Landlord and Tenant - L3

Question 1

What is an FBT?

Answer 1

Governed by the Agricultural Tenancies Act 1995, an Farm Business Tenancy is an agreement between a landlord who owns agricultural property and a tenant who, by paying rent, exclusively occupies the land for the purposes of operating a farming business.

Question 2

When did FBT’s come into place?

Answer 2

1 September 1995

Question 3

What are the three conditions of an FBT?

Answer 3

1 - Business condition
(All or part of the holding must be farmed for the purposes of a trade or business throughout the agreed term. Farming includes breeding or keeping of livestock, grazing the land or producing crops)

2.) Then one of the following -

Notice condition
(When a section 1 (4) notice is exchanged, confirming the tenancy will be and remain an FBT throughout the term)

Agricultural condition
(Fulfilled when the business tenancy (not necessarily at the outset) becomes primarily or wholly agricultural)

Question 4

What is at risk of the conditions of an FBT are not met?

Answer 4

Risk granting a 1954 Act lease, with security of tenure.

Question 5

If an FBT is more than 2-years in fixed term, how does it end?

Answer 5

By serving notice upon the tenant (12-months NTQ under section 5). If this isn’t served, then the tenancy becomes a periodic one.

Question 6

How would you conduct a rent review for an FBT?

Answer 6

Check the agreement first to see what clauses are in the tenancy regarding frequency and how rent is valued, or if staged and set rent reviews. Assuming statutory procedure, serve a s10 notice between 12-24 months before the next term date, then begin negotiations.
If no agreement reached, the parties can refer to arbitration to settle.

Question 7

How would you calculate a rent for an FBT?

Answer 7

Open market rent usually, based on comparable evidence which take into account the size, character, location of the holding, as well as its productive / earning capacity. Tenants improvements and dilapidations are disregarded.
Some FBT rents might be fixed / staged, or linked to RPI or CPI.

Question 8

How could you regain possession of an FBT within the fixed term?

Answer 8

The only way is to exercise forfeiture, however there must be provision in the tenancy for this. Must serve a s146 notice for breach of covenant under Law of Property Act 1925

Question 9

If an FBT is silent on some repairs, what do you do?

Answer 9

Where silent, I would refer to the Model Clauses 2015.

Question 10

What things would you think about including within an FBT, where statute is silent?

Answer 10

Rights to assign or sublet (if silent, the tenant has a right to assign.
Dilapidations
Non-payment of rent (right to forfeiture)
Repair and insurance
Death of Tenant (include provision to serve NTQ)
Tenants insolvency
Landlords reserved rights
BPS / ELMS

Question 11

What considerations should be made for a lease granted over 7 years?

Answer 11

Under Land Registration Act 2002, the leasehold interest will need registering with the Land Registry.
Also, the Tenant may be required to pay Stamp Duty Land Tax dependant on rent amount.

Question 12

Can you briefly explain how a tenant would be entitled to compensation at the end of an FBT?

Answer 12

Under section 26, a tenant has a right to be compensated for Tenants improvements that have been given consent from the landlord during the tenancy.
Compensation payable is the improvement value of the holding as a let holding attributable to the improvement.

Question 13

Can you give me examples of some of the grounds available to serve notice to quit on an AHA tenancy?

Answer 13

Serve a s25 notice stating one of the following -
Case A - tenant is 65 and alternative accommodation is available
Case B - The land is required for non-agricultural use (planning permission must have been granted)
Case C - Tenant is not farming with good husbandry
Case D - Rent arrears
Case E - Commission had materially prejudice landlord the interest of the landlord and cannot be remedied
Case F = Tenant insolvent
Case G = Death of tenant (served within 3-months)

Question 14

Can you serve notice to quit on part of a AHA holding?

Answer 14

Yes, by serving a s25 notice stating a s31 justification:
- adjusting the boundaries between agricultural units
- allotments
- gardens for cottages
- planting of trees
- making road etc

Question 15

Can an AHA tenant counter a s25 notice to quit?

Answer 15

Yes, within one-month by serving a s26 notice, which forces the landlord to apply to the First Tier Tribunal and must prove that a fair and reasonable landlord would insist on possession and one of the s27 categories apply:
- good husbandry
- sound estate management
- agricultural research
- allotments
- greater hardship
- non-agricultural use

Question 16

When could compensation be payable following a landlord serving notice to quit on an AHA tenant?

