Rent Review AHA 1986 Flashcards
When can a RR notice be served?
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.
Wording of s12 notice to avoid contesting based on incorrectly identified term date.
“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”
Rent Formula
when rent is to be determined by an arbitrator/third party
“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
TCpc&recCl
Relevant Factors?
when rent is to be determined by an arbitrator/third party
- 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”
Definition of “productive capacity” under Sch 2
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
Definition of “related earning capacity” under Sch 2
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
What should be disregarded?
- 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
CSVNANA&A
Headline Stages of Rent Review process
- Consider if appropriate + get written appointment
- Service of a valid s12 notice
- Negotiate
- Appoint Arbitrator
- Negotiations continue
- Arbitration + Award
First Stages of Rent Review process
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
After service of valid s12 notice
Next Stages of RR process
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
Valuers skills required in RR process
- Understanding of market conditions
- Ability to appraise holdings physically + financially (farming systems + budgets)
- Identifying + weighing evidence + sources of knowledge
PHDtNtA
Summary of Good Practice for valuers
- Act promptly to avoid potentially complex dispute with possible litigation, delay and additional cost to client.
- Be clear on recent rent history - min 3 year cycle
- Drafted notice correctly prepared & served
- Negotiate in good time
- If it appears negotiations will not be resolved before the term date, ensure the arbitrator is appointed in good time.
Yd v Rg & Ban BC
Case law which relates to service of notices in time.
Yeandle v Reigate & Banstead Borough Council [1996]
What happens if the RR timescales for agreeing rent/appointing an arbitrator are not met?
The s12 notice served becomes invalid
Standard service of notices provisions under s93 of AHA
- delivered to recipients personally
- left at proper address/last known address
- sent by recorded delivery post
Sch. 4 Dereg
Alternative dispute resolution method option before going to arbitration?
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.
Reg Ref Ag T
TRIG Reforms full name & when came into effect?
The Reguloratory Reform (Agricultural Tenancies) (England and Wales) Order 2006
19th October 2006
TRIG reforms impact on RR
Replaced specific rules and time limits of Sch 11 with general stat code of Arbitration Act 1996
How should current levels of rents for comparable lettings be considered?
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
What exclusions should be made when considering evidence from comparable let holdings?
influences on comparables:
* scarcity
* marriage value
* effect of any premium
Value out the above factors to make market evidence comparable to subject holding
Balance between relative earning capacity and comparables
It depends…
The two statutory factors have equal standing in wording of Sch 2
Key steps in RR Arbitration process
- Arbitrators role is judicial. They are appointed to adjudicate between the two conflicting pov and sets of evidence
- Private process = confidential
- Before RR/term date - parties to formally appoint arbitrator by agreement or submitted application to RICS/CAAV for an appointment to be made
- Appointed Arb. will confirm his terms of reference with the parties + may convene a preliminary meeting to determine matters in issue
- 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.
- 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
- Arb. to act fairly + impartially
- Pursuant to s12 + sch 2 of AHA
- Arb. entitled to appoint legal advisor + parties responsible for additonal cost.
Improve
s13 of the AHA 86
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
