Perils and pitfalls to watch for in tenancy agreements
With the considerable uncertainty we are experiencing in agriculture at the moment it is more important than ever to ensure that any new tenancy agreement is taken on terms that are reasonable.
In reality most new agreements will be based on some fairly standard documents produced by the larger law firms or the professional organisations linked to the industry such as the Royal Institution of Chartered Surveyors or the Central Association of Agricultural Valuers.
It is also fairly common to see these agreements reproduced without much editing so the agreement you may be looking at will usually be fairly generic and drafted with a whole range of farms in mind.
There are several important clauses to look out for including:
1 Term – Check if the tenancy is actually for as long as it says it is. It is quite common for a tenancy to be described as a 10-year tenancy on the front cover only to have a five-year break clause buried in the small print. This would be a five-year tenancy not a 10 year tenancy.
2 Repairs – Most tenancies under the 1986 Act relied on what are known as model clauses. These are set out in the relevant statutory instruments. Many Farm Business Tenancies also incorporate these into the agreement as well, but always check. There will often be a repairing schedule at the back of the agreement setting out who is responsible for what. Also, always remember that an obligation to keep in good repair means to put in good repair as well. “It was like that when I came here,” is rarely a defence against disrepair in these circumstances.
3 Quotas and entitlements – milk quotas are long gone but that does not stop many agreements including obligations to obtain and maintain quotas, entitlements and other “payment rights.” Often the obligation is on the tenant to use "best endeavours" to obtain and maintain these payment rights. At the very least ask for “best endeavours" to be changed to "reasonable endeavours" because as any good lawyer will tell you “best endeavours" means “move heaven and earth, which could involve expensive appeals and so on to DEFRA.
4 Landlords costs – Another favourite is to pass on various costs to the tenant. Some of these can be innocuous but some can be more sinister, such as an obligation on the tenant to pay the landlords legal and professional costs in dealing with or contemplating dealing with breaches by the tenant.
Common sense is the key. In my experience most landlords will accede to reasonable requests to have the more onerous or unreasonable clauses removed or at least modified. The overriding message is to be careful what you sign and take advice if you are unsure.
Philip Meade of Davis Meade Property Consultants