A farm business tenancy (FBT), as the name implies, is an arrangement in which a tenant (individual or business) rents land and/or the associated farm house and buildings from the landlord. This is for the purpose running an agricultural business, which can be defined broadly as raising crops or livestock for food.
Farm business tenancy arrangements can be as specific or as flexible as the parties desire. It all boils down to the terms of agreement between landlord and tenant. The arrangement can be written, but verbal arrangements are acceptable. This allows for flexibility to be written into the agreements so that all parties know where they stand and reduces the possibility of either party doing something unexpected.
To create an FBT, both parties must be open to entering into an agreement. The landlord will have land and buildings to rent, and the tenant will take over the tenancy in exchange for a monetary consideration. The tenancy agreement eyelash business cards should clearly state what was agreed, such as the term length, rent payable, what the tenant is allowed to do and what they are prohibited from doing.
Prospective tenants often ask us whether the farm business tenancy agreement should be in their name or in the company’s. There are consequences for both. Each situation should be evaluated individually. It is a good idea to seek legal advice to discuss both the pros and cons. There is no right or wrong answer. You can only decide what is best for you.
The farm business tenancy must clearly state who is responsible for which areas of the land or buildings. To minimize the landlord’s involvement in day-to-day operations, tenants can agree to share all maintenance responsibilities. Tenants are responsible for maintaining the land and managing the buildings. However, the landlord is still responsible for certain things that add value to the land, such as drainage and residential properties.
Farm business tenancy is a contract relationship. As such, there may be sanctions for any party who breaches it. You, the tenant, must be familiar with the terms and obligations that you have signed. A breach can result in your tenancy business of machining being terminated and you being liable for any damages to the landlord. The landlord may also be liable for damages if they violate the terms of your contract.
In most cases, it is easy to take out a farm business tenant. However, you should seek legal advice early, ensure everything is written, and agree on terms that both of you are happy with.
Farm Business Tenancy vs Grazing/Mowing Licence The importance of the right agreement
Landowners frequently ask us the following question: “Can I let my land out as a Farm Business Tenancy and still receive the Basic Payment Scheme?” The short answer is no. The Basic Payment Scheme rules allow you to claim if the land was available on the 15th of May in the claim year. The Farm Business Tenancy gives the tenant sole occupancy for the term of the tenancy and allows the landlord to make repairs as needed. The landowner is not allowed to use the land if a Farm Business Tenancy agreement has been granted. The agreement will indicate whether the rights will be let with land, and the rent will usually reflect this.
Individual circumstances can make farm business tenancy agreements more flexible. These agreements are preferred when farm buildings are involved. The agreement will clearly outline each party’s maintenance and repair responsibilities and is supported by the legislation. A tenancy provides more security for tenants and allows them to plan ahead.
A grazing/mowing license will require that a landowner is responsible for maintaining the land, including the hedges, ditches and fencing, gateways, water supply, etc. This arrangement allows the Licensee to purchase only the grass crop, regardless of whether it is grazed and mown. An agreement may specify the stock that is allowed on the land and the number of silage/hay cuts that are allowed within the term. A licence agreement should not exceed one year. Often, they run from April to October each year. If the landowner is the sole owner of the land, they can be considered an active farmer for inheritance tax purposes and the Basic Payment Scheme. As evidence for these purposes, it is important to have a written agreement.
Equestrian use is not possible with either Farm Business Tenancy or Licence agreements. This is essential to avoid an unintentional grant of a business talent group tenant.
Both agreements have their advantages and disadvantages. The best agreement for you will differ depending on whether you are a tenant/licensee or a landowner.