Understanding the difference between a Farm Business Tenancy and an Agricultural Holdings Act tenancy is essential for any farmer or landowner in England and Wales. The two regimes operate under entirely different legislation and provide very different rights and protections for tenants and landlords. Getting the wrong advice — or failing to understand which regime applies — can have significant and long-lasting financial consequences.
This guide explains both types of agricultural tenancy, compares the key differences and provides practical guidance for farmers and landowners considering their options.
What is a Farm Business Tenancy (FBT)?
Farm Business Tenancies were introduced to replace the Agricultural Holdings Act regime for new tenancies from 1 September 1995. The policy objective was to encourage landowners to let agricultural land by removing the strong security of tenure protections that had deterred many from letting under the AHA regime. As a result, FBTs give the parties broad freedom to agree their own terms within the statutory framework.
Key features of Farm Business Tenancies include: no security of tenure beyond the agreed term; no succession rights; flexible rent review mechanisms; and compensation for tenant's improvements on quitting. Tenancies of two years or more require a minimum of twelve months' written notice to terminate. Shorter tenancies can be brought to an end on the agreed expiry date or by the notice provided in the tenancy agreement.
What is an Agricultural Holdings Act Tenancy?
AHA tenancies are historically significant and remain in force across many farms in England and Wales. Because of the strong statutory protections — particularly security of tenure and succession rights — AHA tenancies are often described as the gold standard of agricultural tenancy law from the tenant's perspective. A sitting AHA tenant is very difficult for a landlord to remove without statutory grounds, and the compensation regime on quitting is substantially more generous than under an FBT.
For landowners, the existence of an AHA tenancy significantly affects the value of the land. Agricultural land subject to an AHA tenancy is typically valued at a substantial discount to vacant possession value — reflecting the difficulty of recovering possession and the long-term nature of the tenant's rights. This is an important consideration for landowners selling or inheriting land with sitting AHA tenants.
Key Differences: FBT vs Agricultural Holdings Act Tenancy
| Feature | Farm Business Tenancy (FBT) | Agricultural Holdings Act (AHA) |
|---|---|---|
| Legislation | Agricultural Tenancies Act 1995 | Agricultural Holdings Act 1986 |
| Security of Tenure | Limited — tenant has no right to remain beyond the agreed term | Strong — tenant has a statutory right to remain and challenge a notice to quit |
| Succession Rights | None — FBTs cannot be inherited by family members | Qualified succession rights for close family members on death or retirement of the tenant |
| Rent Review | Flexible — parties can agree any rent review mechanism | Statutory arbitration mechanism if parties cannot agree rent |
| Compensation on Quitting | Limited — tenant may claim for tenant's improvements only | Broader compensation rights including for disturbance and improvements |
| Notice to Quit | Minimum 12 months' notice for tenancies of 2 years or more | Minimum 12 months' notice, but tenant can contest on statutory grounds |
| Flexibility | High — parties can tailor terms freely within the Act's framework | Low — many terms are governed by statute regardless of the agreement |
| New Agreements | All new tenancies created after 1 September 1995 are FBTs | No new AHA tenancies can be created — existing AHA tenancies continue |
Security of Tenure Under Agricultural Tenancy Law
Security of tenure is the most fundamental difference between the two regimes. Under the Agricultural Holdings Act 1986, a tenant has statutory security of tenure that means the tenancy does not automatically end when the contractual term expires. A landlord wishing to recover possession must serve a notice to quit and, in most cases, the tenant has the right to challenge the notice through arbitration or the Agricultural Land Tribunal. The landlord must establish one of the statutory grounds for possession set out in the Act — such as non-payment of rent, breach of tenancy obligations, or the landlord's need to use the land for non-agricultural purposes. Challenging a notice to quit can take years and, even if successful, may result in the landlord having to pay significant compensation.
Under the Agricultural Tenancies Act 1995, Farm Business Tenancy tenants have no statutory security of tenure beyond the agreed term of the tenancy. When a fixed-term FBT expires and the appropriate notice has been served, the tenant must vacate. Periodic FBTs (such as year-to-year tenancies) can be ended by either party serving not less than twelve months' notice expiring at the end of a period of the tenancy. There is no right for the FBT tenant to contest a valid notice to quit or to apply for a new tenancy.
The difference in security of tenure is the primary reason why, from a tenant's perspective, an existing AHA tenancy is far more valuable than an equivalent FBT. Tenants with AHA tenancies should take specialist legal advice before surrendering them or agreeing to any variation that might affect their statutory rights.
