Fundamentals of the Agricultural Rental Market are Changing
17/10/05

The Tenant Farmers Association's Chief Executive, George Dunn has told a conference of agricultural arbitrators that it is time for agricultural rents to fall.

Speaking at the annual gathering of agricultural arbitrators in Coventry, Mr Dunn said that a combination of reducing farm gate prices and increasing costs had encouraged more tenants to serve rent review notices on their landlords.

"Between 1997 and 2003 farm rents fell by an average of some 30%. Since 2003 rents have stagnated while the industry digested the impact of CAP reform. With rising costs of fuel, chemicals, labour and compliance with regulation coupled with falling prices for nearly all commodities, it's time once again for rents to fall." said Mr Dunn.

One problem that will be faced by tenants seeking reductions is the lack of comparable evidence which arbitrators seek to use in deciding whether rents should rise or fall.

"Lack of comparable evidence is a problem but this is exactly the same problem that we had in 1996. Prior to 1996 there had been a significant rise in farm incomes and rents were increasing on the back of that profitability. When profitability began to slide, there was little helpful comparable evidence that tenants could use. Tenants therefore had to rely upon sound budgets to persuade arbitrators to reduce rents and this is exactly what happened. The only difference today is that we are not following a period of relative profitability for the industry and we expect, therefore, there to be greater resistance from landlords who will not wish to see rents falling further." said Mr Dunn.

"Tenants do not mind paying a strong rent if they see their profitability increasing, if their landlords are meeting repairing obligations and if their tenancy agreements are not restrictive. The TFA believes that there are lessons to be learnt here for landlords, particularly in the light of recent case law which underlined the mutual nature of the contract that exists between landlord and tenant. The tenant is required to pay rent, amongst other things, and the landlord is required to repair, amongst other things. Where the landlord is not complying with the repairing obligations under the lease, and has been formally notified of that by the tenant, then he should not be entitled to rent. This is going to become progressively more important given the degree to which statutory animal health, animal welfare and food safety issues are increasing on farms." said Mr Dunn.

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