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TFC blog: Succession Planning

Bob McIntosh

Succession planning is important in any business and no less so for farming businesses, especially where a tenant wishes to pass on the tenancy to another person, normally someone in the tenant’s extended family.

Careful thought needs to be given to when and how to make the transfer.

And tenants must follow the correct procedures as failure to do so may, in some cases, lead to the tenancy being terminated.

I have published a guide that outlines the ways in which an agricultural tenancy can be passed on to another person. It includes information on whether and how a tenancy might be assigned during a tenant’s lifetime; bequeathing a tenancy and transfer of a tenancy when someone fails to leave a Will.

The guide summarises some of the legal basics, but I strongly recommend that you should always obtain independent legal advice that’s relevant to your particular circumstances,  and seek advice in good time as some parts of the process have to be completed within a certain time.

Here are some of the basic rules for assignation and succession:

A tenant can only transfer a tenancy to another individual. Tenancies cannot be transferred to a company, firm or club, or to two or more people, unless the landlord agrees.

You can’t normally pass the tenancy to just anybody, unless you have agreement with the landlord. Preferential consideration is usually given to ‘near relatives’ of the tenant (a full list of these potential transferees is in the appendix of the Guide).

There are three main ways to pass on a tenancy: as a lifetime assignation; as a testate transfer when someone dies, they may be entitled to bequeath their tenancy in their Will, and an intestate transfer (where someone dies without making a Will) where the tenant’s executors may still be able to transfer the tenancy to another person.

In each of these situations the landlord has certain rights to object; these are described briefly in our new guide.

Which route is chosen will depend on individual circumstances but, generally speaking, making an  assignation to a ‘near relative’ during the tenant’s lifetime is likely to be the most straightforward.

It is important for tenants to have a plan in place for assignation or succession to ensure that when the time comes, they can make way for the next generation.