Are you a landowner or tenant with an Agricultural Holdings Act (AHA) tenancy? If so, it’s crucial to understand the changes to succession rules that came into effect on September 1, 2024 in England. These changes, brought about by the Agriculture Act 2020, impact how successors are chosen and what criteria they must meet.
The Old System: A Brief Overview
Under the previous system, AHA tenancies created before 1984 typically allowed for two successive tenancies. For those established after 1984, succession rights were not automatic but could be applied for upon the tenant’s death or retirement. Eligibility was determined through these tests:
Close Living Relative Test: The successor must have been a spouse, civil partner, child, sibling, or person treated as the outgoing tenant’s child.
Principal Source of Livelihood Test: The successor must have shown that farming was their primary source of income for at least five of the last seven years.
Commercial Unit Test: The successor must not have already occupied another viable commercial farming unit.
The New System: Enhanced Suitability
The most significant change is the replacement of the Commercial Unit Test with an Enhanced Suitability Test. This means successors must be eligible and demonstrate their ability to successfully manage the farm as a business.
The Enhanced Suitability Test evaluates various factors, including:
Experience and Training: The successor’s knowledge and background in farming.
Skills: Their ability to perform necessary tasks and operate farm equipment.
Financial Standing: Their financial stability and ability to manage the farm’s finances.
Capability and Capacity: Their overall ability to successfully operate the farm as a business, considering efficient production and environmental care.
What Does This Mean for You?
Landlords: You now have more influence in choosing successors who demonstrate the ability to successfully manage the farm. Consider negotiating farm business tenancies with potential successors to ensure the farm’s long-term viability.
Tenants: It’s crucial to prepare your potential successor well in advance. Encourage them to gain experience, training, and financial stability. Consider incorporating environmental sustainability practices into your farming operations to enhance their appeal as a successor.
Both Parties: Seek professional advice to understand the implications of these changes and develop strategies to navigate the new system effectively.
Additional Considerations
Environmental Land Management Schemes: The new rules emphasize environmental care. Exploring these schemes could improve your successor’s chances of securing the succession tenancy.
Dispute Resolution Mechanisms: The Agriculture Act 2020 introduced new dispute resolution options for AHA tenants seeking to vary tenancy terms or access financial assistance schemes.
Understanding and adapting to these changes is essential for ensuring the long-term success of your farm and its transition to the next generation. For more information contact Frank Smith & Co Solicitors on 01242 801 748 or www.franksmithandco.com.