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We continue to work through uncertain times following the Brexit vote and whilst Article 50 remains un-served, the insecurity continues.
In the short term, UK Agriculture has seen a boost to the red meat industry, with improved cattle and sheep prices following a weakening of the pound against the euro. It is hoped this in turn will make UK produce across the board more attractive to overseas buyers.
In the medium to long term, the UK Treasury has now made a commitment to Pillar 1 funding, which is currently being paid by the EU through the Common Agricultural Policy, until 2020; providing some reassurance. As to the long term future, uncertainty remains. Undoubtedly both tenants and landlords alike will be considering their position during the transitional period before we leave the EU. Any reduction in agricultural support will have a serious knock on effect to many farm businesses financial stability, which in turn will have an effect on farm rents.
Farmers/landowners who have agricultural letting agreements which are likely to come to an end before 2020, or for those about to negotiate terms for agreements which will exceed 2020 will naturally be questioning how they take the potential consequences of the recent Brexit vote into account as part of the negotiations, to ensure they do not leave themselves in an untenable position.
A recent paper from The Central Association of Agricultural Valuers (CAAV) has identified two key areas which require particular thought:
At present break clauses are not widely incorporated into agricultural tenancy agreements. However, moving forwards this may be an option for both tenants and landlords should Brexit changes result in a holding becoming economically untenable. The difficulty with this option arises in knowing when is the best time to trigger the clause, particularly with a twelve-month time delay in the notice taking effect. Options to consider could include:
In principle, changes in economic situations are normally reflected in rent reviews (dependent on what provisions are agreed in the tenancy). Again the issue is dealing with the unknown and the associated time delays before a considered view of the economic market can be established. Options to consider could include:
The industry faces many uncertainties over the coming years and those reviewing existing arrangements or considering new arrangements should act with caution to ensure they consider all eventualities.
For further impartial professional advice, please do not hesitate to contact:
[team-member name=”Lucinda Riddell”]
Article kindly produced by: [team-member name=”Tom Richardson”]