Following on from Brexit (remember that, doesn’t it seem like a lifetime ago…) the new Agriculture Bill seeks to phase out Basic Payments (BPS) and will introduce the Environmental Land Management (ELM) Scheme.
The transition period will run from 2021 – 2027 and throws up a number of potential issues for Landlords, Tenants and their advisers.
The ELM Scheme will seek to pay farmers for environmental services and benefits with a proposed three tier system. It seems these payments will be available from 2024. They no doubt form part of the earnings potential of any Holding and there are going to be various issues for those in the tenanted sector.
The earnings potential and rent level clearly go hand in hand and so both the Tenant and the Landlord are going to be impacted by the scheme. In longer term FBTs and old style AHA tenancies, rent reviews will be interesting – should the Tenant have opted in if he didn’t? Could the Tenant have opted for a higher level of scheme? Should he be paying more rent if the opportunity was there and he has simply chosen not to take it?
In new agreements, particularly shorter FBTs, will the Landlord want to have some control over the land as well as a guaranteed income and so will he seek to claim the funding himself? If so, that would have to be reflected in the rent charged and in terms of the tenancy agreement, so that the tenant is bound to comply with the scheme requirements. But, if the Tenant is bound to carry out the work or adhere to certain farming practices, but has no financial reward, what is his incentive to do so?
All of these questions will need to be addressed between the Landlord and the Tenant and their advisers in due course and a good working relationship and early discussion between the two parties can only be beneficial.
Are you involved in an agricultural tenancy; either as a landlord or a tenant and have you considered these issues? If you need advice, why not get in touch, we will be happy to help.
Contact Lauren Dixon at our Rural Law Practice branch
Published 11 September 2020
Previous article: Lockdown number 2.....
Next article: The Agriculture Bill: Succession Tenancies