Farming News - Farm tenancy agreements need a climate clause

Farm tenancy agreements need a climate clause

For farmers in the UK, the past 15 months have been extremely challenging. After entering 2012 in drought, the deluges of summer 2012, which persisted intermittently until the end of the year, and a seemingly unending winter this year, lasting well into April, unsettled weather has caused misery and strife for those who rely on its clemency for their livelihoods.

 

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Up until the beginning of the month, heavier land in parts of the country affected by downpours and flooding remained too wet to sow spring crops. Delays to field work caused concern amongst those who thought that, if warmer weather did not arrive on time, their crops would go unplanted.

 

For tenants, the nightmarish weather that has plagued farmers since spring 2012 combined with rising rents to create the perfect storm. Earlier this week, George Dunn, chief executive of the Tenant Farmers Association elaborated on the invidious position in which many tenants have found themselves.

 

Dunn said that, based on predicted high prices for arable crops, sheep and beef, March and September reviews in 2012 saw significant increases in rents, though these came before the full extent of the year's weather damage was known. He added, "However, sadly, landlords' agents do not appear to have significantly reduced expectations in the current market which is causing major stress to many tenants who are involved in contentious rent review negotiations."

 

According to landowners and their agents, as tenants enjoy free use of the landowner's property, any risk associated with working the land must be borne by the tenant. This is outlined in standard Farm business Tenancy agreements.

 

However, tenants' representatives have expressed concern over some relationships, which they say are characterised by landowners seeking to put short term profit over long-term prosperity, capitalising on higher prices by raising rents during fat years, without giving due consideration or compassion to the hardships being faced in lean years such as 2012.

 

TFA's Mr Dunn added, "Landlords and their agents need to understand that the impact of the weather will have long lasting effects which must be taken into consideration in settling rents over the next period of time."

 

One impending, and worrying, factor which suggests that such adversarial relationships could be untenable in the long-term is the potential for weather patterns – and therefore productivity – to be affected by climate change. Met Office predictions, made public in January this year, are for the UK to suffer more unsettled weather. According to Met Office meteorologists, as the shadow of climate change lengthens rainfall patterns in the UK are set to shift, potentially becoming more challenging for those working the land.

 

Thirty year long-term averages show an increase in annual rainfall of about 5 percent from 1961-1990 to 1981-2010. The figures also suggest 'extreme' days of rainfall may be becoming more common; a Met Office spokesperson elaborated in January, "Preliminary evidence suggests we are getting slightly more rain in total and it may be falling in more intense bursts."

 

Of the five wettest years on record, four have occurred since 2000. Commenting on the changing weather patterns, Professor Julia Slingo, Chief Scientist at the Met Office, said, "The trend towards more extreme rainfall events is one we are seeing around the world, in countries such as India and China, and now potentially here in the UK." However, she added, "Much more research is needed to understand more about the causes and potential implications."

 

Nevertheless, property agents maintain that nothing, not even shifting weather patterns, will change the relationship between landlords and tenant farmers in the foreseeable future. Agricultural solicitors and property companies were unequivocal in their assertions that risk would not be shared between partners in tenancy agreements.

 

Guy Banham, of Berrys Kettering explained, "This is not something that's going to change. Financial risk is with the tenant. Tenancy is viewed as an investment from the landowners' point of view so the tenant takes the financial risk. Otherwise landowners would farm the land in-hand."

 

However, Gerorge Dunn said a more nuanced approach may be necessary. As weather patterns change, and years like 2012 become more common, he argued that there should be more scope for risk sharing between landlords and their tenants, or at least leeway for rents to reflect the situation on the ground.

 

Mr Dunn said, "It is important that both landlords and tenants view the relationship as long term. Rents need to be at sustainable levels to allow tenants to make a viable return from their enterprise and landlords to make a viable return from their investment. Sadly the FBT tender market is characterised by rents which are unsustainable based on a heady mix of scarcity, hubris and the economics of the madhouse."

 

He added that farm tenancies under the Agricultural Holdings Act have statutory provisions, which require that rents factor in the productive capacity of the holding and the capacity for potential earnings from the land. He added, "On FBTs, it behoves both landlords and potential tenants to take a realistic, sustainable long-term view factoring in volatility in prices, costs and weather. To date some have been too eager to offer high rents in the tender market and landlords have been too eager to accept them without having due regard to the consequences of their decisions. It's time to wake up and smell the coffee."