Negotiate carefully before accepting tenancy deals

Posted by LindaStenner on November 26, 2020

Negotiate carefully before accepting tenancy deals

November 26, 2020 at 10:19 AM

Tenant farmers who are approached to discuss surrendering their old agricultural tenancies should be cautious and take advice before accepting any deals. Mutually beneficial deals can be struck but the full value of tenant’s interest in the land must be acknowledged.  

The advice comes from land agents at Davis Meade Property Consultants who have received a number of calls from tenants who have been approached by their landlords to enquire of their willingness to dispose of their valuable interest in the land.  

“These landlord enquiries are not a new phenomenon but we’re noticing a spike in cases and a pattern emerging in the context of the landlord enquiry,” said Edward Page, land agent at Oswestry-based Davis Meade Property Consultants.

 “Discussions around surrendering and re-granting old tenancies have been common place since the 2006 Tenancy Reform Industry Group’s amendments. Discussions then were driven by a landlord’s Inheritance Tax position but generally deals could be amicably struck as the surrender didn’t prejudice the tenant’s long term interest and rights,” he explained.

Now, in late 2020, at a time of uncertainty in the principle investment markets, new owners of land are considering both the tenancy and land as a separable investment.

“The value of land subject to Agricultural Holdings Act tenancy can be discounted by anything up to 50 per cent depending on the terms of the lease,” Edward said.

“These recent cases show the purchaser recognising the potential uplift in the value of their investment if they can achieve either an agreed surrender or forced lease termination. The Agricultural Holdings Act provides a Tenant with a significant level of protection which these Investors are not familiar with.

“Although the tenant might be offered a sum of money to leave it is likely that they will be entitled to a lot more. Farmers therefore should take advice from a tenancy specialist or their agent as it could be an opportunity to leave the farm with a decent surrender payment or ‘golden handshake’ which would be extremely advantageous for a tenant looking to retire with no successor.

“Consider also the tax implications as a capital payment made by the landlord may be liable to capital gains tax,” he added.

For advice call Davis Meade Property Consultants on 01691 659658 or email edwardpage@dmpcuk.com

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