From 1 September 2024 the eligibility and suitability tests under the Agricultural Holdings Act 1986 (AHA 1986) are changing!
Where a tenant dies or retires after 1 September 2024 the new succession rules will apply to the potential successor. Where the tenant dies or retires before this date the current succession rules will apply to the potential successor.
The current rules
Currently if a tenant wishes to be a successor tenant under the AHA 1986 they need to comply with the following tests:
- Close Relative Test – The successor tenant must be a close relative of the retiring or deceased tenant i.e. a child, spouse or civil partner, or treated as a child by retiring or deceased tenant.
- Livelihood Test – The successor tenant must derive their principle source of income in 5 of the previous 7 years from the holding in question or another unit of which the holding in question is a part.
- Commercial Unit Test – The successor tenant must not occupy separately another commercial unit of agricultural land.
- Suitability Test – The successor tenant must be suitable to take on the tenancy from the retired or deceased tenant i.e. the successor tenant must demonstrate they have sufficient training and experience to take on the tenancy and run the farm as well as demonstrate they are of suitable health and financial standing to take on the tenancy and run the farm.
The changes to the rules
- The Commercial Test – This test has been scrapped entirely as it was deemed unfair to entrepreneurial tenants.
- The Suitability Test – This test has been made much tougher to comply with. A successor tenant must now demonstrate that if the tenancy was available on the open market they are of a standard that a prudent landlord would be willing to shortlist them for the tenancy.
This change does not require the tenant to be the best tenant just that the tenant would make the shortlist. Successor tenants will be required to show they can farm the holding to a high standard, commercially and with care for the environment. The offer of rent and age of the successor tenant must not be factored into this test. It is likely however successor tenants will need to provide even more in depth information to support their succession applications: including budgets, cashflows and references from both their bank and personal references.
Currently, a person wanting to succeed to an Agricultural Holdings Act 1986 (AHA ‘86) tenancy must be both eligible and suitable, for which there are several tests.