AHA succession: a new era

Agricultural Holdings Act 1986 (“AHA”) tenancies are tenancies over agricultural holdings generally created before 1 September 1995. AHA tenancies seek to protect farmer tenants by ensuring succession rights and compensating them at the end of their tenancy for any major long-term improvements based on the increased value of the farm.

Recent changes to the rules of succession for AHA tenancies came into effect on 1 September 2024, marking the final component of the Agriculture Act 2020 being implemented.

The commercial unit test and minimum retirement age requirement have been repealed.

Two sets of tests are applied for applicants– eligibility and suitability – both must be satisfied.

Eligibility test, formed of two parts:

1. Close living relative test – only the following persons satisfy the test:

• Spouse or civil partner of the tenant
• Sibling of the tenant
• Child of the tenant or person treated as a child of the tenant

2. Principal source of livelihood test

The potential successor must show that in at least five of the last seven years of the outgoing tenant’s tenancy, they derived their only or principal source of livelihood from their agricultural work on the holding.

Suitability test:

The new test focuses on business competency and reflects the shift to environmental management. Now, the test considers the following:

• The person’s likely capability and capacity to farm the holding commercially, with or without other land, taking into account the need for high standards of efficient production and care for the environment in relation to managing that holding
• The person’s experience, training and skills in agriculture and business management
• The person’s financial standing and their character
• The character, situation and condition of the holding
• The terms of the tenancy.

The tribunal will consider the applicant’s “likely capability and capacity to farm the holding commercially”.

Removal of the commercial unit test is welcomed making it easier on the one hand for the successors. However, the new suitability test is more demanding. Subjectivity will remain around suitability and it is hoped new tribunal cases will provide clarity to those involved in these applications.

Planning for succession is essential for all farming businesses in general however more so for tenanted businesses to ensure all parties’ interests are protected.