Farm Business Tenancies vs 1986 Act Tenancies: The Full Guide

At a glance

• The dividing line is 1 September 1995. Tenancies granted on or after that date are generally Farm Business Tenancies (FBTs) under the Agricultural Tenancies Act 1995. Earlier tenancies, and a narrow list of exceptions, stay under the Agricultural Holdings Act 1986.
• New 1986 Act tenancies are effectively closed. Section 4 of the 1995 Act stopped the 1986 Act applying to fresh lettings from 1 September 1995, subject only to specific exceptions such as Tribunal-directed successions and written contracts expressly adopting the 1986 Act.
• FBT notice to end a yearly tenancy: at least 12 months, expiring at the end of a year of the tenancy (s.6, ATA 1995). A fixed term over two years rolls into a yearly tenancy unless 12 months' notice is given before the term date (s.5).
• 1986 Act notice to quit also needs 12 months to the end of a year of tenancy (s.25) — but that is rarely enough on its own. A tenant's counter-notice usually forces the landlord to obtain Agricultural Land Tribunal consent under one of eight specific statutory grounds (Cases A–H, Schedule 3) before the notice can take effect (s.26).
• Rent reviews cannot happen more than once every three years under either regime as a statutory minimum, unless the parties have validly contracted around it.
• Succession rights exist only under the 1986 Act, and generally only for tenancies granted before 12 July 1984 (s.34). A Farm Business Tenancy carries no statutory succession right at all.
• Disturbance compensation under the 1986 Act can reach six years' rent where the landlord ends the tenancy by notice to quit (s.60) — a cost that rarely appears in FBT negotiations because the FBT compensation regime is different (Part III, ATA 1995).
• The Agriculture Act 2020 reformed 1986 Act succession, removing the "occupier of a commercial unit" bar that previously disqualified otherwise-eligible successors (in force in England from 1 September 2024, per commencement regulations under s.57 and Schedule 3).

The two regimes: Farm Business Tenancies and 1986 Act tenancies

Two separate statutory frameworks govern agricultural lettings of land in England and Wales, and only one of them is generally available for new lettings today.

Farm Business Tenancies (FBTs), created by the Agricultural Tenancies Act 1995, apply to essentially all agricultural tenancies granted on or after 1 September 1995. The framework is built around freedom of contract: the parties negotiate the term, the rent, the repairing obligations and most other commercial terms themselves, and the statutory scaffolding around notice, rent review and compensation exists mainly to fill gaps and set minimum protections rather than to override what the parties agreed.

1986 Act tenancies, governed by the Agricultural Holdings Act 1986, are the older regime. They generally cover tenancies granted before 1 September 1995, plus a small number of tenancies created afterwards in specific circumstances set out in section 4 of the 1995 Act — most commonly a tenancy obtained through an Agricultural Land Tribunal succession direction, a tenancy granted on an "agreed succession" between the parties, or a written contract of tenancy that expressly states the 1986 Act is to apply. Outside those exceptions, the 1986 Act is closed to new lettings.

The practical consequences of getting the wrong regime — or the wrong assumption about which one applies — run through every part of the relationship: how long the tenancy lasts, how it can be ended, whether a family member can succeed to it, and how much compensation changes hands when it finishes.

What makes a tenancy a Farm Business Tenancy

Section 1 of the Agricultural Tenancies Act 1995 sets a two-part test. A tenancy is a farm business tenancy if it meets the business conditions together with either the agriculture condition or the notice conditions, and it is not a tenancy excluded under section 2 of the Act.

| Element | What it requires | |---|---| | Business conditions (s.1(2)) | All or part of the land is farmed for the purposes of a trade or business, and has been farmed that way since the beginning of the tenancy. | | Agriculture condition (s.1(3)) | Having regard to the terms of the tenancy, the use of the land, the commercial activities carried on there and other relevant circumstances, the character of the tenancy is primarily or wholly agricultural. | | Notice conditions (s.1(4)–(6)) | Before the tenancy begins, landlord and tenant each give the other written notice stating they intend the tenancy to be, and remain, a farm business tenancy — and at the start of the tenancy the character was primarily or wholly agricultural. |

The notice-conditions route matters most where diversification is planned. It lets the parties lock in FBT status even where non-farming use will later become significant, provided the notices are exchanged before the tenancy starts and are not folded into the tenancy document itself (s.1(6) expressly bars the notice from being included in the instrument creating the tenancy). Without matching notices in place beforehand, a heavily diversified letting risks falling outside the Act altogether if the agriculture condition can no longer be satisfied.

