As the name suggests, a farm business tenancy (FBT) is an arrangement whereby a tenant (which can be an individual or a business) rents land and / or the accompanying farm house and buildings, from the landlord, the person (or entity) who owns the property, for the purpose of running an agricultural business (broadly defined as growing crops or producing livestock for food).
The tenancy arrangement can be as concrete or flexible as both parties wish: it all comes down to the terms of the agreement between the landlord and tenant. Although the arrangement can be verbal, we always recommend that it is in writing. This means that any flexibility can be written into the arrangements so that each party knows exactly where they stand, reducing the chance of one of them doing something unexpected.
In order to create a FBT, it stands to reason that both parties need to be willing to enter into an agreement: the landlord has land and buildings to rent and the tenant agrees to take on the tenancy in return for a monetary consideration. The tenancy arrangement should set out formally what has been agreed such as the length of term, the rent payable, what the tenant can and cannot do, and the maintenance obligations of both parties.
We are often asked by prospective tenants entering a farm business tenancy whether the agreement should be in their own name or that of a company. There are implications either way so there is no blanket answer: each situation needs to be considered according to the individual circumstances. If in doubt it is sensible to take legal advice and discuss the pros and cons of both options. There is no right or wrong answer – just what is right for you.
A farm business tenancy should always set out who is responsible for maintaining which parts of the land and buildings. Tenants can agree to take on all the maintenance responsibilities in order to minimise the landlord’s involvement in daily operations. But generally speaking, tenants are usually responsible for the maintenance of the land and day to day management of the buildings, and the landlord retains responsibility for certain things which bring inherent value to the land such as good drainage to residential properties.
A farm business tenancy is a contractual relationship so, as with any contract there are sanctions if either party breaches it. As a tenant, you must understand the terms and obligations you have agreed as a breach could result in your tenancy being forfeited and you being responsible for damages payable to the landlord. Equally, if the landlord breaches the terms of the contract, they may incur contractual liabilities such as damages in favour of the tenant.
Taking out a farm business tenancy in the vast majority of cases should be straightforward providing you take legal advice early on, make sure everything is in writing, and agree terms with which both parties are happy.