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Agriculture - diversification |
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Agricultural Ls should be wary before consenting to a request by T for
diversification. It is important for Ls to remember that they do not have
to consent to diversification. In Jewell [2002] there was a user covenant
providing for agricultural use only, and the court held that such a clause
should be strictly interpreted in L’s favour (thus preventing use as an
educational farm on part of the holding). Thus such clauses still give Ls
a strong bargaining hand in deciding whether to agree to non-agricultural
use by T.
It should not be forgotten that a substantial move by a T towards nonagricultural
activities can severely prejudice L’s position (eg the right to
50% agricultural property relief for IHT, or 100% relief on land subject to
a Farm Business Tenancy). Even the DEFRA code concedes that loss of
tax relief by L in the event of implementation of a diversification proposal
would constitute grounds for a reasonable refusal of consent. In
addition, extensive non-farming activities could result in the tenancy
ceasing to be an agricultural holding, and instead being protected as a
business tenancy under LTA 1954. Accordingly, activities carried out in
a holding which are probably not agricultural, but which may generate a
substantial proportion of T’s income, may best be dealt with by way of a
surrender and a grant of a fixed term 1954 Act tenancy, contracted out
with a security of tenure provision.
What agricultural Ls should not do is consent to diversification by T
without having first taken specialist advice as to the possible
implications. Source: Lee & Pembertons. © Practical Lawyer
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November 2007 |
