Dealing with a surrender and regrant

farm hay bales

farm hay bales - Credit: Archant

What is a “surrender and regrant” and how should I deal with it? I’m a tenant farmer and my landlord has asked for it!

Q: I am a tenant farmer and also run a small rough shoot on the land. My landlord has asked for a 'surrender and regrant'. What is this and should I agree to it?

NICK PLAYFORD replies: Essentially, a surrender and regrant is the giving up or relinquishing of your existing tenancy agreement and, in return, you will be given a new tenancy agreement. It is difficult to give specific advice on this specific scenario without having further accompanying facts. However, the key aspect is to identify what sort of tenancy you currently have, with two likely possibilities being an Agricultural Holdings Act 1986 tenancy or a Farm Business Tenancy (FBT) and, here, there is potentially more than your shooting rights at stake. The advice is to tread carefully and seek proper legal counsel.

If, for instance, you have a long-term Agricultural Holdings Act 1986 tenancy, you might be the first-generation successor to the original tenant (benefitting under the original agreement and potentially locking the land up for 60 years or more). You may well benefit from a reduced rent than you might otherwise have received under an FBT. There may be another succession permitted under the existing legislation, and, in such a case, you would be unwise to surrender this without due consideration.

The landlord may have requested that you enter into a surrender and regrant of the existing tenancy for very legitimate or practical reasons, such as increasing the Agricultural Property Relief (an inheritance tax relief) available to him or her from 50% to 100%, but always remember that your landlord's tax requirements will not necessarily align with your own as the tenant. Often, a surrender and regrant should adopt a collaborative professional approach, with the involvement of experienced land agents and accountants who can advise on both sides of the transaction.

Leaving the agricultural tenancy aside and to concentrate more on the shooting aspect, if you are a shooting tenant it is always worthwhile documenting the tenancy you have in a written tenancy agreement for a sustainable term or duration. I often come across a two- or three-year shooting tenancy or licence. These are often basic agreements and little thought is given to the parties' positions at the end of the term. In practice, this probably favours the landlord.

In reality, without heavy investment (or even with it by and large), most readers will appreciate that it can take many years to build up a shoot and to get the best out of it, assessing how the birds will fly, where the Guns should stand, the most effective feeding locations, how the shoot succeeds throughout the days and also throughout the season and, generally, the particular nuances of each shoot. By the time the two or three years are up, significant labour and investment in the shoot will have been undertaken and the landlord will often be in a position to call time on the tenancy. The shooting infrastructure such as the pens and the shoot's goodwill may be significantly undervalued (or not accounted for at all) as valid improvements on the land. The landlord can reap the dividends and will be free at that point in time to grant a new agreement to a different occupier.