Update: Changes to AHA tenancy succession rules

In September 2024, the long-awaited changes to the Agricultural Holdings Act 1986 (AHA 1986) succession rules came into force in England and Wales.

In this article, we provide an important reminder of the headline changes that came into force on the 1 September 2024.

The revised test

In any application for a succession AHA tenancy where the sitting tenant died or retired on or after 1 September 2024, a potential successor will need to prove to the Tribunal that they satisfy all of the following tests:

Eligibility test

The eligibility test has two limbs:

1. Close living relative test - The potential successor must be a close living relative of the outgoing tenant, which requires the applicant to be the outgoing tenant's spouse, civil partner, child, sibling, or a person treated as the outgoing tenant's child.

2. Principal source of livelihood test - The potential successor must show that in at least five of the last seven years of the outgoing tenant's tenancy, they derived their only or principal source of livelihood from their agricultural work on the holding (or an agricultural unit which the holding forms part of). In the case of an application for succession on the death of the outgoing tenant (but importantly not in the case of retirement), if the potential successor does not strictly satisfy this test but does so to a material extent then they can ask the Tribunal to treat them as if they have satisfied this test.

Suitability test

If the potential successor satisfies the eligibility test, they must then prove that they are suitable to become the tenant of the holding taking into account all relevant matters, including the applicant's experience, training, skills, financial standing, capability and capacity to farm the holding commercially "taking into account the need for high standards of efficient production and care for the environment", the character, situation and condition of the holding and the terms of the tenancy.

In addition, the potential successor must demonstrate that if the tenancy was available on the open market, then they are of a standard that means a prudent landlord would be willing to shortlist them for the tenancy. Whilst the Tribunal must consider all relevant matters, it must also disregard certain specific factors such as the applicant's age and the rent that the applicant and other potential tenants might be willing to offer to secure a tenancy of the holding.

Key points to consider

As this revised succession test is relatively new, we have so far seen very few cases come through the Tribunal which might shed some light on how these new tests are applied in practice. In particular, we consider that the following points will require further clarification:

1. What evidence will applicants need to produce to show that they can farm the holding commercially taking into account the need for high standards of efficient production and care for the environment? Whilst this is an untested point, we expect that evidence of care for the environment might include evidence that the applicant has successfully engaged in Environmental Land Management Schemes in the past. We also anticipate that evidence of the applicant's ability to farm to a high standard of efficient production is likely to require a supporting statement from an expert accountant and/or land agent, which obviously risks adding considerable cost to the process for the applicant.

2. What exactly will the applicant need to prove to demonstrate that they are someone who would be shortlisted by the landlord, and how long or short will that shortlist be? Does the applicant need to show they would be the first or second choice, or just not the worst candidate, or something in the middle? We expect that this is going to be something that the Tribunal deals with on a case-by-case basis based on the particular holding under consideration, which is going to make satisfying this test particularly difficult to predict, but we anticipate a supporting statement from an expert land agent as to the applicant's attractiveness as a candidate is going to be vital in most cases.

These new tests and the questions they raise mean that careful succession planning for AHA tenants and their potential successors is more vital than ever. It is going to be extremely important that careful plans are made early on to maximise the potential successor's chances of successfully applying for a succession tenancy when the current tenant dies or retires - particularly as, despite the best laid plans, that moment can arrive suddenly and without warning. It is therefore important that current AHA tenants and their potential successors consider as early as possible whether the potential successor already meets the necessary succession tests; or, if not, puts in place a plan which enables them to reach a point where they do satisfy those tests as soon as possible.

How we can help

Whether you are an AHA tenant or landlord it is important to start thinking about these changes and how they might impact on you as soon as possible. Our Farms, Estates and Rural Land team are agricultural law specialists who have the necessary expertise to advise on potential succession applications from the perspective of AHA tenants and their potential successors as well as that of landlords. For further guidance and advice on these changes, please feel free to contact a member of our specialist Farms, Estates and Rural Land team.