Agricultural Tenancy Agreement Forfeiture

Rights of Forfeiture for Non-Payment of Rent and Other Breaches

A right of forfeiture is a Landlord’s right to terminate a Lease early on account of a Tenant’s breach of their Lease and will entitle a Landlord to recover possession of their land early.

1. Forfeiture is a powerful right for a Landlord but it must be exercised carefully taking into account:
2. What is required to effect agricultural tenancy agreement forfeiture.
3. The consequences of forfeiture.

The steps that a Landlord should or more importantly should not take to ensure that he has not waived the right to forfeiture. This editorial relates to forfeiture of agricultural land subject to Tenancies under (1) Agricultural Holdings Act 1986 (“AHA”) and (2) Agricultural Tenancies Act 1995 (“ATA”).

Many Agricultural Tenancies can include residential accommodation such as a farmers or tide cottage. A Landlord must therefore exercise caution in recovering possession in the correct manner. A Landlord must never attempt to forfeit an Agricultural Tenancy Agreement by peaceful re-entry if residential accommodation is included.

How Does the Right to Forfeit Arise?

The right to forfeit should be contained in the Tenancy Agreement between the Landlord and Tenant, for example, if the rent remains unpaid for 14 or 21 days then the Tenancy Agreement usually allows the Landlord the right to re-enter the land.

If the right has arisen the Landlord must not waive it e.g. by demanding or accepting the rent. If the Landlord waives the right to forfeit and then attempts to subsequently forfeit the Lease it will then be the Landlord whom is in breach of his covenant to allow the Tenant quiet enjoyment of the land and the Landlord will then be required to pay the Tenant damages.

How Agricultural Tenancy Agreement Forfeiture Works

The Landlord must take a step that clearly and unequivocally demonstrates that the Landlord considers that the Tenancy Agreement is at an end by:

1. Peacefully re-entering the agricultural holding; or
2. Issuing a claim for possession of the holding at Court.

Peaceful Re-Entry

This is a cheapest and quickest route to bring about an agricultural tenancy agreement forfeiture and recover possession. The Landlord simply re-enters albeit with the use of a Certificated Bailiff and secures and repossesses the property from the Tenant thereby communicating by his actions that the Tenancy Agreement is at an end. However there are traps for the unwary.

1. There must be a clause in the Lease allowing re-entry without which a Court Order is the only alternative.
2. To exercise peaceful re-entry for an AHA Tenancy there must be in the Lease (a) an express term permitting the Landlord to forfeit and (b) a requirement that the Landlord gives the Tenant 6 week’s written notice of his intention to forfeit.
3. The right to forfeit must have arisen, for example the rent must have been unpaid for 14/21 days dependent upon the Agricultural Tenancy Agreement, before the Landlord can act. For breaches other than unpaid rent, the Landlord must issue and serve a Notice under Section 146 of the Law of Property Act 1985.
4. Once the Tenancy Agreement has been forfeited it has been brought to an end unless the Tenant attempts to reinstate the Agreement by making an Application for Relief from Forfeiture which the Tenant has the right to do so 6 months from the date of forfeiture. This could make it difficult for a Landlord to re-let or indeed to occupy the holding himself.
5. If the Tenant has been made bankrupt a Landlord maybe unable to forfeit without authority from the Tenant’s Insolvency Practitioner or without permission from the Court.
6. A potential problem with an agricultural holding is the difficulty a Landlord may find in securing the holding to prevent the Tenant gaining access and actually to secure the land.

Court Action

Whilst Court Action is the most expensive route to recover possession, it does have a benefit in that a Tenant’s potential claim for Relief from Forfeiture will be determined within the same Proceedings.

A Farm Business Tenancy under the Agricultural Tenancies Act 1995

In general whilst slightly more expensive, forfeiture via a Court Action is often the most appropriate method of Agricultural Tenancy Agreement forfeiture as compared to peaceable re-entry, certainly practically on the ground it may be difficult to secure the agricultural holding to prevent the Tenant gaining access. However, with a smaller holding that can be secured such as agricultural outbuildings and a store, then peaceable re-entry with use of a Certificate Bailiff would be the most appropriate way forward.

Lands Subject to Agricultural Holdings Act 1986

Tenant This Act provides a statutory mechanism to enable a Landlord terminate a Tenancy to recover possession for non-payment of rent or breach of one of the Tenant’s other covenants under the Lease.

There is provision for the Landlord to issue a Case D Notice but this does require 12 months notice making forfeiture a preferable method of recovering the agricultural holding as such a lengthy notice will not be required.

The disadvantage of forfeiting is that the forfeiting via a Court Action under this type of Tenancy is the cost which will be incurred early on the issue of Court Proceedings for possession if the Tenant pays the Landlord’s outstanding rent and costs then he can effectively force a Landlord to relinquish possession and reinstate the Tenancy.

Summary

Forfeiture is a useful weapon in an Agricultural Landlord’s armoury; however it must be operated carefully. Often each case where forfeiture can be considered is different as are the procedures to follow.

If you consider that you have the right to recover possession of your land due to an Agricultural Tenant’s breach please contact Marcus Chapman on telephone: 01354 602886 or e-mail: marcuschapman@fraserdawbarns.com to ensure that the correct procedure is followed and that all other alternatives are considered before bringing about an agricultural tenancy agreement forfeiture as well as advice on carrying this out in the most cost effective manner.