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Agricultural tenants encouraged to consider succession planning

Succession planning is important in any business and no less so for farming businesses, especially where a tenant wishes to pass on the tenancy to another person, normally someone in their extended family.

A new guide published today, 26 August 2019, by the Tenant Farming Commissioner, Bob McIntosh, summarises some of the legal basics and outlines the ways in which an agricultural tenancy can be passed on to another person.

It includes information on whether, and how, a tenancy might be assigned during a tenant’s lifetime; bequeathing a tenancy and transfer of a tenancy when someone fails to leave a Will.

In a nutshell, a tenant

  • can only transfer a tenancy to another individual. Tenancies cannot be transferred to a company, firm or club, or to two or more people, unless the landlord agrees
  • can’t normally pass the tenancy to just anybody, unless the landlord agrees. Preferential consideration is usually given to ‘near relatives’
  • can pass on a tenancy in three main ways: as a lifetime assignation; as a testate transfer through a Will, when someone dies, and an intestate transfer (where someone dies without making a Will) where the tenant’s executors may still be able to transfer the tenancy to another person

In each of these situations the landlord has certain rights to object; these are described briefly in the new Guide.

Speaking about the new guide, Bob McIntosh said, “It’s important for tenants to have a plan in place for assignation or succession to ensure that at the appropriate time, they can make way for the next generation.

“I strongly recommend that tenants always obtain independent legal advice that’s relevant to their particular circumstances and seek it in good time as some parts of the process are time-sensitive.

“Careful thought needs to be given to when and how to make any transfer.

“Which route is chosen will depend on individual circumstances but, generally speaking, making an  assignation to a ‘near relative’ during the tenant’s lifetime is likely to be the most straightforward.”

Tenants must follow the correct procedures as failure to do so may, in some cases, lead to the tenancy being terminated.