Tenants considering retiring or planning for succession in the next five years are being advised to plan for changes, after the Government amended the Agricultural Holdings Act (AHA) earlier this month (June 2021).
The new regulations for England, which have been made under the Agriculture Act 2020, will apply from 2024 and will see changes to the rules on succession.
The main change will be the removal of the commercial unit test, which had previously prevented some successors with larger businesses (separate from the tenancy), from taking on the tenancy. The removal of this previous barrier to succession will widen the opportunity for larger businesses to secure tenancies going forward.
The eligibility tests will still require the applicant to prove a close relationship with the tenant and pass a principal source of livelihood test. However, the suitability test is being tightened up to require the applicant to prove how they are going to farm the holding commercially, with or without other land, considering the need for higher standards of efficient production and care for the environment.
The test will consider the applicant’s experience, training and skills in business management, financial standing and character.
Commenting on the changes, Partner and Chartered Surveyor Matthew Anwyl at leading property consultancy Berrys said: “The new suitability test introduces a higher bar for those wishing to succeed to a tenancy.
“It is now not enough to just demonstrate you can farm and have the experience; you will have to demonstrate your commercial ability to be able to farm the holding as well as the ability to farm in a manner that cares for the environment.
“Abolishing the commercial unit test will also pave the way for farmers operating on a larger commercial scale to succeed if all the other conditions are met.”
Mr Anwyl added: “If you have an AHA agreement and are starting to think about the next generation, then it is vitally important to start preparing for the changes now.
“It is essential you consider which set of rules are most favourable to your circumstances. One of the rules requires the applicant to demonstrate their income source for the previous five years, so acting now and planning will ease the process from 2024 onwards.”
Mr Anwyl also warned of the importance of planning for changes with regards to the Basic Payment Scheme (BPS), which will see payments halved by 2024 and removed in 2027.
“BPS is the elephant in the room. By 2027 the payments will be gone, so it is important to look at how you are going to replace BPS; look at what your cash needs are and get a handle on your costs, budgets and business overall.”