Termination of Farm Business Tenancies
Termination of Farm Business Tenancies
by David Thorp
Tenants under Farm Business Tenancies (“FBT’s”) do not enjoy any long-term “security of tenure”.
However, the Agricultural Tenancies Act 1995 does provide limited statutory protection to Tenants if the FBT, when granted, was an annual periodic tenancy or was for a term of more than two years. (The Landlord and the Tenant cannot “contract out” of any of the statutory provisions in the 1995 Act in connection with the termination of the tenancy).
The extent of the statutory protection depends on the length and nature of the Tenancy in question.
Fixed-term tenancies for terms of two years or less:
If the FBT is granted for a fixed term of two years or less, it will expire at the end of the fixed term. There is no statutory continuation of the tenancy, and the Landlord will be entitled to recover possession when the contractual term expires.
If, at the end of the term, the Tenant “holds over” (i.e., continues in possession) with the Landlord’s consent, the probability is that, in the absence of any other agreement, a new tenancy, which is likely to be a periodic tenancy, will arise.
Periodic tenancies (for a period of one year or less)
An FBT which is granted for successive periods of less than one year can be brought to an end by service of a notice to quit.
The length of the notice which has to be given is governed by common law rules. The grant of a tenancy at a monthly, weekly or quarterly rent ordinarily gives rise to a presumption of a monthly, weekly or quarterly tenancy, as the case may be.
At common law, the notice period must, in the absence of any agreement to the contrary, be not less than the length of a period of the tenancy (so, for example, one week’s notice must be given in the case of a weekly tenancy, one month’s notice must be given in the case of a monthly tenancy and one quarter’s notice must be given in the case of a quarterly tenancy).
Ordinarily, where a tenancy comprises premises let as a dwelling, at least four weeks’ notice must be given under the Protection from Eviction Act 1977, even if the Tenancy Agreement or the common law rules would allow a shorter notice period. However, this does not apply to an FBT which includes a dwelling.
Fixed-term tenancies for more than two years
An FBT granted for a fixed term of more than two years will (in the absence of relevant steps being taken by one of the parties – see below) automatically continue as a tenancy from year to year at the end of the fixed term.
If the Landlord or the Tenant wishes to end the tenancy at the end of the contractual term, at least 12 months’ notice in writing must be given in advance.
If an annual periodic tenancy arises (because no steps are taken to end the tenancy at the end of the contractual term) it can be terminated as set out below. However, the necessary notice can be served during the last year of the contractual term so as to allow the Landlord to recover possession at the end of the first annual period after the fixed term has expired.
In order to obtain possession, all the Landlord must show is that the tenancy has been terminated by the service of a valid notice. A court has no discretion to refuse to grant possession or allow an application for relief by the Tenant.
Annual periodic tenancy
An FBT which is an annual periodic tenancy (whether granted as such, or arising when a Tenant “holds over” after the end of a fixed term tenancy of more than two years) can only be terminated by notice under the 1995 Act. That Notice can be given by either the Landlord or the Tenant. There is no prescribed form of notice, but it must be in writing, take effect at the end of a year of the tenancy, and be given at least 12 months before the date on which it is to take effect
Break clauses
The 1995 Act refers to a break clause as an ‘option to terminate’.
If an option to terminate is included in a Tenancy Agreement for a fixed term of two years or less, there is no restriction on it’s application and it can be operated in accordance with its terms.
If the tenancy is for a fixed term of more than two years, the notice has be given at least 12 months before the date on which it is to take effect. This applies even if the relevant provision in the Agreement says that a shorter period will suffice.
Forfeiture
If an FBT agreement contains a forfeiture clause (i.e. in short a provision enabling the Landlord to end the tenancy in specified circumstances, typically including non-payment of rent, or some other breach of the Tenant’s obligations) the tenancy can be terminated in accordance with that clause. Where the tenancy includes residential property, the Landlord would if necessary have to obtain a court order to be able to recover possession —forfeiture by physical re-entry would not be permitted.
However, the process differs depending upon whether the right to forfeit arises for non-payment of rent or for breach of some other covenant. In the case of non-payment of rent, the Landlord must have made a formal demand for the rent, unless there is a provision in the Tenancy Agreement which provides to the contrary (and most Agreements will include this provision).
For other breaches of covenant, the Landlord must serve a formal notice under section 146 of the Law of Property Act 1925 as a preliminary step.
(This article is not intended to be comprehensive or to provide specific legal advice. It should not be relied upon in the absence of advice given in relation to particular circumstances.)
For further information please contact David Thorp at dct@bowcockcuerden.co.uk
