A Midland agricultural lawyer expects to see a rise in agricultural rent reviews over the coming years as landlords reap their own harvest on the back of increasing agricultural profits volatile commodity prices and diversification
Sarah Denney-Richards, an associate in the agriculture and rural affairs division of MFG Solicitors, believes landlords are already and will continue to exploit “the perfect opportunity” to serve rent review notices following one of the best years for agriculture since the mid-1990s.
Ms Denney-Richards said that September experienced an increase in the level of rent review notices being served by landlords on their tenant under section 12 of the Agricultural Holdings Act 1986 and that a similar trend may emerge for March term dates. Where an arbitrator cannot be agreed by the parties then most of these are being settled by an arbitrator appointed by the Royal Institute of Chartered Surveyors.
“Either party may demand arbitration and the arbitrator must apply a statutory rental formula when determining the level of rent. The notice can be given by either party – in the current climate it is most likely to be the landlord on the tenant.”
“However, landlords should be aware that once a notice had been served under section 12 they cannot withdraw it.” This was an important consideration in a volatile economic climate – especially where commodity prices were concerned and a rent review was being sought on the back of a profitable farming year for the tenant in a purely agricultural sense.
“The earning capacity of the farm may start going down in the period between serving the notice and the date on which the rent is determined. If the landlord has served a notice on the basis of a rising market and the tide changes in the meantime then he may find out after the event that his actions are playing against him.”
If an arbitrator was appointed he would assess the “rent properly payable.” He would take into account all relevant factors including the current level of rents for comparable lettings, the productive capacity of the holding and its related earning capacity. The arbitrator would also need to consider any diversification carried out on the farm.”