Rent Review AHA 1986

Question 1

When can a RR notice be served?

Answer 1

Can be served on either party at least 12 months but no more than 24 months before the date of the RR

The new rent agreed or decided by arbitration then takes effect on the first annual term date of the tenancy not earlier than 12 months following the date of the demand

For example, if you have tenancy with a lady day term date (of 25th March) then you would have needed to serve a s12 notice before 24th March 22 for a new rent to take effect on lady day 23.

Question 2

Wording of s12 notice to avoid contesting based on incorrectly identified term date.

Answer 2

“or at the expiration of the year of your tenancy which shall expire next after the end of 12 months from the date of service of this notice”

Question 3

Rent Formula

when rent is to be determined by an arbitrator/third party

Answer 3

“The rent at which the holding might reasonably be expected to be let by a prudent and willing landlord to a prudent and willing tenant, taking into account all relevant factors

Question 4

TCpc&recCl
Relevant Factors?

when rent is to be determined by an arbitrator/third party

Answer 4

• The terms of the tenancy
• The character and situation of the holding
• The productive capacity of the holding and its related earning capacity = Divisible Surplus
• And the current level of rents for comparable lettings”

Question 5

Definition of “productive capacity” under Sch 2

Answer 5

means the productive capacity of the holding (taking into account fixed equipment and any other available facilities on the holding) on the assumption that it is in the occupation of a competent tenant practising a system of farming suitable to the holding

Consideration of:
* soil
* prevailing climate
* buildings capacity
* drainage + other relevant factors

Question 6

Definition of “related earning capacity” under Sch 2

Answer 6

means the extent to which, in the light of that productive capacity, a competent tenant practising such a system of farming could reasonably be expected to profit from farming the holding.

Based on the considered productive capacity of holding, identify:
* output of each enterprise
* GM for each
* Total GMs
* Deduct any enterprise specific overheads
* Deduct fixed costs for whole holding (excl. rent)
* Arrive at a net figure = net pre-rent surplus

Question 7

What should be disregarded?

Answer 7

• Scarcity of comparable holdings available for letting
• Marriage value
• Increase in value attributable to tenants’ improvements or fixed equipment
• Any grants received by Landlord on their improvement
• Payments after 11th January 2021 made by tenant for productivity improvements

Question 8

CSVNANA&A

Headline Stages of Rent Review process

Answer 8

1. Consider if appropriate + get written appointment
2. Service of a valid s12 notice
3. Negotiate
4. Appoint Arbitrator
5. Negotiations continue
6. Arbitration + Award

Question 9

First Stages of Rent Review process

Answer 9

Service of a valid s12 notice
* Doesn’t necessarily have to be a stat prescribed form. Model forms are available from CAAV publications + S&D.
* Should obtain written instructions to act on Ls behalf
* Identify parties, holding + term date correctly
* Review written tenancy agreement/other relevant records of terms if no written agreement in place
* Establish if can serve valid s12 notice
* Checking whether any changes to rent/holding have retriggered the min 3 year cycle
* Advise whether based on rent level + all relevant factors/circumstances s12 should be served at all

Question 10

After service of valid s12 notice

Next Stages of RR process

Answer 10

Negotiate
* Firstly establish fact relevant to RR (usually require inspecting holding)
* Advise the client who may have views which prove not sustainable within the legal framework
* Negotiate (generally as a mediator between the parties) while honoring duty to client.
* If negotiations become protracted then list areas of agreement & disagreement in respect of RR factors
* RR tend to be a major opportunity for parties to discuss any issues they have with regard to the tenancy - RR settlement by agreement can lead to resolution of a number of matters, which otherwise may not be dealt with.
* Need to be clear with clients from outset a clear timetable in which negotiations need to be progressed

Question 11

Valuers skills required in RR process

Answer 11

• Understanding of market conditions
• Ability to appraise holdings physically + financially (farming systems + budgets)
• Identifying + weighing evidence + sources of knowledge

Question 12

PHDtNtA

Summary of Good Practice for valuers

Answer 12

1. Act promptly to avoid potentially complex dispute with possible litigation, delay and additional cost to client.
2. Be clear on recent rent history - min 3 year cycle
3. Drafted notice correctly prepared & served
4. Negotiate in good time
5. If it appears negotiations will not be resolved before the term date, ensure the arbitrator is appointed in good time.

