Relinquishment and Assignation: Are we seeing the benefits?

I was contacted recently by a new entrant who had become somewhat disillusioned with the procedure for trying to purchase a tenancy that had been through the Relinqhishment and Assignation process. They were experiencing a number of barriers to progressing the purchase and wanted to highlight some issues they had faced.

It was very interesting to hear this perspective as a lot of the focus on Relinquishment and Assignation has been on the opportunity it presents to an exiting tenant with relatively little attention on the potential opportunity it can present for a new entrant. I suppose, given the nature of the provisions and the current desire to take land back in hand, it is perhaps unsurprising that the opportunity for new entrants have been a secondary consideration.

Relinquishment and Assignation provisions have been in place for almost 5 years now. They allow a tenant with a secure tenancy to relinquish the tenancy in return for value. This value is realised in one of two ways, The landlord can purchase the tenants interest in the lease at a value qualified through a prescribed methodology. In this case, the tenancy comes to an end and the land is taken back in hand by the landlord.

Alternatively, if the landlord chooses not to purchase the tenant’s interest, the tenancy can be assigned for a negotiated value (not necessarily tied to the valuation) to a new entrant or progressing farmer. The assignee would then step into the shoes of the original tenant with all associated rights and responsibilities of that original tenant. Guidance on Relinquishment and Assignation can be found here.

The Tenant Farming Commissioner (TFC) has an active role within the provisions. When the Notice of Relinquishment is served on the landlord by the tenant the TFC is included and the process formally begins. The TFC then appoints a valuer to carry out the valuation.

When these provisions were introduced their objectives were twofold. First, to offer secure tenants who did not have a successor in place an opportunity to retire by realising the value of their tenants’ interest. Second, to provide an opportunity for new entrants and progressing farmers to access land.

After 5 years of operation, this feels like a good a time to look back and consider whether these objectives are being met. Given the TFC’s active role in the process we have sight of the relinquishments that have progressed through the official channels. It is important to note that the legislation was only intended to be a backstop for when parties could not agree.

In total, 20 Notices of Relinquishment have been submitted to the TFC over the five-year period. Anecdotally, it is understood that this represents just over 20% of the actual number of relinquishments that have taken place, with the other 80% being privately negotiated.

Of the cases involving the TFC the vast majority of land is being taken back in hand by landlords with only six farms not being taken back in hand. The fate of these six farms is unclear as there is no requirement to inform the TFC of any subsequent assignation, although some have been advertised locally.

Based on the information available it would appear that the first objective is being successfully met. Tenants without a successor now have an avenue to retire which is a positive for the sector.

The second objective is less clear. More information is needed to competently asses whether opportunities for new entrants are being delivered. On the face of it only a small percentage, 7%, of relinquished tenancies appear to be reaching a stage where they will be available to new entrants. But this figure does not consider the instances of land that is being taken back in hand and relet to new entrants under a new tenancy or other type of agreement.

To fully consider the success or failure of the provisions, we need more information on what happens once land is taken back in hand. It would also be of benefit to have a better picture of how tenancies are marketed and assigned as new entrants need to be fully informed to make decisions on taking on a tenancy. Only with full sight of these aspects can the provisions be judged.

What is clear is the appetite for taking land back in hand remains strong.