New Succession Rights for Tenant Farmers in 2024.
Tenant farmers considering retirement or who are planning for succession within the next 5 years are being advised to plan for changes to the Agricultural Holdings Act (AHA). New regulations are being introduced under the Agriculture Act 2020 (due to take effect in 2024) that could have significant impact on AHA tenants looking to pass on their tenancy to the next generation:
- there will no longer be a minimum age to serve a retirement notice. Previously a tenant would have to be 65 years or older to serve a notice of retirement on their landlord.
- the Commercial Unit Test is to be removed from the eligibility criteria. The removal of this previous barrier will widen the opportunity for larger businesses to secure tenancies going forward and will remove the worry for many tenants that their successors would not pass the test because of other areas that they farm either as freeholders or tenants.
- The Eligibility Test will still require the successor to have a close relationship with the tenant and pass the ‘principal source of livelihood’ test, so they will still need to derive their only or principal source of income from agricultural work either on the holding in question or an agricultural unit that forms part of the holding.
- The Suitability Test will now only require the applicant to show that they have the ability to farm “commercially to high standards of efficient production and care for the environment”. While this narrows the scope of the test, it does introduce higher standards as each applicant will have to demonstrate commercial ability as well as the ability to farm in a manner that cares for the environment. The test will consider an applicant’s experience, training and skills in business management as well as their financial standing and character.
These changes will make it much easier for succession tenants to be successful and will give current tenants the option to retire early. However it is still essential to consider whether succession is available before making any plans. It is therefore necessary to establish:
- Whether the Tenancy initially has succession rights; and
- How many successions are left.
For any farmers who have an AHA agreement and are thinking of succession, it is important to start thinking about these changes and their effects now. You should consider which set of rules would be most favourable to your individual set of circumstances.