Succession Rights on Farm Tenancies
One of the most valuable features of an AHA tenancy is the right of close family members to succeed to the tenancy on the death or retirement of the sitting tenant. Under the Agricultural Holdings Act 1986, a spouse, civil partner or child of the tenant may apply to the Agricultural Land Tribunal to succeed to the tenancy if they satisfy the eligibility criteria — in particular, the principal source of livelihood test and the suitability test. Succession is limited: in most cases, no more than two successions can occur before the landlord is entitled to recover possession.
Farm Business Tenancies have no succession rights whatsoever. When an FBT tenant dies, the tenancy forms part of their estate and, unless the tenancy agreement specifically provides otherwise, the landlord can bring it to an end by serving the appropriate notice on the personal representatives. For farming families, the absence of succession rights under FBTs represents a significant difference from the AHA regime and should be a key factor when structuring farming arrangements and succession planning.
Which Agricultural Tenancy is Right for You?
For landowners who are letting agricultural land for the first time, or re-letting land where the previous AHA tenancy has ended, a Farm Business Tenancy under the 1995 Act is the only option for a new letting. The FBT framework gives you flexibility to tailor the term, rent and conditions to your requirements, and — crucially — gives you the certainty of recovering possession at the end of the agreed term. FBTs are particularly appropriate for short to medium term lettings, diversification projects, and situations where the landlord may wish to use the land for other purposes in the future.
For tenants, the priority should always be understanding what type of tenancy you have — and if you hold an AHA tenancy, protecting and exercising your statutory rights. AHA tenants should be very cautious about agreeing to any surrender, variation or novation that could affect their security of tenure, succession rights or compensation entitlements, and should always take specialist legal advice before doing so.
NJB Legal advises farmers and landowners across Cheshire and the North West on all aspects of agricultural tenancy law, including Farm Business Tenancy drafting and negotiation, AHA tenancy advice, succession planning and dispute resolution. Contact us to discuss your specific situation.
Frequently Asked Questions About Agricultural Tenancies
- No. Since 1 September 1995, it has not been possible to create new Agricultural Holdings Act tenancies. All new agricultural tenancies created after that date are Farm Business Tenancies governed by the Agricultural Tenancies Act 1995. Existing AHA tenancies created before September 1995 continue in force and retain all their statutory protections. If you are a farmer or landowner with an existing AHA tenancy, it is important to understand that those rights are valuable and should be carefully managed.
- Under the Agricultural Holdings Act 1986, the close family members of a tenant — typically a spouse, civil partner or child — may be entitled to apply to succeed to an AHA tenancy on the death or retirement of the sitting tenant. Succession is not automatic: the applicant must satisfy eligibility criteria (including a principal source of livelihood test and a suitability test) and must apply to the Agricultural Land Tribunal within strict time limits. Succession rights are limited to two generations in most cases. FBT tenants have no succession rights.
- Under a Farm Business Tenancy, the parties can agree any rent review mechanism they choose — this may be a fixed date review, an RPI-linked increase, an open market review or any other mechanism. If the tenancy does not contain a rent review clause, either party can trigger a rent review at any time by serving a statutory review notice under the Agricultural Tenancies Act 1995. If the parties cannot agree the new rent, an arbitrator or independent expert (depending on what the tenancy provides) can determine the market rent. This is more flexible than the AHA arbitration process.
- Under the Agricultural Tenancies Act 1995, an FBT tenant is entitled to claim compensation for tenant's improvements — physical improvements and planning permissions obtained by the tenant — when the tenancy ends, provided they gave the landlord proper notice before carrying out the improvement. Under the Agricultural Holdings Act 1986, AHA tenants have wider compensation rights, including disturbance compensation (typically one year's rent) and compensation for improvements, routine improvements and high farming. The AHA compensation regime is significantly more generous than that available to FBT tenants.
- The Agricultural Tenancies Act 1995 does not require a Farm Business Tenancy to be in writing, but a written agreement is strongly recommended. A well-drafted written tenancy agreement clearly sets out the term, rent, review mechanism, repairing obligations, permitted use, restrictions on assignment and subletting, and provisions for compensation at the end of the tenancy. Without a written agreement, disputes about the terms of the tenancy are much more likely. NJB Legal can draft or review FBT agreements for both landlords and tenants.
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