Tenants on arable farms should brace themselves for a possible
rent review this year as landlords look to cash in on higher grain
and straw prices.
The warning comes from Graham Bowcock, tenancy specialist with
Berrys in Cheshire, who reminds tenants that Michaelmas, the
traditional time for rent reviews, this year coincides with an
uplift in prices in the arable sector.
"We have not seen a round of solid rent reviews for a decade or
more but landlord agents may be looking the price of grain and
thinking now it the time to act," he said.
But achieving a rent increase won't be a done deal as tenants
are facing larger bills for inputs such as fuel, fertilisers and
chemicals and these will have to be considered in the rent
negotiations.
"Farmers receiving a rent review notice from their landlord this
Michaelmas (September 29) have a year to negotiate and although
grain prices may be higher now, this might not be the case in 12
months time," he suggested.
"The key for tenants is not just to forget about the rent
notice, you should take action straight away, informing your agent
who can act on your behalf and start gathering all the information
necessary, such as accounts and bills etc to justify your
case."
Farmers who received a rent notice September 2009 should by now
have either completed their negotiations or be close to
settling.
"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 is a costly option," he said.
As to average rents, every farm is different so each review has
to be negotiated individually.
"This is not a one-solution-fits-all science and in our region
while the arable and red meat sectors seem to be faring well the
same cannot be said for dairying where milk prices remain
stubbornly low while inputs continue to rise.
"A landlord who served a rent review notice on a dairy farm last
September may struggle to squeeze an increase this year,
particularly if the base rent is relatively high to start with as
the tenant will be facing higher forage costs and other pressures
such as NVZ legislation.
"Not only are grain and straw prices high but also silage is in
short supply and the price of hay has soared."
Rentals under Agricultural Holding Act 1986 tenancies will
depend on a number of factors including the related earning
capacity of the farm and comparable lettings of similar farms in
the area (although these are sometimes hard to find). Any
landlord's improvements are ignored when calculating the rent.
"The conclusion is that each review has to be considered on its
own merits but if tenants do have to accept an increase they should
try and negotiate something for themselves, such as a new farm
track or a new farm building," he added.
For advice on tenancy matters, contact Graham Bowcock on 01606
49200 or email graham.bowcock@berrybros.com
For more information about Berrys, please visit their website
here: www.berrybros.com