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 email@example.com
For more information about Berrys, please visit their website here: www.berrybros.com