Answer 16

Where the notice to quit if based on Case B or s27(3)(f) non-agricultural use.
Compensation is one years rent, or the tenants actual losses.
Can then claim up to 4 x the annual rent if s60(6) notice served within one month of termination of the tenancy, expressing an intention to claim addition compensation.

Question 17

What takes precedence within an AHA, repairing clauses within the agreement, or Model Clauses?

Answer 17

Tenancy agreement clauses take precedence and Model Clauses are implied where tenancies are silent.

Question 18

How would you conduct a rent review under an AHA agreement?

Answer 18

Serve a written s12 notice referring the rent to arbitration between 12-24 months prior to the next termination date.
If negotiations fail, can be referred to arbitration no more than 4 months prior to review date.

Question 19

What does an AHA rent take into account and disregard?

Answer 19

What the holding might reasonably be expected to be let by a prudent landlord to a prudent tenant, taking into account:
- terms of the tenancy
- character and situation of the holding
- productive capacity and earning capacity
- comparable lettings

DISREGARDS:
- tenants improvements or fixed equipment
- landlords improvement if grant funded
- tenants current occupation of the holding
- tenants dilapidations

Question 20

How can a Landlord review the rent after carrying out an improvement under an AHA tenancy?

Answer 20

Serve a s13 notice within 6 months of completing the improvement

Question 21

To what agricultural tenancies does succession apply?

Answer 21

AHA’s that commenced before 12th July 1984, two successions are permitted under s37 of the Act.
Succession applications are judged on 2 main principals -
1.) Eligibility (principal source of livelihood and family member)
2.) Capacity and capability (experience and skill in agriculture and business management. Age is now disregarded)

Recent amendments mean that the commercial unit test has been scrapped (Agriculture Act 2020)

Question 22

How would a succession applicant apply on death (AHA)?

Answer 22

An application (TASD 111 form) to tribunal and landlord simultaneously no more than 3 months after death.
Landlord can counter-notice within 28 days using TASD 121 form. This is advisable so that Landlord has a chance to review all information, even if he is considering allowing the succession.

Question 23

How would a succession applicant apply on retirement (AHA)?

Answer 23

Retiring tenant must serve retirement notice at least 12 months prior to the termination date, nominating one person to succeed. That nominated successor must apply to the tribunal within one month using TASR211 form.
Landlord can counter-notice within 28 days by submitting TASR221 form to the tribunal.

Question 24

In what circumstance can a surveyor (FAAV) create a deed?

Answer 24

Under the Legal Services Act 2007, FAAV qualified surveyors can execute Farm Business Tenancies under the Agricultural Tenancies Act 1995.

Question 25

What should you mark documentations prior to the signing of a tenancy / lease?

Answer 25

SUBJECT TO CONTRACT
This means that all negotiations prior to the signing of the tenancy do not intend to make any legally binding contract.

Question 26

What is a common law tenancy?

Answer 26

An occupation that is not covered by statute. This can arise when renting a residential property to a company or where the rent exceeds £100,000 per annum.

Question 27

What rights does a common law tenant have?

Answer 27

Have the right to occupy the property and be notified when anyone is entering the property.

Question 28

If you want to terminate a common law tenancy, how much notice should be given?

Answer 28

Tenants must give 28 days notice, but if the fixed term was 1 year, they must give 40 days notice.
Landlord can give 28 days notice of the fixed term was 4 months or less, or tenant breached the a clause, or 40 days of fixed term was over 4 months.

Question 29

How much can you obtain for a deposit under a common law tenancy?

Answer 29

Up to 2 months rent.

Question 30

What is a service occupancy?

Answer 30

Where an employee is required to live in a specified property in order to perform their job. That occupation must be essential and a term within the employment contract.

Question 31

What happens when a service occupier does not vacate at the end of their employment?

Answer 31

Generally, the employer does not need a court order but instead can regain possession through peaceable eviction (changing the locks).

Question 32

What information should be included on an RR1C form?

Answer 32

Property, landlord, tenant, current rent, rent the landlord wants it to be reviewed to, services included in the rent, any material changes to the property since the last rent review.

Question 33

Why did you recommend a 50% waiver to the AST rent reviews?

Answer 33

You must review the rent to an accurate value, therefore the Form 4’s had to be at market value. I documented the waiver by a memorandum of understanding that took affect for 12 months.

