- By Annie Garner Hutton
Letting farmland can provide landowners with an income while ensuring their land continues to be managed and maintained. But deciding to let land is about more than finding someone willing to pay for it.
There is a host of decisions to make before a tenancy begins, from choosing the right tenant and deciding how much land to let, to agreeing who will be responsible for repairs and maintenance. Getting those decisions right at the outset can make the difference between a straightforward, productive tenancy and problems further down the line.
Here are some of the most common mistakes I see, and how landowners can avoid them.
1. Choosing a tenant based on rent alone
It can be tempting to choose the prospective tenant offering the highest rent, particularly when there’s strong demand for farmland. But rent is only one consideration.
I would also look at the tenant’s experience, business model and plans for the land. References from previous landlords, farm accounts from the past three or four years and a business plan can all help build a picture of whether the proposed tenancy is sustainable.
It’s also worth being open-minded about who might make a good tenant. Young farmers can sometimes be dismissed because they don’t have significant capital behind them, but that doesn’t necessarily mean they should be ruled out. Looking at their business model and ideas can reveal a different picture. A reliable tenant with a sound business and a good approach to looking after the land may ultimately be a better choice.
2. Not being clear about what you want from the land
Before advertising land, landowners need to ask themselves why they want to let it in the first place. Is the priority simply to generate an income? Is it because they no longer want to actively manage the land? Or are there other plans for the future?
Future intentions matter. A landowner may be considering diversification, development, environmental schemes or another use further down the line. A long-term tenancy can reduce that flexibility, so it’s important to think carefully about the length and structure of the agreement.
Does the whole holding need to be let? There may be circumstances where letting only part of it makes more sense, or where a grazing licence provides greater flexibility than a longer tenancy.
3. Leaving important terms unclear
One of the most avoidable causes of disputes is failing to agree and document the terms of a tenancy clearly at the beginning. That includes the obvious questions, such as the length of the tenancy and the rent, but also responsibilities for repairs and maintenance, access, buildings, utilities and water.
For example, who’s responsible for maintaining access tracks if they’re used by both landowner and tenant? Who’s responsible for buildings and their insurance? What happens if a tenant wants to make improvements?
Environmental responsibilities also need to be understood. If the land is subject to an existing agri-environmental scheme, the agreement should make clear who is responsible for meeting the relevant requirements. Tenants also need to understand obligations such as those relating to nitrate vulnerable zones and other designations, such as SSSIs.
The more clearly these things are documented at the outset, the less scope there is for disagreement later.
4. Failing to record the condition of the property
A schedule of condition can seem like another administrative task, but it’s extremely important to make sure you create one. Before a tenancy begins, the condition of the land and buildings should be recorded, along with a plan showing relevant boundaries, fences, hedges, drainage and utilities. Any historic monuments on the land should also be identified.
Without a clear record of the starting condition, it can be much harder to establish what has changed during the tenancy or who’s responsible for putting something right.
I saw a case where a tenancy was approaching its end and an inspection revealed missing roof sheets and dilapidated buildings. The tenant hadn’t realised that keeping them in order was their responsibility, even though it was set out in the tenancy agreement. They simply hadn’t read that part of the agreement properly and communication between landlord and tenant was infrequent.
The tenancy was ultimately renewed, but the responsibilities were made much clearer.
5. Assuming the tenant can use the land however they want
A tenant needs to understand exactly what they can and can’t do with the land. Agricultural land isn’t automatically available for whatever alternative use a tenant might have in mind. A tenant who decides to diversify, for example by establishing a campsite, must seek the landlord’s permission before doing so.
I’ve seen this happen with a farm tenant who decided to set up a campsite on their rented land. The venture was successful, and the landlord was ultimately understanding, but the tenant should have approached the landlord for permission first to prevent any potential disputes or detrimental impacts.
Diversification can be positive, but it needs to be considered within the terms of the tenancy. A breach of permitted use can have serious consequences, including the possibility of the tenancy being terminated.
6. Not keeping an eye on the tenancy once it’s started
Agreeing a tenancy is not the end of a landowner’s involvement. Regular communication and property and land inspections can identify problems early, before they become disputes. It also gives both parties an opportunity to discuss how the tenancy is working and address issues as they arise.
Rent reviews are another area where it pays to understand the terms of the agreement. Farm Business Tenancies offer considerable flexibility over rent review provisions, including how frequently reviews take place. But there are notice periods to observe, so missing the relevant timescale can mean a review cannot take place when intended.
It’s also important to understand what type of tenancy is in place, particularly where an existing tenancy is concerned. Older Agricultural Holdings Act tenancies are subject to a much stricter framework than Farm Business Tenancies, so check which type you have.
When reviewing the rent, landowners should also be aware of the local market. Knowing what other farmers are paying for comparable land can help ensure that rent remains realistic. Pushing the rent too high could potentially damage the relationship with a good tenant.
7. Overlooking alternatives to a conventional tenancy
Finally, landowners should not assume that letting farmland is necessarily the only or best use of the land for their circumstances. There may be other options worth thinking about, including renewable energy, biodiversity net gain, environmental schemes or converting farm buildings for commercial use. The right option will depend on the individual holding and the landowner’s objectives.
I always recommend stepping back before committing to a tenancy and considering as landowner what you want to achieve long-term. An experienced rural agent can help landowners work through their options, find and assess prospective tenants, and negotiate the key terms of a tenancy. They can also help manage inspections and rent reviews, providing an independent point of contact that can help maintain a positive relationship between landlord and tenant.
Taking the time to get the foundations right can help create an enjoyable and thriving relationship in which the tenant can run their business, and the landowner can have confidence that their land is being properly looked after.
About the author
Annie Garner Hutton is a Senior Surveyor at Evergreen Rural. She works closely with landowners and tenants, combining professional expertise with her practical knowledge of effective rural estate management.
