Farm Business Tenancy Rent Review to Market Value.

Our client was a landlord who had let all the land on his farm under a Farm Business Tenancy. We had originally helped with the letting of the farm and the implementation of the Farm Business Tenancy. He remained living in the farm house, so the tenancy was for the land only. The land was wholly arable.

We were approached by the landlord to discuss whether it was appropriate to review the rent.

How We Approached And Achieved The Project

We undertook a comprehensive review of the original agreement and determined that it would be possible to review the rent on the third anniversary of the term date, which was 13 months away. We knew if we wanted to have an opportunity to review the rent we needed to serve a rent review notice now, at least 12 months in advance of when the new rent would take effect. The rent review mechanism was to market value, which is very common in Farm Business Tenancies.

We gathered information on comparable farms that were similar in size, land type and cropping. We looked at all the relevant factors and determined that it would be sensible to have the opportunity to review the rent in 12 month’s time. The passing rent was below the market comparable information we had gathered. Whilst we didn’t know where the market would be exactly at the time the new rent would take effect, we wanted the landlord to have the opportunity, so we served the appropriate rent review notice.

In the summer before the rent would take effect (in September), we looked again at comparable rents and determined that there was scope for increasing the rent. We also determined that the increase in rent over the next 3 years was of a figure that would make a review worthwhile. Sometimes the increase achievable is a small margin and in those cases it might not be worth spending the professional fees for such a small increase.

We approached the tenant and their agent in plenty of time before the term date to allow time for negotiation. We proposed a sensible increase and shared our market information with the tenant and his agent. After some negotiation we agreed on a revised rental figure which was an increase on the passing rent of £5/Acre.

We then ensured that we implemented the correct paperwork to sit alongside the existing Farm Business Tenancy to ensure that the new rent was recorded legally.