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Shropshire Farming Talk: Agricultural Holdings Act (AHA) leases.
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Shropshire Farming Talk: Agricultural Holdings Act (AHA) leases.

Changes have recently been made to the succession rules, which came into effect on 1 September 2024 and apply in both England and Wales.

Succession is a process that is applicable to some agricultural leases that are governed by the AHA 1986 and may, in certain cases, enable next of kin to apply to take over and continue to lease a holding.

Succession is an opportunity to secure favorable long-term property security, which can last up to three generations and is often on more sympathetic tenancy terms. In many cases, the owner will try to contest a probate application, or will certainly want to make sure the applicant meets the probate rules, before simply allowing the probate to take place, primarily because of the amount of time it would take could be confronted. a loss of control over the holding.

In terms of the recent changes to the succession rules, if notice of retirement has been served or the tenant’s death has occurred before 1 September 2024, the old succession rules will apply. If the date of death or notice of retirement was after this date, then the new rules will apply.

Under the old succession rules, the tests were about eligibility and suitability. In terms of the eligibility test, it looked at three components, being the next of kin, the main source of livelihood and the business unit test components.

Under the close relative test, the claimant had to prove that they were either a child or treated child, wife, husband, civil partner, brother or sister of the outgoing tenant. There have been no changes to this element of the eligibility test.

The main means of livelihood test requires the applicant to demonstrate that they are economically dependent on the subject holding or a wider unit of which the subject holding is part. The applicant must show that, within 5 of the 7 years ending with the date of death or retirement notice, their main source of livelihood was gained from the holding or wider establishment. This is a very technical area within the succession rules and the burden of proof is on the applicant to demonstrate and prove the case. Again, there were no changes to this component of the test.

The business establishment test was in place to disqualify an applicant who, in addition to the subject property they owned, owned or occupied another establishment that was considered large enough to support 2 full-time agricultural workers. There was often a requirement to have a net annual income assessment and generally if this demonstrated an NAI of around £40,000+ then the applicant could fail the test. This component of the eligibility test has been removed from 1 September 2024.

As for the old suitability test, it previously focused on the applicant’s training, practical experience, age, physical health, financial situation and the owner’s views on suitability. These items have now been removed from September 1, 2024.

The new rules for the suitability test now direct the Tribunal to consider, in all relevant respects, the claimant’s ability and likely ability to cultivate the holding commercially, with or without other land, taking into account the need for high standards of efficient production and care. for the environment. The test now looks at a person’s experience, training and skills in farming, but also in business management, plus their financial situation and character. The appropriateness test now considers a hypothetical tender process for the holding, and the test provides that consideration should be given to the scenario where, if the applicant applied for the lease, then the likelihood would be that a prudent and willing landlord would have selected the applicant. as a likely candidate for lease.

The applicant must now, through the suitability test, be able to clearly demonstrate that they can farm commercially, through efficient agricultural production, but at the same time with care for the environment, and there is a requirement to demonstrate that both of these can be achieved. .

These new suitability test requirements will need to be demonstrated by producing quality evidence such as detailed business plans, cash flows and budgets.

A successful application for probate will often depend on the level of training, both in terms of the application itself and supporting information, but also in terms of the years of training leading up to either the retirement notice being issued, or the date of death. To be successful with this process requires a lot of advance planning and adjustment within the business, and it cannot be emphasized enough how important it is to actively plan well in advance of filing for probate.

The final change from 1 September 2024 is age related. An applicant can no longer be discriminated against because he is too young or too old. If retirement succession is considered under the old rules, the retiring tenant must have reached the age of 65 on the date of the retirement notice. This rule has now been abolished and therefore the departing tenant can now send the retirement notice at any age. This change was introduced to allow succession to take place when the departing tenant deems the time to be the most appropriate. Applicants should take this change as a welcome opportunity and consider the merits of this new flexibility in line with their selection of the relevant period for the main means test.

For more information on Farm Estate Succession, please contact me – www.dmpcuk.com

by Kathryn Williams, Davies Meade