How to apply for a tenancy to avoid pitfalls and problems

A NEW farm tenancy is a major decision for both potential tenant and landlord. Applicants must show their skills, experience, financial position and judgement to best effect to be successful. Chief executive of the Tenant Farmers Association George Dunn runs through the basics.

New tenancies will be let as Farm Business Tenancies (FBTs), which are governed by the Agricultural Tenancies Act 1995. It is important for all applicants to get advice on the legal background to the tenancy they are applying for.

Unfortunately, there is not a centrally-held list of farms available to let. Usually farms are advertised in the farming press.

If you are interested in a particular location, you should look at local papers and approach land agents, so they are aware of your interest if they have a farm to let.

The Tenant Farmers Association can provide a list of good agents in your area. You may also wish to approach large landowners in your area, who may have land to let. A number of County Councils have smallholdings available to rent.

Before applying, it is important to assess your strengths and weaknesses in order to ensure you present yourself in the best possible light to a potential landlord.

It is also essential to decide the level of rent that lies within your financial reach. In tendering for a farm it is important not to bid over the odds, which might win you the farm, but leave you with a huge financial burden you will be unable to manage.

Professional help

The skills used in applying for a tenancy come with practice and you should consider retaining a professional (normally a chartered surveyor) to help you put your applications together. Prepare each case thoroughly to get the best effect for the cost, time and effort involved in doing the job properly. Equally, if you believe the landlord is looking for more than you can sensibly offer, think hard before putting the work in.

If the farm is advertised in the press, there will normally be an opportunity to obtain a set of particulars in return for a small fee, usually between £5 and £20. These particulars should give details of the holding, the terms of the tenancy agreement and the procedures involved.

There will be at least one viewing day, probably two. Take full advantage of these to walk the farm, assess the land, consider the buildings and question the landlord’s agent.

The farmhouse should be open for inspection and the outgoing tenant may be available to glean useful information. Check your first impressions by going back on the second viewing day, preferably with someone to talk matters through with.

Be wary if the landlord does not hold a viewing day or the draft tenancy agreement is not available to see.

Your tender should be based on the information you have about the farm, most of which will be gathered on the viewing days and from the particulars.

You must find out exactly what you are paying for. This could include liabilities, paying for the previous tenant’s improvements and other matters that you will have to put in hand (such as poor fences, black-grass or wild oats).

Preparation

Taking all this into consideration you will need to prepare a budget, a three-year quarterly cash flow and a balance sheet. If you are going to borrow, your bank will need to be reassured as much as your landlord, and will probably ask for the same information.

In making the application, you will be invited to set out your plans and forecasts, so they will have to stand scrutiny and questioning. While it is recognised they will be no more than best guesses, they will reflect your approach and judgement.

When the landlord’s agent has received the tenders, a shortlist would normally be prepared, from which the landlord makes the final choice, following a formal interview.

There may be many applicants for each tenancy, and reaching the final shortlist suggests you are on the right lines in preparing your application.

If you are successful, the landlord will provide you with a written FBT agreement. Before signing, you should check that it contains the terms you expected (you may wish to take professional advice on this). Minor amendments can be negotiated at this stage.

If the tenancy is capable of running for more than seven years, you will have to file a Stamp Duty Land Tax Return and you may have to pay duty on the lease to HMRC (most FBT leases are below the tax threshold).

The TFA recommends you instruct a solicitor or appropriately qualified accountant to file the return for you.

  • The above provides some important pointers, but professional advice is always recommended.

Readers' comments (1)

  • oh i,ve done plenty tenant application packs generally 5+ hour doing full costings for all enterprises for min of 1st 5 years of term. have put together some very good economic business plans, i'm young (ish!) driven and energetic. but always lost out to local large scale potato growers. until agents and owners show a bit more respect for independent businesses/farmers applying for these leases is a total waste of effort all you do is allow the agent to justify their undoubtedly big fee to the owners!

    Unsuitable or offensive? Report this comment

Have your say

Mandatory
Mandatory
Mandatory
Mandatory
Register your email address for Farmers Guardian e-bulletins

Get the latest from Farmers Guardian delivered straight to your inbox. Click here to sign-up today

Already receiving bulletins? Sign-in to edit your preferences