Simon Boendermaker: Relinquishment and assignation of 1991 Act tenancies
The long-awaited relinquishment and assignation procedure in respect of 1991 Act agricultural tenancies came into force on 28 February 2021. Simon Boendermaker explains the details.
The new provisions allow a tenant of a 1991 Act lease to serve a statutory Notice of Intention to Relinquish on their landlord, which begins the relinquishment procedure. A Notice of Intention to Relinquish cannot be served if the tenant has already served a valid Notice of Intention to Quit or if the landlord has served a Notice to Quit or a written demand on the tenant requiring them to remedy a relevant breach of the tenancy.
Once the notice has been served, a landlord may respond with a Notice of Declinature, to turn down the opportunity to purchase the tenancy, or a Notice of Acceptance. Alternatively, the landlord may wish to wait for the outcome of the valuation process set out below.
On receipt of a valid Notice of Intention to Relinquish, the Tenant Farming Commissioner (TFC) will appoint a valuer within 28 days to assess the compensation payable to the tenant from a panel to be maintained by the TFC. Alternatively, the landlord and tenant may agree on a preferred valuer, this valuer will normally be a panel valuer but the TFC will have regard to circumstance where the agreed valuer is not a panel valuer. The tenant will meet the cost of the valuer.
Once appointed, the valuer will have eight weeks from the date of appointment to carry out an assessment of the value according to a statutory formula and provide a Notice of Assessment to the landlord, tenant and TFC.
Once the Notice of Assessment has been received, the landlord and tenant both have 21 days to appeal the Notice of Assessment to the Lands Tribunal.
Following determination of the compensation payable, the tenant has 35 days (or 14 days if the decision was made by the Lands Tribunal) to decide to proceed or withdraw the Notice of Intention to Relinquish. The landlord then has a further 28 days (i.e. 63 days from receipt of the Notice of Assessment) to issue a Notice of Acceptance if they have not already done so.
The procedure also gives the landlord the right to withdraw the Notice of Acceptance at any time up to 6 months from the last date on which a tenant could have withdrawn the Notice of Intention to Relinquish.
If the landlord serves a Notice of Declinature, fails to comply with any of the timescales set out in the statutory instrument, or withdraws the Notice of Acceptance the tenant then has a period of 1 year to assign the tenancy to a new entrant or an individual progressing in farming.
The definitions of a “new entrant” and “person progressing in farming” are set out in statute, however it is worth noting that the definition of a “person progressing in farming” includes “someone who does not already hold two or more controlling interests in a lease, croft, smallholding or ownership that is more than three hectares.” This wide definition does suggest that an established tenant with a substantial holding held on a single title could still be treated as a “person progressing in farming.”
There is no prescribed valuation process for an assignation, so the value payable to the outgoing tenant will be a matter for negotiation between the parties.
If the tenant is unable to assign the lease within one year, the tenancy will revert to the status quo before the Notice of Intention to Relinquish was assigned.
Whilst the relinquishment and assignation provisions provide a statutory framework in which to end a tenancy, landlord and tenants may still negotiate relinquishment outwith the statutory process, as many have in the past, and this remains the most straightforward way of achieving the negotiated surrender of a lease.
Simon Boendermaker is a solicitor at Murray Beith Murray