Think carefully before issuing rent reviews
Published September 12th, 2017
With Michaelmas Day (September 29) fast approaching, the traditional start date for many agricultural tenancies under the Agricultural Holdings Act (AHA) 1986, landlords are being urged to think carefully before seeking a rent review.
“Landlords may be considering serving notice under section 12 of the AHA 86 to allow the rent to be reviewed as at September 29, 2018, as a minimum 12 months’ notice is needed to review rent,” said Sarah Reece, a chartered surveyor at Berrys.
The 12 months’ notice, which is also needed for Farm Business Tenancies under the Agricultural Tenancies Act 1995, gives time to review the financial position and prepare for discussions with the other party.
However, serving a rent review notice can aggravate landlord/tenant relations, she warned.
“At the moment, many farm businesses are under pressure from volatile income. Milk price has increased on this time last year but the market is still subject to volatility and great variance between contracts.
“Brexit is entirely uncertain and although the situation could be clearer in 12 months’ time it may be having a negative impact on incomes and returns.”
Under a rent review it is possible for rent to be increased, decreased or to remain the same and depending on which act the tenancy is under there will be a different process for reviewing the rent. Rentals under AHA 1986 tenancies depend on set factors such as related earning capacity of the farm and comparable lettings of similar farms in the area.
“On the plus side, what the rent review process can do is lead to discussions between landlord and tenant about the holding, the business and plans for the future,” said Sarah.
“Such discussions could be valuable for all parties, particularly where the landlord’s objectives may have changed or a tenant has factors such as succession or investment to consider.”
Farmers who received a rent notice in September 2016 should by now have either completed their negotiations or be nearing completion.
“If you cannot agree your rent amicably, or the landlord has not instigated the negotiation procedure, the notice will either expire and the rent remain unchanged or the landlord will have to proceed to arbitration, which can be a costly option,” she said.
“The key for tenants is not just to forget about the rent notice, you should take action straight away, informing your agent who can then act on your behalf and start gathering all the information necessary, such as accounts and bills etc to justify your case.
For more information contact Sarah Reece at Berrys on 01743 267068 email: email@example.com