Case Study

Question 1

Does there have to be a written tenancy agreement under the ATA 1995?

Answer 1

• No, but a failure to have a written agreement can lead to uncertainty.
• If there is no written agreement then default conditions will apply under the legislation.

Question 2

What IHT Reliefs are available?

Answer 2

• Nil Rate Band = £325,000
• Residence Nil Rate Band = £175,000
• PETs
• APR (50/100%)
• BPR (50/100%)
• Woodland Relief
• Heritage Relief

Question 3

What are the ownership conditions for Agricultural Property Relief?

Answer 3

To qualify for APR, must have occupied the property for the purposes of Agriculture 2 years prior or owned the property for the last 7 years.

Question 4

What does NPK stand for?

Answer 4

(N) Nitrogen
(P) Phosphorus
(K) Potassium

Question 5

What are the conditions of an FBT?

Answer 5

• Commenced on or after 1st September 1995.
• Satisfies Business & Agricultural or Notice Conditions (BAN).

Question 6

What are the main features of an ATA 1995?

Answer 6

• freedom of contract for the parties to negotiate the terms of the tenancy
• no minimum term
• minimal security of tenure
• limited freedom in respect of rent review
• complete freedom for the tenant to remove the tenant’s fixtures
• no restrictions on the parties’ ability to negotiate compensation, other than in relation to the tenant’s improvements
• a formal statutory encouragement to use alternative dispute resolution (ADR)
• the encouragement of diversification

Question 7

What is soil sampling?

Answer 7

Process of taking a small sample of soil and sending it to a lab to determine the nutrient content.

Question 8

What are the minimum BPS requirements?

Answer 8

• 5 ha + of Agricultural Land
• 5 entitlements or more
• Active Farmer

Question 9

How would you deal with a breach under ATA?

Answer 9

Depending on the terms of the agreement & severity of the breach you could;
- Review the tenancy agreement,
- Apply for the appointment of an arbitrator under s28 of the Act (£115).
- Write to the tenant & give them ‘reasonable time’ to remedy the breach. If not remedied, serve a s146 notice under the Law of Property Act 1925. Must stipulate breach, time frame to remedy & compensation payable. If still not remedied, LL can commence proceedings in the Court for forfeiture.

Question 10

How were you certain the previous tenancy had come to an end?

Answer 10

• Wrote to both parties to confirm surrender & issued a ‘deed of surrender’.
• Crystallised the terms of the tenancy.
• Confirmed no tenant right matters or compensation payable.
• Confirm vacation date.
• Anything can be done by agreement.

Question 11

How often should you soil test?

Answer 11

• Permanent Grassland; Every 5 years
• Arable land; Every 3-4 years
  (However I would speak to an agronomist)

Question 12

How are soil samples carried out?

Answer 12

• W sampling pattern (avoiding gateways, water troughs and muck heaps).
• Soil sampling Auger & Sandwhich Bags.
• Push Auger approx 6 inches into ground.
• Store @ room temp and send to Lab ASAP.

Question 13

What are the Business, Agricultural and Notice Conditions?

Answer 13

Business = All or part of the land comprised in the tenancy is farmed for the purposes of a trade or business.

Agricultural = The character of the tenancy is primarily or wholly agricultural.

Notice =
(a) The LL & Tenant each gave the other a written notice -
(i) identifying the land to be comprised in the tenancy or proposed tenancy.
(ii) containing a statement that they intend that the tenancy or proposed tenancy is to be, and remain, a FBT.
(b) At the beginning of the tenancy the character of the tenancy was primarily or wholly agricultural.

Question 14

What are the consequences of not serving a s1(4) notice under ATA 1995?

Answer 14

Failure to exchange notices might lead to the tenancy falling out of the farm business tenancy category and being governed by other legislation such as the Landlord and Tenant Act 1954.

Question 15

What are the requirements of a deed?

Answer 15

• Have to be written.
• Must state their intention to be a deed.
• Do not require ‘consideration’ (something to be given in return).

Question 16

What is the benefit of soil sampling?

Answer 16

• Determine the levels of available nutrients in the soil.
• Allows the farmer to consider adding more nutrients in the soil.
• More accurately check soil health.
• Reveals Phosphorus (P) Potassium (K) and Magnesium (Mg).

Question 17

What fees did you charge in respect of the FBT and why?

Answer 17

• 10% of the rent plus expenses plus VAT.
• Usual rate for preparing a FBT.
• Scope of works outline in TOE - anything additional charged at hourly rate.

Question 18

What sections of the ATA 1995 set out default rent review arrangements?

Answer 18

Part II, s9 - s14
- Parties can contract out of Part II, providing they satisfy s9 (written tenancy agreement).