Ending a Farm Business Tenancy: notice to quit and minimum term

The 1995 Act sets no statutory minimum term for a Farm Business Tenancy — the parties are free to agree any length. What the Act does regulate closely is what happens as the tenancy approaches its end:

• Fixed term of more than two years (s.5): the tenancy does not simply expire on the term date. Instead it continues automatically as a tenancy from year to year on the same terms, unless at least 12 months' written notice to terminate has been given by either party before the term date.
• Yearly tenancy (s.6): a notice to quit a tenancy running from year to year is invalid unless it is in writing, timed to take effect at the end of a year of the tenancy, and given at least 12 months before that date.
• Fixed term of two years or less: there is no equivalent continuation mechanism in the Act, so the tenancy simply ends on the agreed term date without a notice to quit being required.

Because the 12-month rule is calculated backwards from the term date or the anniversary of the tenancy, a notice served even a few days late can be invalid — pushing the earliest possible termination back a further year.

Farm Business Tenancy rent reviews

Part II of the Agricultural Tenancies Act 1995 gives either party the right to demand a statutory rent review, unless the tenancy document itself validly contracts out of it (s.9 — for example, by fixing the rent for the term, providing a specified variation formula, or expressly excluding Part II while not precluding a rent reduction).

Where the statutory scheme applies, either party can serve a written statutory review notice under section 10 requiring the rent to be referred to arbitration. The notice must specify a review date that:

• falls at least 12 months but less than 24 months after the notice is given, and
• does not fall earlier than three years after the beginning of the tenancy, or three years after the date any previous rent determination or agreement took effect — whichever is latest.

In practice this means a rent review can happen no more often than once every three years unless the parties have agreed a different, more frequent mechanism in writing.

Farm Business Tenancy compensation at the end of the tenancy

Part III of the 1995 Act (ss.15–27) gives an outgoing FBT tenant the right to compensation for a tenant's improvement — broadly, physical improvements or the benefit of planning permission obtained during the tenancy — provided the landlord's consent was given where the Act requires it (s.17) and the relevant conditions of eligibility are met. Compensation is generally measured by the increase in the value of the holding that the improvement leaves behind for the incoming party, not simply the tenant's cost of carrying it out (s.20). The parties can agree a cap on this in writing, and unresolved disputes go to arbitration under section 28.

1986 Act tenancies: security of tenure and notice to quit

This is where the 1986 Act diverges most sharply from an FBT. Section 3 mirrors the FBT continuation mechanism — a tenancy of two years or more continues as a yearly tenancy unless at least 12 months' (but not more than 24 months') written notice is given before the term date — and section 25 sets the same 12-months-to-the-end-of-a-year rule for notices to quit a yearly tenancy.

The protection that gives 1986 Act tenancies their reputation for "lifetime security" sits in section 26. Where a valid notice to quit is served, the tenant can serve a counter-notice within one month requiring the landlord's consent from the Agricultural Land Tribunal before the notice can take effect. Critically, the Tribunal can only consent if the case falls within one of eight specific statutory grounds set out in Schedule 3, Part I — the "Cases":

| Case | Broad ground | |---|---| | A | Smallholding let by a smallholdings authority, tenant has reached retirement age and suitable alternative accommodation is available | | B | Land required for a non-agricultural use for which planning permission has been granted or is not needed | | C | Certificate of bad husbandry given by the Tribunal within the preceding six months | | D | Tenant has failed to comply with a notice to remedy a breach capable of being remedied | | E | Tenant has failed to comply with a notice to remedy a breach not capable of being remedied | | F | Tenant's insolvency | | G | Notice given following the tenant's death, served within the relevant time limit | | H | Notice given by the Minister in connection with statutory smallholdings |

Outside these Cases, a landlord generally cannot recover possession simply by giving 12 months' notice if the tenant chooses to serve a counter-notice — which is the practical source of the "lifetime security" description often applied to 1986 Act tenancies.

Succession rights under the 1986 Act

Part IV of the 1986 Act gives certain family members the right to apply for a new tenancy when the existing tenant dies or retires — a right that has no equivalent under the 1995 Act.

Who it applies to. Section 34 confines Part IV to tenancies granted before 12 July 1984, plus a small set of tenancies granted later in specific circumstances — for example, tenancies obtained through a Tribunal succession direction or created by a written contract that expressly adopts Part IV.

Who can succeed. Under section 36, an "eligible person" is a surviving close relative of the deceased tenant whose only or principal source of livelihood, for at least five of the seven years ending with the death (continuously or in aggregate), came from agricultural work on the holding or an agricultural unit of which it forms part. GOV.UK guidance confirms the application to the Tribunal must be made within three months of the tenant's death, and that making the application suspends any notice to quit given because of the death.

How many successions. Section 37 stops statutory succession once two successions have already occurred on a holding — so, combined with the original tenant, a family can in principle farm under the same tenancy for up to three generations. A broadly equivalent scheme applies to succession on retirement under sections 49–58, including the ability for a retiring tenant to nominate a successor.

