Tenancy Succession Planning: What to do and Why?
Tenancy succession planning is a growing issue for farmers that hold a traditional Agricultural Holdings Act tenancy. I know most of you will be aware of it and the role it plays in ensuring your tenancy has the maximum chance of being left in the right hands however, the importance of getting it right is often missed with long-lasting consequences for future generations.
Under a large number of 1986 Agricultural Holdings Act tenancies, tenant farmers can be within their rights to seek to secure succession of their tenancy, as long as the successor meets the relevant eligibility criteria. This is what makes succession planning – in a timely manner – so vital. Succession is not automatic, or a given.
First things first
It is never too early to start the succession planning process because the criteria that the potential successor needs to meet is strict. A lot of preparation can be needed to ensure the person that you want to succeed can do so.
Many farmers fail to plan effectively, or at the right time – rather they wait and deal with it when they’re ready to retire or the next of kin has to handle it in case of an unexpected death. Without preparation, in many cases the successor can fail to meet the criteria to succeed. If the process is started earlier and managed properly, this can be prevented.
Seek the right advice
Tenancy succession planning involves many issues including income, livelihood, diversification, land outside the tenancy, financial position and experience, over many years. Therefore it’s crucial that you receive the right advice from the start.
It is also important to remember that in certain situations, succession can be an advantage for landlords and can be negotiated by agreement rather than through the First Tier Tribunal.
Actions that make good business sense at the time can have a detrimental effect upon the chances of succeeding. The law governing succession is complex. There is potential for disclosure and analysis of farm accounts and bank statements for seven years before succession, among other information.
In addition, ensuring fair treatment of other family members is important and should be considered alongside succession planning. This should involve taking advice from your solicitor and accountant to ensure all assets are passed in the most efficient manner possible.
From my experience, it really is better to act sooner rather than later. This reduces risk and when succession is secured, the business can plan for the future with certainty.
For more information about succession planning and how to plan well please contact Matthew Brown on firstname.lastname@example.org or 07854 903631.