What type of agreement should I enter into when letting land for equine use: a guide for landlords

Landlords should be alert as to the risks when letting land for equine use as they could find that they have inadvertently granted the tenant security of tenure i.e. the statutory right to a renewal tenancy on expiry of the term.    

In this article we explore the different agreements that can be used to document the letting of land for equine use, their key characteristics and how they can be correctly terminated.  

1. Licence 

If the occupier is not having exclusive possession of the land i.e. use of the land to the exclusion of all others, then the arrangement can be documented as a licence agreement. Grazing licences are typically used when a landowner wants to let land for a short period of time.  

A licence can be drafted to terminate automatically on expiry of the term. Alternatively, a landowner can correctly terminate a licence by serving a notice on the occupier in accordance with the terms of the agreement. A licensee does not have any renewal rights or security of tenure.      

Landowners should be mindful that if exclusive possession is granted to the occupier then the likelihood is that a tenancy has arisen, even if the document is labelled a licence. Care therefore needs to be taken not to inadvertently grant a tenancy that affords the occupier additional rights as set out below.

2. Common law tenancy  

If exclusive possession is granted and the land is being used for non-business use such as the grazing of a family horse, the arrangement can be documented as a common law tenancy. 

The correct method of terminating a common law tenancy is by serving a notice to quit on the tenant. The notice period depends on whether it is a fixed term tenancy and the length of the term or, if the tenancy is periodic, the duration of the rental periods. A tenant of a common law tenancy does not have any renewal rights or security of tenure.

3. Farm business tenancy 

If exclusive possession is granted and the land is being used primarily or wholly for agricultural business use with any non-agricultural use (e.g. equine business) either incidental or carried out somewhere else, then the arrangement can be documented as a farm business tenancy under the Agricultural Tenancies Act 1995.  

In order to qualify as a farm business tenancy, at least some of the land must be farmed commercially throughout the term. In addition, the parties must satisfy one of the following conditions:

1. The notice condition, which requires notices stating the tenancy is a farm business tenancy to be exchanged either on or before the date of the agreement or the date on which the tenant is entitled to possession under the terms of the tenancy, whichever is the earliest.
2. The agriculture condition, which requires the character of the tenancy to be primarily or wholly agricultural having regard to the terms of the tenancy, the use of the land, the nature of the commercial activities carried out on the land and any other relevant circumstances. Agriculture includes the commercial grazing of horses. It also includes the breeding and keeping of livestock although livestock does not include horses unless they are kept for farm work or for the sale of their meat or hides.  

Farm business tenancy agreements are governed by the statutory provisions of the Agricultural Tenancies Act 1995, though many of the legislative constraints do not apply to tenancies granted for terms of two years or less. The correct method of terminating a farm business tenancy will depend on whether it's a fixed term or periodic tenancy and the length of the term or duration of the rental periods. However, the tenant will not have any renewal rights under the Agricultural Tenancies Act 1995 or security of tenure.

4. Protected business tenancy 

A landlord might find that they have granted a business tenancy and unintentionally given the tenant security of tenure under the Landlord and Tenant Act 1954 if the tenant occupies the land for the purposes of a business. This means that the tenant is entitled to a new lease of the land at the end of the contractual term.  

The unintentional grant of a business tenancy is likely to occur when dealing with horses or other animals not considered livestock under the Agricultural Tenancies Act 1995. Where the land is let for grazing and is also used for non-agricultural business purposes, such as a riding school or livery yard, the tenancy could be protected under the Landlord and Tenant Act 1954.  

If there is any doubt as to whether the tenancy is a business tenancy, then the landlord and tenant should follow the contracting-out procedure before completion or before the tenant goes into occupation, whichever is the earliest. Complying with the contracting-out procedure means that the tenant will not accrue renewal rights or security of tenure and so a landlord can terminate the tenancy in accordance with the provisions set out in the tenancy agreement.

If you require any advice or assistance in connection with entering into an agreement to let land for use by horses, or on terminating any such arrangement, please do not hesitate to contact Ria Hattam and Aimee Fishleigh.