The Agricultural Holdings Act 1986 ("AHA) covers agricultural tenancies where the tenancy started before 1 September 1995. The arbitration provisions of the AHA have long been seen as a costly and slow mechanism for resolving disputes which arise between a landlord and tenant. Recent changes bring with them the new possibility of a landlord and tenant seeking to resolve issues through third party determination.
The Deregulation Act 2015 amends the Agricultural Holdings Act 1986 ("AHA"). It allows for the appointment of an independent person to resolve some agricultural tenancy disputes as an alternative to the arbitration provisions, which have always been used under the AHA. In practice, the third party will be an expert in the area (most likely an experienced land agent).
The amendments came in to force on 26 May 2015. In common with many other parts of the Deregulation Act, the amendments are intended to modernise the AHA regime and lead to the swifter resolution of disputes. Expert determination in relation to agricultural disputes is not a new concept. It is already fairly common in farm business tenancies.
The reforms have been widely welcomed and certainly should lead to a saving of time and expense in some disputes. The most obvious example of cases where they should be capable of being used successfully is in rent reviews. However, there are a number of points to bear in mind including:
- Both landlord and tenant must agree to utilise the expert determination option. That raises the obvious problem of tactical games being played out with one party agreeing and the other not.
- The parties will have freedom in terms of setting the rules for the expert determination process they want to agree for resolving disputes.
- If an Arbitrator has already been appointed, the option of expert determination is not available. However, if that current Arbitrator's role comes to an end (e.g. they are ill and have to step down) then the expert determination option comes in to play.
- It is important to note that the new expert determination provisions apply to many disputes under the AHA, but not all. For example, and as noted above, it covers the most common area for dispute, rent reviews. It does not however change the process and arbitration provisions for 'Notices to Quit'. The arbitration process therefore remains as before and the result is that the resolution of some of the most costly disputes remains unaffected.
- If landlords and tenants are going to take up the opportunity of expert determination, that must be decided very early on. You cannot start arbitration and then switch. That means great thought needs to be given well in advance to issues such as rent reviews. Under the AHA, you need to give a least 12 months' notice before the term date, for rent to be reviewed at arbitration. If a landlord and tenant are going to use expert determination, this must be decided before the demand for arbitration is even served.
Over the coming months it will be interesting to see if there is much appetite amongst land agents, landlords and tenants for using the opportunities created by these reforms. It is hoped that over time some standard procedures will be adopted to ensure a consistent approach is taken on all sides.
When parties are considering using the option of expert determination, they should also give careful thought as to what provision they want to make in the agreement for expert determination for challenging and overturning an expert's decision. The normal grounds are very restrictive and the parties may want to consider setting out expressly what grounds for challenge they will permit.