Jun 18, 2018

If you’re a tenant farmer and your landlord decides to sell, the news of a sale can be very unsettling. But it could also provide new opportunities. And there are a number of things to consider, before you decide what to do next.

For example, the sale may give you the opportunity to buy the farm or negotiate a surrender of the tenancy – but legally your landlord is under no obligation to give you first refusal.

The Agricultural Holdings Act (AHA) 1986 gives tenants who have succession rights a favourable discounting from the vacant possession value, compared to those under farm business tenancies (FBTs) which are governed by the Agricultural Tenancies Act 1995.

The 1986 AHA Act gives tenants greater tenure security and they have the right to two successions if the tenancy was created before the 12 July 1984. This may result in the value of the farm being significantly reduced. Add to this the fact that many landlords believe farmland prices have peaked, and there may be a good opportunity ahead.

And if, for example, you’re given the chance to purchase the farm, consideration should be given to how any improvements are accounted for (make sure you don’t pay for them twice!) as well as how the entitlements are treated because they usually belong to the tenant already. With a FBTs, tenants should check that the landlord can legally terminate the tenancy early via a breakage clause.

Before any decision is made professional agricultural accounting advice should be sort to consider the following points:

– Capital Gains Tax implications

– The offer and the valuation

– Legal ownership

There has been a recent increase in the number of farm tenants now opting to either buy their farms or to take a lump sum on surrendering their tenancies. If you’re one of them, it’s a wise decision to speak to an expert in agricultural accounting before you proceed. Partner, Lindsay Beeston, is head of the agricultural accounting team at Afford Bond Chartered Accountants and can be contacted by email at Lindsay.Beeston@affordbond.com to discuss individual circumstances.

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