26 August 2015, With barely a month before new Model Clauses affecting many Agricultural Holdings Act 1986 (AHA) tenancies come into effect, careful thought must be given to the changes in liabilities for both landlords and tenants for the maintenance and insurance of fixed equipment on farms.
Not only AHA agreements are affected. There are instances where Farm Business Tenancies (FBT) use Model Clauses as the basis for some sections of the tenancy agreement and the new Model Clauses may also affect them.
The Model Clauses, first drawn up in 1948, were updated in the early 1970s and again in the late 80s but since then have remained unchanged. The 2015 Clauses include important changes to repair and replacement responsibilities for both landlords and tenants that reflect rising costs, modern practice, and new technologies on farms. However the terms of the tenancy agreement take precedence and the new Clauses will only apply if the agreement states that they may be amended by Statute. If they do not then the earlier Model Clauses continue to apply.
Most importantly when the new Model Clauses for England and Wales come into effect (though they expressly only affect tenancies in England as the Welsh Assembly has devolved responsibility so the 1973 Model Clauses and their 1988 amendments will still apply) there is only one month, that is from 1 to 31 October 2015, for either the landlord or tenant to refer to arbitration issues that arise through the change in repair responsibilities between them.
The implementing Statutory Instrument (SI950) also provides that dispute resolution by arbitration can, for certain disputes, be replaced by third party expert determination, intended as a time and cost-saving measure.
These changes are detailed and need careful study, maybe not something to the forefront of tenant farmers’ minds as harvest ends, field preparation and sowing begin, and delayed hedge cutting gets underway.
Anyone who has studied the new Model Clauses, and that should be everyone with an AHA tenancy agreement or FBT where they apply, if only in part, will see that there has been much attention given to detail change. For instance, a tenant’s liability for roof repairs that stood at £5 when the Clauses were first introduced in 1948, rose to £25 in 1973, £100 in 1988, will be £500 per annum from October 1. At the same time, the responsibilities for landlords to undertake some repairs that were previously the responsibility of the tenant have been tempered by the ability for the landlord to recoup half of the cost.
Fixed electricity generating equipment wholly for the use of the tenant, fast becoming a regular sight on modern farms, is the tenant’s responsibility for repair. But landlords now have the burden of reed beds for water and sewage treatment, and slurry, silage, and other effluent systems (excluding anaerobic digesters and removable covers or tops).
Importantly, landlords will have responsibility for repair of gas pipes, fixed LPG and gas tanks, and the electrical supply system, including the consumer supply board, whereas before the liability was purely for replacement. Boiler replacements are no longer regarded as a repair of the heating system so also become a landlord responsibility.
However, there are many other detailed repairs that now transfer to the tenant and perhaps the best news of all is that all these responsibilities are set out in an easily tabulated form, far more accessible than the previous long paragraphs from which it was difficult to extract information.
Both landlords and tenants would do well to speak to their agents without delay to establish just what the new Model Clauses mean for them. The one month limit on starting the process of arbitration (there is no stated time limit on their completion) over transferred costs could prove very expensive if ignored.