Question 19

Who is liable for what under the Agricultural Model Clauses for Fixed Equipment Wales Regulations 2019?

Answer 19

LLs: Underground water pipes, roofs, walls, floors.
Tenants: Fences, gates, £500 per annum towards slates.
LL may recover 1/2 of reasonable costs: guttering, barge boards, floorboards.

Question 20

When does BPR apply?

Answer 20

• BPR only applies to trading businesses and NOT investment businesses.
• Not consist wholly or mainly of dealing in land or buildings or making or holding investments.

Question 21

What are the implications of a 3 & 7 year FBT Term?

Answer 21

3 years =
- Must be created by deed

More than 7 years =
- Registered with LR (Land Registration Act 2002)
- SDLT return must be submitted within 14 days of the date of grant, whether or not SDLT is payable.
(Fellows of the CAAV or member & Fellows of RICS are authorised to create an FBT).

Question 22

How do you compare comparables?

Answer 22

• Break it down into different elements.
• Gather and obtain comparables.
• Analyse each comparable & make adjustments based on; soil type, land use, access, locations, size, topography, height above sea level. (Use local knowledge).

Question 23

How has the Agriculture Act 2020 impacted FBTs?

Answer 23

• Limited.
• The only change relates to the bodies which can appoint arbitrators.
• President of RICS & Chair of ALA.

Question 24

What would you do if the tenant didn’t pay their rent?

Answer 24

• Call & write to the tenant.
• Keep the LL fully informed.
• If overdue by 21 days, LL may forfeit the lease by re-entering the property as per the terms of the tenancy agreement.
• Tenant should indemnify the LL for his reasonable costs under s146 of the Law of Property Act 1925.

Question 25

What section of the ATA 1995 defines Agriculture?

Answer 25

s38

Question 26

Did you consider any other methods of letting?

Answer 26

- Yes - Formal Tender, however, my client felt this method did not provide him with the room to negotiate, if required.

Question 27

Did you consider any other type of Agreements?

Answer 27

- Yes - Both Contract Farming and Share Farming Agreements were considered however my client did not want the level of involvement which is required for such joint ventures.

Question 28

What was included in the TOB?

Question 29

What is disregarded when calculating a FBT Rent?

Answer 29

Disregards: - Any tenants dilapidations - The fact the tenant is in occupation - Any contribution from the LL made to a tenant's improvement - Any increase in rental value due to tenant's improvements

Question 30

Did the Tenant have an Agent?

Answer 30

Yes, the tenant had an Agent who was also present during the round table discussion.

Question 31

End of Tenancy Compensation for FBTs is found under what section?

Answer 31

s15 ATA 1995

Question 32

What are the types of tenant improvements they can claim compensation for?

Answer 32

- Physical Improvements - Intangible Advantages

Question 33

What is the Rent Review Formula under the ATA 1995?

Answer 33

- S13 - The rent at which the holding might reasonably be expected to be let on the open market by a willing landlord to a willing tenant, taking into account all relevant factors, including the terms of the tenancy.

Question 34

What repairing obligations were incorporated in the agreement?

Answer 34

The Agricultural (Model Clauses for Fixed Equipment) (Wales) 2019 SI2019/1279

Question 35

Was a Record of Condition carried out prior to the commencement of the tenancy?

Answer 35

Yes. A record of condition was carried out prior to the commencement of the tenancy. It was then issued for signed and dating by both parties and attached to the tenancy agreement as an Addendum.

Question 36

How do you calculate SDLT for a tenancy of 7 years plus?

Answer 36

- SDLT is payable if the "Net Present Value of the FBT exceeds £150,000 (non-residential stamp duty threshold). - Calculating the NPV is quite complex, therefore would advise to seek advice from accountant. - Tenant is responsible for submitting SDLT return. - SDLT is payable within 30 days of completion of the FBT.

Question 37

How would you register a lease?

Answer 37

Send a completed AP1 Form, together with a copy of the lease, SDLT Certificate and a cheque for the application fee to the Land Registry. £45 fee if Registeredusing Portal and value between £0-£80,000

Question 38

What is the rent of FBTs based on?

Answer 38

Market Value

Question 39

Did you consider any other Rent Review basis (apart from MV)

Answer 39

- RPI (Retail Price Index) Measure of inflation - Cost of commodities

Question 40

Why was RPI & Cost of commodities deemed unsuitable?

Answer 40

RPI - High levels of inflation which may exceed Market Value Cost of commodities - Very volatile due to COVID & Ukraine

Question 41

When looking at a potential site for diversification, did you carry out any Desktop Research?

Answer 41

Yes, looked at: - Flood Maps - Designations (AONBS, Conservation Areas, SSSIs, Ancient woodlands, listed buildings) - Ecology - siting of ponds/watercourses etc.