Part 2 : a summary of relevant legislation (2) agricultural dwellings
The Valuation Office Agency's (VOA) technical manual relating to Inheritance Tax.
If a farmhouse or cottage is let with land in circumstances where the letting is of the whole as an agricultural holding, then the relationship between the landlord and tenant will be governed by the AHA legislation (see Part 1 hereof).
The relationship between occupational tenants of agricultural dwellings and their immediate landlord is normally governed either by the Rent (Agriculture) Act 1976 or by the Housing Act 1988 and the provisions of these Acts are summarised below:
Rent (Agriculture) Act 1976
This is relevant to the valuation of “tied” cottages and is dealt with in detail. However new tenancies granted after 15 January 1989 will be subject to the provisions of the Housing Act 1988 (see below).
Unless otherwise indicated all statutory references in the following paras are to sections and schedules of the Rent (Agriculture) Act 1976 (R (A) A 1976) amended where appropriate by the Rent Act 1977. The quoted references are restricted to the main section or schedule paragraph of the Act which deals with the relevant point.
The R(A) A 1976 came into force generally on 1 January 1977 in accordance with Commencement No. 1 Order 1976 (SI 1976 No. 2124). Commencement No. 2 Order 1977 (SI 1977 No. 1268) appointed 1 October 1977 as the date of operation for the provisions relating to forestry workers. Although Forestry Commission workers are excluded from the Act it is intended that they should have equivalent protection under extra-statutory arrangements.
Effect of the Act
The Act has the effect of giving statutory protection, both as regards security of tenure and restriction of rents, to service occupiers or service tenants of agricultural dwellings (tied cottages) who were previously not protected under the general Rent Acts legislation. Protection is achieved, in appropriate circumstances, by converting the “service occupation” into an arm’s length rent controlled occupation independent of employment. The provisions of the Act are complex. It employs expressions such as “relevant licence” and “relevant tenancy” which are defined in Sch 2 (now substantially amended by the Rent Act 1977); and “qualifying worker”, “house in qualifying ownership” defined in Sch 3. This special terminology (indexed in Sch 1) must be understood before the operation of the Act can be fully appreciated.
The conditions for qualification for protection expressed in the simplest terms are that a person must:-
occupy a dwelling house provided by the employer (Para 3 Sch 3) under a service agreement (s.2 & Sch 2), and
have been employed, or be deemed to have been employed, the whole time in agriculture for the last 2 years (or at least 91 out of the last 104 weeks). There are special provisions for workers suffering certain disabilities (Para 1 Sch 3).
Protection for one succession only
The Act protects for one succession only (unlike the Rents Acts which provide for two) benefiting the widow(er) who was living with a protected occupier at death, or if there was no such surviving spouse, one or more members of the deceased’s family (not statutorily defined) who were residing with the deceased at the time of death and for the period of six months immediately beforehand (s.3). These provisions have been modified by Part II of Sch 4 Housing Act 1988 in respect of deaths of the original occupier on or after 15 January 1989. The principal alterations are that a common law husband/wife will be treated as a spouse, the qualifying period of residence for members of the deceased’s family is increased to two years and the succession tenancy for a family member other than a spouse will be a 1988 Act “assured agricultural occupancy” and not a R (A) A 1976 tenancy. A succeeding spouse will continue under the 1976 Act however.
Grounds for possession
If a farm worker or a successor qualifies for protection under the Act they can only be dispossessed:-
if alternative accommodation is found either by the local authority re-housing procedures in PART IV of the Act or by the employer;or
through the Courts if one of the grounds for possession set out in Sch 4 can be made out.
Terms and rent limit under a statutory tenancy
As long as the agricultural worker remains in the employment of the farmer the existing terms of the service occupation will continue, and will do so even after the contract of employment has been terminated, but as soon as the former employer either serves a notice to quit or attempts to increase the rent a statutory tenancy is created (s.4). The basic terms of the statutory tenancy, other than as to the rent, are set out in Sch 5. The rent may be agreed between the landlord and statutory tenant under s.11, but it shall not exceed any fair rent registered for the dwelling-house or, if none is registered, the annual equivalent of the weekly or other periodical payment shall not exceed a prescribed multiple of the Rateable Value (at present 1.5 (s.12(9)(b)). Either landlord or tenant may apply to the Rent Officer to register a rent for the dwelling-house which will then become the maximum rent payable. Registered rents may be reviewed every two years with staging of increases where necessary.
S.5 provides that various bodies are excluded from being saddled with statutory tenants created under the Act. These landlords include the Crown, Government Departments, various local authorities, the Housing Corporation, Commission for New Towns, etc.
Planning restrictions on occupation of an agricultural cottage
By s.33 if there is a planning restriction whereby a tied cottage is to be occupied by a farm worker, such a condition will be suspended while a statutory tenancy under the Act is in force but it will be re-enforceable immediately thereafter so that a landlord will not be able to re-let or re-occupy the premises free of the conditions.
Housing Act 1988
Ss.24-26 and Sch 3 Housing Act 1988 introduced assured agricultural occupancies of agricultural dwellings in substitution for the previous scheme under the Rent (Agriculture) Act 1976 (see above). The underlying philosophy was to continue to provide security of tenure for agricultural workers but at the same time enable a market rent to be charged.
The new provisions relate to tenancies or licences which must not have been entered into, or pursuant to a contract made, before 15 January 1989: in such cases the R(A)A 1976 regime still applies (subject to slight amendments).
Effect of the Act
The Act involves a good deal of R(A)A 1976 terminology and qualification rules and is quite complex in terms of fine detail. Broadly however where a dwelling house is exclusively occupied (a mere license or tenancy-at-will will suffice) by a qualifying agricultural worker (Sch 3 para 1 R(A)A 1976) there will be an “assured agricultural occupancy”. The worker will enjoy security of tenure and one succession will be permitted (Sch 3 para 3 HA 1988).
Security of tenure
In order to recover possession where an assured agricultural occupancy exists the landlord would have to make an application to the Courts specifying his ground(s) for possession which are broadly the same as for assured tenancies (see Sch 2 HA 1988). Certain grounds bind the Courts to grant possession, some give discretionary powers and they are similar though not identical to the Rent Act 1977 grounds for termination of a statutory tenancy. However in respect of assured agricultural occupancies (discretionary) ground 16 of Sch 2 (tenant having ceased to be in the landlord’s employment, the dwelling-house having been let in consequence of employment) is not available (s.25(2)). Nevertheless if the landlord needs possession in order to provide accommodation for another person employed in agriculture and satisfies the local authority in this respect, the local authority will be under a statutory duty to provide alternative accommodation (s.27 R(A)A 1976).
The rent payable in respect of an assured agricultural occupancy may be determined in default of agreement by a rent assessment committee which must determine the rent at which they consider the dwelling-house concerned might be let in the open market by a willing landlord under an assured agricultural occupancy(ss.14(1) and 24(4) HA 1988). Such rents ought to be significantly in excess of R(A)A 1976 levels although in practice landlords may choose to continue to charge low rents or no rent at all.