Don’t let a lease lend you an unintentional headache
None of us likes to see farm buildings sitting empty and unused. But if we have no direct purpose for them, what’s the best course of action?
It’s tempting to let others use them, especially when we know of someone perhaps struggling to get started with a fledgling business or maybe the reverse – a long-established contact who is having a job to keep up with changing markets yet still providing a service we value.
The danger of allowing others to use farm buildings for non-agricultural purposes, often at a low rent, is that this type of use can result in that occupier being unwittingly caught out by laws relating to commercial leases and / or planning consent.
Where a lease (or a sub-lease) is granted for non-agricultural, commercial purposes which is not “contracted out” of certain provisions of the Landlord and Tenant Act 1954, the tenant of that lease has a right for the lease to be renewed at the end of the term.
But how can you avoid this when all you want to do is help someone else having a hard time? Serving a notice at the commencement of the lease to ensure the right to renew is removed is the straightforward solution to avoid, what many building owners or occupiers do not realise they are granting, a lease which falls within the 1954 Act.
Having an unwritten arrangement in place is no protection and the Act can apply even where the parties were unaware that they are actually granting a “commercial” lease. The term “commercial” covers a wide range of situations and includes leases granted to not-for-profit organisations, such as sports or gun clubs.
Granting a lease to a third party for non-agricultural purposes (including, for example, simply for storage) can also result in the occupier of an agricultural holding being in breach of planning laws. If the holding only has planning consent for agricultural use then an application for change of use for the buildings concerned may be needed. This can also affect a landlord who is not in direct breach but whose immediate tenant has granted a commercial sub-lease as the landlord could find itself being held accountable for the breach.
Paul RussellBSc FRICS MCIArb
Paul specialises in formal valuations together with landlord and tenant negotiations in regard to commercial property as well as residential development opportunities. Paul qualified as a Chartere...