Question 34

Was there any other way of regaining possession of an AST so the landlord could live in the property?

Answer 34

Ground 1 under section 8 of the Housing Act 1988 states that a Landlord can regain possession to live in the property themself, but notice must have been served at the commencement of that tenancy telling the tenant that this may happen. This notice had not been served, therefore i could not recommend this to the client.

Question 35

What are the relevant documents under the Deregulation Act 2015 to enable a s21 to be served?

Answer 35

Valid EPC
How to rent guide
Prescribed information
Gas Safety certificate
Tenancy deposit protection / certificate

Question 36

On what circumstances can a s21 notice be invalid?

Answer 36

Following a complaint made about the landlord
Where the deposit wasn’t protected within 28 days of receipt
Where the landlord has accepted a prohibited payment

Question 37

What are the government’s proposals to change the private rented sector?

Answer 37

Renters Rights Bill, formerly the renter reform bill under the conservative government.
Abolition of s21
All tenancies will become periodic
Introduce new ombudsman
Create a database for all landlords to submit compliance documents to
Decent homes standard
Further protection against discrimination to prospective tenants

Question 38

Could the Landlord have denied the prospective tenants their application to run their business from the property?

Answer 38

In this case no, as there was no reasonable reason to deny the application.
Should there have been an adequate reason to, then yes a Landlord can say no. These reasons would include:
Where the activity cannot be reasonably expected to be carried out within the home (licenced premises etc)
Where it would cause disturbance (noise, parking)
Where the landlords mortgagee only permits residential use.

Landlords should be careful as they may need commercial premises insurance, rather than just residential landlords insurance.

Question 39

How does a Home Business Tenancy not endure security of tenure?

Answer 39

The Small Employment Enterprise and Business Act 2015 amended the Landlord and Tenant Act 1954, to exclude Home Business Tenancies from s24-28 security of tenure provisions.

Question 40

How was forfeiture carried out?

Answer 40

The lease specified that forfeiture could be exercised in the event the tenant breached a clause.
Notice of forfeiture was drafted, sent to the tenant via post, email and attached to each entrance of the premises.
It was also carried out via peaceable re-entry (the locks were changed) and the tenant was given one month to empty the barn while supervised.

Question 41

What other options could you have explored other than forfieture?

Answer 41

Rent deposit draw down (did that)
Repayment plan (tried to negotiate but unsucessful)
Commercial Rent Arrears recovery (where bailiffs sent in after adequate notice given, to recovery items and sell to pay off debt) - we didn’t explore this route as we were very much aware that none of the items were of sufficient value, and the cost of exploring this would have outweighed any small gain.
Court proceedings (again due to the tenants circumstances, the cost of this would not have made it worth it. The tenant was not capable of paying off the arrears)
Bankruptcy claim (too costly and no benefit to the landlord)

Question 42

How could security of tenure be established under the common law?

Answer 42

In the event that business use arose, therefore I ensured the tenancy was explicit in stating that that was not allowed and there was notice provision for any breach of obligation.

Question 43

What was the rent payable under the common law tenancy?

Answer 43

£2,400 per annum (£530 per acre)
Was so high as stables and sand school were included.

Question 44

Is there any other agreement the equestrian property could have been let on?

Answer 44

Nothing else was applicable as the tenant has exclusive occupation, so couldn’t be on a licence. Also, couldn’t be a tenancy at will as it was for a determined rent, over a set term.

Question 45

What is a cropping licence?

Answer 45

Usually an annual stubble to stubble agreement allowing someone to grow crops on the land, whereby the landowner still has the principal management control, and has influence on what is grown.

Question 46

How would the landlord end the FBT on the 5-year term date?

Answer 46

As the tenancy was over 2-years, the landlord must serve a notice to quit, giving 12-24 months notice to bring the tenancy to an end on the term date.

Question 47

Can you outline some of the clauses and obligations included within the FBT?

Answer 47

Consent for the tenant to claim environmental schemes, with consent of the landlord if that scheme were to run past the 5-year term.
Maintenance obligations on hedges and ditches.
Rent review dates (3 years)
Alienation
Insurance (tenant to obtain public liability)
Dispute resolution

Question 48

What was the dispute resolution methods stated within the FBT?

Answer 48

Referral to arbitration to make a binding decision. If the parties cannot agree on who to appoint, an application can be made to the CAAV.