katy.

“In cases where a rent was properly reviewed three years ago and the character of the holding along with terms of the tenancy have not changed, given comparable rents are static or falling, the only change has been the major drop in commodity prices which has resulted in the related earning capacity of holdings being greatly reduced. Tenants with these circumstances can present a strong case to argue for rent reductions and should be doing so,” said Katy.

Get Our E-Newsletter - breaking news to your in-box twice a week
Will be used in accordance with our Privacy Policy

About The Author