Shropshire Farming Talk: Compensation on quitting an agricultural holding

A Tenant’s right to claim compensation under an AHA tenancy is provided for within schedules 7, 8 and 9 of the Act. Within these schedules a list of improvements are set out and the amount of compensation payable is measured by the increase in rental value of the holding as a result of the improvement.

There is no ability to contract out of the compensation provisions except in very limited circumstances. It should also be noted that there is no automatic provision for compensation in relation to diversification under the AHA 1986.

Under the AHA 1986, improvements are considered old improvements if they were carried out before 1st March 1948 and new improvements if that began after this date.

They are then divided further into long term and short term improvements. Tenant Right is also then claimable as a residual element of compensation and covers expenditure on materials and labour in respect of activities for which the tenant did not reap the full benefit of during the period of occupation. Examples of Tenant Right items include, growing crops, seeds sown and pastures recently reseeded.

Under the AHA 1986 a Tenant is also entitled to claim for disturbance where the tenancy has terminated following a Landlord’s notice to quit in relation to the whole holding or where a Tenant has served a counter-notice to enlarge a notice to quit part. The amount of compensation depending upon the circumstances and proven loss will be between one and four year’s rent.

All claims under the AHA 1986 become unenforceable unless within 2 months after termination, notice of intention to make a claim is given to the other party.

Tenancies governed by the Agricultural Tenancies Act (ATA) 1995, more commonly referred to as Farm Business Tenancies, also contain a statutory code for compensation. These provisions also include a claim in relation to non-agricultural improvements. Improvements under the ATA 1995 are a physical improvement to land or an intangible advantage.

Compensation is only payable if Landlord’s consent to the improvement was obtained. There is however a sub-category of improvements called routine improvements. These are made in the normal course of farming such as growing crops, fertilising, liming and cultivations.

As per the AHA 1986, the Tenant must give notice of intention to claim within two months from the termination date to enforce the claim.

For further advice or assistance with the submission of an end of tenancy claim please contact our Oswestry office – oswestry@dmpcuk.com

by Kathryn Williams, of Davies Meade Property Consultants