1986 Act Tenancies – Tips and Traps
28 February 2008
1986 Act Tenancies – Tips and Traps
There are still many tenancies governed by the Agricultural Holdings Act 1986 (1986 Act). This article explores problem areas relating to the termination of these agreements. The notices to quit relating to Cases as mentioned below are those notices where the tenant has only a limited opportunity for successful resistance. Thus good legal advice for landlord or tenant is vital.
Forfeiture
Most commercial leases contain forfeiture clauses. A 1986 Act tenancy can also contain them, but not all forfeiture clauses in these tenancies are enforceable. This is because they do not give the tenant sufficient time to serve a counter notice in respect of agricultural matters.
Case B –Planning permission for non-agricultural use
All land identified in a notice to quit must be included within the planning permission.
If there is going to be a phased development, and the tenant is on the last part of the site, the tenant might be able to resist the notice to quit if it is given at the beginning of the development. This is because the tenant’s area might be developed several years later.
In other cases, in an attempt to resist a Case B notice, the tenant could look at the design of the development. For example if there are barns to be converted to offices with areas of landscaping, part of the planning permission might show the landscaping areas as being grazed or mown for hay. The notice to quit may be bad if it includes these landscaped/agricultural areas as not all the land included in the notice would be required for non-agricultural use.
Case C – Bad Husbandry
As everyone knows, keeping the land in good agricultural and environmental condition is the standard required for the cross compliance regulations. The emphasis in the definition of bad husbandry is on production as opposed to the actual farming methods. If a tenant is going to go out of production, but merely comply with the cross compliance regulations then he will need the landlord’s consent, otherwise there is a danger that the landlord could attempt to obtain a certificate of bad husbandry and give a Case C notice to quit.
Case D – Remediable Breach
If a tenant is behind with his rental payments, a landlord can serve a Case D notice to terminate the tenancy if he has previously served a notice to pay the rent, and the tenant has failed to pay. The notice to pay rent does only relate to sums reserved as rent in the agreement. Recently a landlord attempted to pursue a notice to quit for non-compliance with a notice to pay rent, where that notice referred not only to the principal rent but also to VAT. The landlord argued that the VAT was rent. There was no provision in the agreement to reserve the VAT as rent and the notice to quit failed.
Case E – Non-remediable Breach
As with all tenancy agreements, if there is no reference in the agreement to a restriction on assignment or if it is an oral agreement, then the tenant is free to assign. However, it is very important to check all paperwork signed by the parties during the lifetime of the tenancy to ensure that there are no memoranda introducing such a provision. If a tenancy agreement or memorandum with a non-assignment clause is later found, then having assigned the agreement, the tenant will be in breach of covenant. The landlord will be entitled to serve a Case E notice to quit for a non-remediable breach.
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