Question 13

Yd v Rg & Ban BC

Case law which relates to service of notices in time.

Answer 13

Yeandle v Reigate & Banstead Borough Council [1996]

Question 14

What happens if the RR timescales for agreeing rent/appointing an arbitrator are not met?

Answer 14

The s12 notice served becomes invalid

Question 15

Standard service of notices provisions under s93 of AHA

Answer 15

1. delivered to recipients personally
2. left at proper address/last known address
3. sent by recorded delivery post

Question 16

Sch. 4 Dereg

Alternative dispute resolution method option before going to arbitration?

Answer 16

On the 26 May 2015, under Schedule 4 the Deregulation Act 2015 the 1986 Act was amended to provide for disputes, which are referable to arbitration to be capable of determination by a jointly appointed third party.

Both landlord and tenant must agree to utilise the independent expert determination option.

Question 17

Reg Ref Ag T

TRIG Reforms full name & when came into effect?

Answer 17

The Reguloratory Reform (Agricultural Tenancies) (England and Wales) Order 2006

19th October 2006

Question 18

TRIG reforms impact on RR

Answer 18

Replaced specific rules and time limits of Sch 11 with general stat code of Arbitration Act 1996

Question 19

How should current levels of rents for comparable lettings be considered?

Answer 19

In addition to relative earning capacity considerations, when negotiating rent (or when arbitrators/experts are considering rents for AHA tenancies), there should also be regard to rents agreed in respect of

“comparable agricultural holdings on terms similar to those of the tenancy under consideration”

Allowances + adjustments to reflect differences of comparables to subject holding

Question 20

What exclusions should be made when considering evidence from comparable let holdings?

Answer 20

influences on comparables:
* scarcity
* marriage value
* effect of any premium

Value out the above factors to make market evidence comparable to subject holding

Question 21

Balance between relative earning capacity and comparables

Answer 21

It depends…
The two statutory factors have equal standing in wording of Sch 2

Question 22

Key steps in RR Arbitration process

Answer 22

• Arbitrators role is judicial. They are appointed to adjudicate between the two conflicting pov and sets of evidence
• Private process = confidential

1. Before RR/term date - parties to formally appoint arbitrator by agreement or submitted application to RICS/CAAV for an appointment to be made
2. Appointed Arb. will confirm his terms of reference with the parties + may convene a preliminary meeting to determine matters in issue
3. Procedure and timetable to be applied is to be agreed between the parties with guidance of Arb. If not agreed, Arb. will issue directions to ensure matter is dealt with without uneccessary delay + expense.
4. Directions likely to include:
   
   • identification of issues in dispute
   • List of issues + Stmt of Agreed facts (incl. agreement on comps + format of budgets
   • exchange of stmts of case
   • dislosure of relevant documents
   • exchange of expert witness reports + WrSubs
   • confirmation matter to be dealt with by WrSub or at Hearing
5. Arb. to act fairly + impartially
6. Pursuant to s12 + sch 2 of AHA
7. Arb. entitled to appoint legal advisor + parties responsible for additonal cost.

Question 23

Improve

s13 of the AHA 86

Answer 23

Rent variation for improvements
* S13 entitles a L who has carried out improvements to an ag holding to obtain and increase in rent (only applicable to specifc improvements under s13 (2).
* Written Notice required to be served on T within 6 months of completion of improvement.
* Increase takes effect from completion of improvement
* Amount of increase will be amount equal to increase in rental value of holding attribitable to carrying out improvement.
* Stat notice procedures under s13 for varying rent for improvement
* NB if stat notice procedures not followed (agreed by negotiation btw parties) = restarts RR 3 year cycle