The Tenant Farmers Association is encouraging tenant farmers to seek advice before they enter into agreements with their landlords.
In the statement - which could apply to any farmers and indeed to any sector - the TFA warns against signing written agreements that do not accurately reflect the terms which were discussed, as well as letting enthusiasm or desperation cloud rational judgement.
It is important that a tenant farmer carefully considers the legal status of their agreement and tests the commercial nature of their agreement with professionals, such as land and farming agents and solicitors.
For example, is it intended that an agreement should bind any future landlord (if the current landlord sells the land)? Agreements between landlords and tenants will not automatically “bind the land” and subsequent owners of the land.
Also, if the agreement comes to an end or the tenancy terminates for any reason, does the farmer require compensation to be paid in order to cover capital expenditure incurred which the tenant has not had the opportunity to recoup? If there is to be compensation, the documentation needs to be checked in order to ensure that “wasted” expenditure is recoverable.
The Agriculture Sector (not just with tenant farmers but also more widely) there is a tendency is notorious for the practice of doing a deal "on a handshake" where a man's "word is his bond". Frequently the terms of oral agreements are arrived at over many conversations over a number of days or weeks. The issue from a legal perspective is that, should there ever be a disagreement over the terms, it is often very difficult to establish with certainty what the actual terms of the agreement were. Having to argue over the terms of the agreement as well as having to argue whether there was a breach of the terms adds to the time and expense of litigation. Would investing in a set of written terms been a better and more cost effective course of action?
Committing the terms to coherent written terms will also give the parties the ability to allocate important and costly risks, such as responsibility for environmental liabilities and health and safety co-ordination. These points are frequently skipped over because discussions on practical "farming" matters (such as fertiliser spreading rates, seed choice and price) take priority in commercial discussions.
There are many other potential pitfalls and traps for the unwary. The message is clear: engage with appropriate advisers to help appraise you of the risks, so that you can deal with those risks in the most appropriate manner.
- 4 mins read