Agricultural Landlord and Tenant Code of Practice for England: A new era?

Just under a year after the government’s response to the Rock Review was published, the Farm Tenancy Forum, appointed by the government to consult, feedback and provide a working plan, has launched the Agricultural Landlord and Tenant Code of Practice for England.

The Code’s mission statement is to support landlords and tenants, and their professional advisers, to establish and maintain productive commercial relationships, established through dialogue and communication with a sense of fairness and proportionality.

We summarise the main areas of the code and consider how it could affect new tenancy agreements and what would happen if the code is not followed.

Overview

Landlords and tenants are still expected to comply with the terms of their written tenancy agreement, along with all obligations imposed by law. The Code does not extend the law or create new legal obligations.

There are three key principles:

1. Clarity: the parties should be clear on their intentions, expectations and their positions if problems arise.
2. Communication: the code requires open, timely and considered communication at all times between the parties.
3. Collaboration: a collaborative and cooperative approach is required, based on the belief that the parties can achieve more when they work together, rather than against each other.

The Code deals with expectations before a tenancy agreement is granted, during the tenancy and on and after termination.

Before a tenancy is granted

Where a tenancy is offered on the open market, the landlord (or their agent) should provide accurate and fair information of the land being let. Complete openness on the condition of the land and the key terms should be stated at the outset. In return, tenants are expected to outline their farming proposals, their experience and qualifications, the rent they are offering and to raise any concerns or proposals at the earliest opportunity.

During the tenancy

The parties should seek to meet and discuss matters on an ongoing basis.

The landlord should not be too quick to act against a tenant if they are late to pay the rent; they should listen to the tenant’s reasoning and consider it appropriately.

Rent reviews should be conducted openly and fairly and not obstructively. Points of common interest should be discussed. The landlord should consider the tenant’s immediate requirements in the context of the landlord’s longer-term plan for the future of the holding or the wider estate.

In the context of repairs and improvements, the parties should collaborate in identifying any issues and sort them out. Parties should review any future need for investment in the holding from time to time and requests for improvements by tenants should not be refused unnecessarily.

The landlord should not stand in the way if a tenant wishes to enter into environmental schemes as it is not in the interests of the industry for such schemes to be excluded. The Code suggests that tenancy agreements should include the ability for tenants to explore new schemes, without a blanket ban on entering into such schemes. Similarly, if a landlord wishes to carry out environmental works on the holding, a sensible discussion should occur.

Our own template Farm Business Tenancies have already provided options for the parties to cooperate over exploring such schemes, in the spirit of openness and collaboration. The Code will no doubt encourage others to follow suit.

Termination and renewal

The Code states that the parties should make their intentions on renewal or quitting the tenancy clear in good time. Early dialogue regarding succession for tenancy agreements with such rights can save substantial expense for both parties.

Where matters cannot be settled between the parties, timely reference to dispute resolution should be initiated and the parties should continue to define and refine issues in a constructive manner.

The role of professional advisers and agents

The Code states that professional advisers acting for landlords or tenants should make their clients aware of this code and should encourage them to abide by it.

It is also suggested that advisers may also consider the desirability of accepting instructions from clients who unreasonably refuse to abide by the Code.

A new era?

It is clear that attitudes towards the landlord and tenant relationship within the agriculture sector are changing. There is a move away from acting only in the best interest of one party, to a more collaborative approach. This is consistent with how other issues affecting the agriculture industry are changing, particularly with issues such as natural capital and environmental payments.

Gone are the days of serving a notice one day after the rent payment is missed, or commencing arbitration for a rent review whilst substantive discussions are ongoing. Often such routes lead to unnecessary professional costs to be incurred and the parties become more entrenched, the further those costs spiral.

Whilst the Code is entirely non-binding unless it is expressly incorporated into the tenancy agreement, it is obviously going to be a relevant document that will be considered by those resolving disputes, such as arbitrators, experts and the civil courts, and they may look dimly upon a landlord or a tenant if they have not followed or considered the Code. The Code refers to the fact that an arbitrator or expert can rely on the Code when considering the parties conduct and whether or not to make a costs award.

Beyond those measures, enforceability of the Code may be more ambiguous even where it is expressly referred to in the tenancy agreement; however, it is clearly intended to reset agricultural landlord & tenant relationships and will doubtless go some considerable way to achieve this.

Click here for a copy of the Code.