The 2020 reform. The Agriculture Act 2020 removed the requirement that a successor must not be the occupier of a "commercial unit" of agricultural land — a bar that had previously disqualified otherwise-eligible applicants who farmed land of their own elsewhere. This change came into force in England, for all successions not already decided, from 1 September 2024 (having applied for specified purposes from 11 November 2020), under section 57 and Schedule 3 of the Agriculture Act 2020.

1986 Act rent reviews

Either the landlord or the tenant can refer the rent to arbitration or third-party determination under section 12 of the 1986 Act. As with a Farm Business Tenancy, the statutory frequency is capped: a new reference cannot generally be made less than three years after the tenancy began or the date of the previous rent determination took effect, under the detailed timing rules in Schedule 2.

Compensation under a 1986 Act tenancy

The compensation regime is more layered than under an FBT, because it distinguishes between different categories of claim.

| Type of claim | What it covers | Where in the Act | |---|---|---| | Disturbance | Where the tenancy ends by the landlord's notice to quit (or a related counter-notice): basic compensation of one year's rent (or up to the tenant's actual loss or two years' rent, if the tenant gives the required advance notice) plus additional compensation of four years' rent | s.60 | | Long-term improvements | Structural and lasting improvements such as buildings, drainage or roads — generally needs the landlord's prior consent | ss.64, 67–68 | | Short-term improvements | Shorter-lived work such as liming, manuring or protecting trees | ss.64, 66 | | Tenant-right matters | Growing crops, cultivations and similar items of value left behind at the end of the tenancy | s.65 | | Landlord's deterioration claim | The landlord can claim against the tenant for deterioration of the holding, generally the reasonable cost of remedying it | ss.71–73 |

The combination of basic and additional disturbance compensation under section 60 means a landlord ending a 1986 Act tenancy by notice to quit can face a bill of up to six years' rent, before any separate claims for improvements or tenant-right matters are settled.

Worked examples

Example 1 — working out the regime. A landowner grants a grazing and arable letting in March 2024. Because the tenancy begins well after 1 September 1995 and none of the narrow exceptions in section 4 of the 1995 Act apply, it is a Farm Business Tenancy, regardless of what either party privately assumed or what a previous tenancy on the same land looked like.

Example 2 — the yearly-tenancy notice trap. A Farm Business Tenancy granted for a five-year fixed term reaches its term date without either party giving notice. Under section 5, it does not end — it rolls into a tenancy from year to year on the same terms. If the landlord then wants to end it, a fresh 12-month notice under section 6, timed to expire at the end of a year of the tenancy, is needed; simply waiting for "the original five years" to run out again achieves nothing.

Common mistakes and risks

• Assuming the older regime still applies because a previous tenancy on the same land was a 1986 Act tenancy. Each new letting is assessed on its own grant date and terms.
• Missing the 12-month notice window on either side of the Act — a notice served late, or that does not expire at the end of a year of the tenancy, can simply be invalid, with no shortcut to correct it once the deadline has passed.
• Serving a 1986 Act notice to quit without checking the Cases in Schedule 3 — a landlord who assumes 12 months' notice is enough can be met with a valid counter-notice that stops the notice taking effect entirely.
• Diversifying an FBT without exchanging notice-condition notices beforehand — retrofitting the notices after the tenancy has started does not satisfy section 1(4), which requires them before the tenancy begins.
• Overlooking rent review timing — a defective or late statutory review notice under either Act can cost the party who missed it a further three years at the existing rent.
• Ignoring succession eligibility until it is too late — the three-month window to apply to the Tribunal after a 1986 Act tenant's death is easy to miss during a bereavement, and missing it can be irreversible.

What to do next

1. Establish the grant date and terms of the tenancy. This single fact decides which Act applies and therefore which rules govern everything else.
2. Check for any of the section 4 exceptions if the tenancy began on or after 1 September 1995 but the parties believe the 1986 Act nonetheless applies.
3. Diarise notice and rent review deadlines as soon as the regime is confirmed — both Acts penalise lateness harshly and there is rarely a way to cure a missed date.
4. Take specialist advice before serving any notice to quit, particularly under the 1986 Act, where a defective notice or an unanticipated counter-notice can derail the entire process.
5. Address succession early where a 1986 Act tenancy is involved — establishing eligibility and evidence of the livelihood test well before it is needed avoids a rushed application within the three-month window after a death.

This guide provides general information about Farm Business Tenancies and 1986 Act agricultural tenancies in England and Wales. It is not legal advice and does not take account of your specific circumstances or documents — reading it does not create a solicitor–client relationship. LegalDocuments.co.uk is not a law firm and is not regulated by the Solicitors Regulation Authority. The law described was accurate as at August 2026 and is subject to change; always check legislation.gov.uk and GOV.UK for the current position, and speak to a regulated adviser or specialist land agent before granting, varying or ending an agricultural tenancy.

Last reviewed: August 2026 by a non-practising solicitor · Next review due: August 2027 or on legislative change.