Single Family Rental (SFR) projects are more likely to involve green field sites. As a result, we have seen an increased interest in agricultural land acquisitions. Here are some top tips to look out for when buying agricultural land.
Licences
It is extremely common to see grazing or cropping licences granted for short periods of time to allow grazing of livestock or production of crops. It is also a familiar story that these are often allowed to run on over a number of years and unwittingly the occupier can accrue rights, if they have exclusive use of the field in return for paying rent. The warning is that even if it is called a licence, that will not prevent it legally as becoming a tenancy if the right criteria are met.
Agricultural tenancies
Agricultural tenancies do not need to be in writing and unless they are granted after October 2003 for a term of more than 7 years then they will likely not show up on Land Registry official copies. There are two main types of agricultural tenancy and both can make it difficult for the landowner to recover possession.
- Agricultural Holdings Act 1986 tenancies
Usually, after a short initial period of one or two years, the term is expressed to run from year to year. As they are only a few pages long, and the term sounds as though it is flexible, people may think that these are not cause for concern, but due to the security that they afford they are valuable tenancies and we have seen them reduce land values by up to 50%.
There are two ways to terminate this type of tenancy. The first is by serving an "unqualified" notice to quit allowing a notice period of 12 months, to expire on a term date. The tenant can serve a counter notice and if that happens, the notice is suspended unless the landlord can rely on sound estate management grounds, and even then the First Tier Property Tribunal must withhold consent if "in all the circumstances it appears to them that a fair and reasonable landlord would not insist on possession".
Alternatively, you can serve an "incontestable notice" by relying on one of the grounds (known as Cases) as set out in the Act. The most common ground is Case B, where planning is obtained for the whole of the holding for a non-agricultural use. The tenant cannot serve a counter notice but can challenge the ground relied on, by referring to arbitration.
2. Farm business tenancies
Subject to a few exceptions, if a tenancy is granted for the purpose of an agricultural business since 1 September 1995 it will be a "Farm Business Tenancy". If granted for 2 years or less then the term will end on the expiry date, or earlier if there is a break option that is exercised. If granted for more than 2 years then it is not possible to contract out of a 12 month notice period and after the contractual expiry date, if occupation continues then it will convert to a yearly periodic tenancy so that the 12 months' notice must expire at the end of a year of a tenancy.
Due to the difficulties and time that it takes to recover possession for development sites a surrender is usually negotiated but under both types of agricultural tenancy, compensation may be payable to the tenant and the whole process can be very expensive.
Sporting rights
Agricultural land may be subject to sporting rights that could restrict future use of the land. If not noted on the Land Registry official copies, we would recommend carrying out a Search of the Index Map to check if there are any sporting rights registered with their own title number (known as a "profit").
Restrictive covenants
Agricultural land may also be subject to covenants that restrict or prevent future use, such as the construction of buildings or accessways and other services. If not noted on the Land Registry official copies, we would recommend carrying out a Search of the Index Map of adjoining properties to see if they benefit from those covenants.
Easements
Early consideration should be given to the provisions of any express rights of access and services in case they are restricted to agricultural use. If there are such restrictions, then you may need to enter into deeds of variation that could cause delays and increase costs.
If there are no express rights of access or to use services, then it may be possible to claim "prescriptive easements" through continuous long user of at least 20 years but as this would be based on the current and historic agricultural use, we recommend consideration of an "absence of easement indemnity insurance" policy.
Telecoms
Agricultural land may also be subject to a lease governed by the Electronic Communications Code ("the Code"). The Code's aim is to assist the rollout of 5G, by giving operators statutory powers to access, install and maintain apparatus on sites. The Code is more heavily weighted in favour of operators than site providers (the idea being that the rollout of technology is in the public's interest) and Code rights can only be terminated in certain limited circumstances (one of which is re-development). Termination typically requires a notice giving at least 18 months' notice to be served. Early consideration of Code issues is therefore essential if delays to a development are to be avoided.
Horses
As horses are not livestock they will not qualify as "agricultural" use unless they are farmed for meat and so there is a risk depending on the use of the land of the occupier benefitting of protection afforded to commercial business tenants under Part II of the Landlord and Tenant Act 1954. It is important to check the circumstances and to understand if the horses are kept for business purposes.
Unregistered land
Agricultural land often remains in the same farming family for generations and so there is still a high proportion of unregistered land. Whilst ideally, the owner will be asked to register it at the Land Registry before an acquisition, if you end up buying unregistered land then you need to make sure that you have the right legal expertise to deal with the application. These applications can take a very long time to be processed by the Land Registry (12 – 18 months) and so it is advisable to plan ahead and get any applications submitted as quickly as possible.
Conclusion
With the right early checks, proper planning time and land agents and lawyers engaged with the right expertise then many of these red flags can be overcome but it is important to be aware of them so that their significance is understood and sufficient funds and time allocated for dealing with them.
If you need any advice, then please contact the specialist Agriculture & Rural Estates or the BTR team at Trowers & Hamlins.
