Farm tenants and landlords are facing uncertain times, so it’s vital to keep dialogue open and plan together to ensure the future viability of both.
The combination of the massive rise in input costs, much higher values for many types of produce, changing public support and discussion of new markets for environmental services makes for a confusing picture. At a time when farms need to manage their future, the effects of climate change and the measures to mitigate it only further muddy the waters, says Jeremy Moody, secretary and adviser to the Central Association of Agricultural Valuers (CAAV).
“There is a lot of flux and change, so landlords and tenants need to keep the conversation going throughout as the uncertainties evolve,” says Mr Moody. “They need to understand each other and their individual objectives, still talking even if they are not reviewing the rent.”
All farms will need to adapt to the post-Brexit, post-BPS era, which might involve new investment in farm infrastructure, diversification, or entering into environmental schemes and tree planting. “It’s very easy for each party to assume the other’s answer to a question; as Britons we are very good at not having conversations. But ask the question – don’t assume the other person will say no.”
It’s also important to be open-minded and work together for long-term mutual benefit, he adds. “There is often a desperate desire for people to protect their interests, but if only seen in the short term when so much is still unknown that has the potential to do long-term self-inflicted damage.”
Offers of support such as Defra’s expected scheme for slurry store improvements may prompt renegotiation of FBTs and their length to enable the tenant’s investment in the future.
It’s vital to explore the implications of an agreement: A tenant selling carbon credits could have continuing personal liability, as under a forward contract for selling grain. A landlord trying to reserve carbon could cramp the tenant’s farming and so the rent.
Freedom for economic change
“Both landlord and tenant need the freedom for economic change, but neither party should deal unilaterally without agreement, certainly not while so little is yet known of the new markets. Negotiate a proper contract, don’t just use a template unthinkingly, because when things go wrong that is the rule book of how things will be handled.”
When it comes to environmental schemes, it’s important to plan ahead, says Mr Moody. If the tenant plants trees under the England Woodland Creation Offer and the Woodland Carbon Guarantee Scheme, how will that be compensated at the end of the tenancy, for example?
“And beware the extremes of environmental schemes; is the land still being actively farmed?” For example, peatland restoration might remove the land from agricultural activity, which would break most farm tenancies, he adds. “If both parties are willing, they could agree their own long-term tenancy and perhaps restructure other agreements between them. If the terms for any agreement are right then shake hands, if the terms aren’t right, then don’t do it.”