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Grazing : Don't Take The Informal Approach
If you are wanting to let out your land for grazing, it is important that the arrangement is correctly documented so that there are no disputes when it comes to requiring the grazier to vacate the land. As you will read, there can be plenty of traps for the unwary.
Commonly a grazing licence is used where the landowner is happy to let out grazing land on a short term basis (usually during the grazing period from May to October), but wishes to regain possession quickly and without fuss.
The licence permits the grazier to graze their animals on the land in return for a licence fee. The grazier will be bound by a number of obligations, such as to pay the licence fee and not do anything which is likely to harm the land. At the end of the licence period, the grazier will be required to remove the animals from the land, without argument. It is also useful to include provisions in the licence that the grazier comply with cross compliance rules or any grant schemes affecting the land, so that the landowner is not at risk of losing its payments, due to an act or failure by the grazier.
The landowner will still be classed as the occupier which may have benefits for tax planning purposes.
If the landowner wishes to renew the agreement annually, then it is advisable to ask the grazier to remove its stock for a few days before entering into a new agreement, so that a longer term tenancy cannot be inferred.
If the landowner wishes to impose obligations on the grazier such as repair or maintenance obligations or where activities on the land go beyond the definition of grazing, such as planting or ploughing, then a farm business tenancy agreement may be more appropriate. This needs to satisfy the “business condition” (the land comprised in the tenancy is used in connection for the purposes of a trade or business) and the “agricultural condition”, (the character of the tenancy must be primarily or wholly agricultural).
In this instance, the landowner will not be classed as the occupier which may have implications for single farm payments, or tax-planning.
Even though the grazier will not be able to claim a right to remain on the land, if the tenancy is on a year on year basis or for a fixed term of more than 2 years, the landowner will be required to serve a written notice of at least one year, and no more than 2 years, to expire on the term anniversary date. This means that you may not be able to regain possession as quickly as you wish. If the tenancy is for a term of 2 years or less, the tenancy automatically expires at the end of the fixed term.
Problems can arise if the land is to be used for the grazing of horses. These are not classed as livestock (unless kept for farm work), and therefore not an agricultural activity to fall within the scope of a farm business tenancy. If the land is to be grazed exclusively by horses at a riding school, or livery business, then to avoid any statutory rights being inadvertently given to the grazier, allowing them the right to remain on the land, it would be advisable to grant a business tenancy, excluded from the Landlord and Tenant Act 1954, which would require the grazier to vacate at the end of the term.
It is important, that if you are considering letting your land out for grazing you do take advice as to the most suitable agreement to enter into with the grazier, I would be happy to discuss this with you, either at our offices here or in Newark, or at your farm office for your convenience.