A recent study by our Professional body, the Central Association of Agricultural Valuers, has confirmed that activity in the tenancy sector is considerably less than it used to be. In 2002 the number of tenanted transactions were 2565 compared to 892 in 2016. 2002 was the last year unaffected by the CAP reform, which indicated that the reforms have stifled the tenancy sector.
The Study also showed that 86% of Agricultural Holdings Act tenancies that ended were re-let as Farm Business Tenancies. Whilst it is good that the majority of land is re-let, the change to FBT’s will mean that rents increase significantly.
More worryingly the survey found that only 17% of Agricultural Holdings Act tenancies that ended had a successful succession to the next generation. For one reason or another the vast majority don’t succeed in passing the farm on. Whilst some will have no natural successor or the next generation are not interested, there are likely to be a significant proportion who miss out.
The complex tenancy succession application progress is partly to blame. It is expensive, drawn out and complicated which means a lot of potential successors leave it too late to qualify. In the current farming era, more potential successors have found work off the farm or have diversified. Both these actions can count against the hopeful successor.
There are ways to restructure the business or diversified activities so that they are not seen as negative points at succession, however the succession process looks back over 7 years so planning early is critical.
A secured farm tenancy will add another dimension to regular farm succession planning. Securing the farm for the next generation is the added objective.
We recommend that succession plans are reviewed every 5 years to ensure the plan remains up-to-date. This would be irrespective of the current tenant’s age or health.
We are happy to speak to current tenants or the potential successor about their succession plans in total confidence. We offer a desk based review of your farm succession plans followed with an office meeting to discuss the plans for a fixed fee of £300 plus VAT.
If you would like to discuss this further please contact Mike Cluley or Andrew Troughton on 01684 853400.