Farm Business Tenancy (FBT) in Yorkshire: What they mean for landlords and tenants

Understanding Farm Business Tenancy agreements can be tricky – here, Katie Wright, partner at Wilkin Chapman, unpicks the detail.

In the world of farming, situations often arise where the description doesn’t quite match the reality. One common arrangement is the Farm Business Tenancy (FBT), which governs how land is used, when the agreement can be terminated, and what happens to the land. However, complications can arise when tenants start diversifying their income streams. There are two main conditions that are required to be satisfied in order to ensure that the agreement is a true FBT. These are:

1. The property is being used for agriculture

2. The property is being used for a business

Whilst the latter is usually satisfied where the tenant is actively engaged in a business, the former can cause issues. The definition of ‘agriculture’ limits the use of the property concerning livestock to dairy farming and livestock breeding and grazing land. Livestock, in this context, refers to animals kept for the production of food, wool, skins, or fur. It also includes animals used for farming itself.

Whilst at the outset of an agreement the use of an FBT is entirely appropriate, it is important for landlords to make sure that a tenant doesn’t diversify the use of the property to include uses that would fall outside the scope of an FBT, such as equestrian or leisure use.

If the landlord allows this to occur, it could result in the agreement (or at least part of the agreement) becoming a business lease. This could in turn mean the tenant acquires security of tenure, making it harder for the landlord to regain possession of the property.

It is equally important that a tenant makes a landlord aware of their desire to diversify and that they obtain the necessary consent for the diversification. Failure to do so may result in the landlord seeking to enforce the tenancy or recover possession of the property.

Both parties, landlord and tenant, should seek professional advice when setting up the agreement. Regular reviews will ensure that it is still appropriate for circumstances on the ground to avoid the tenancy becoming something that was never originally intended.

For further information, please contact Katie Wright on 01472 398376, email [email protected] or visit wilkinchapman.co.uk