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TENANTS NEED TO PLAN FOR NEW SUCCESSION RULES

Tenants thinking about retiring or planning for succession in the next five years are being advised to plan for changes after the Government amended the Agricultural Holdings Act (AHA) in June.

The new regulations for England made under the Agriculture Act 2020 will

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apply from 2024 and will see changes to the rules on succession.

The main change will be the removal of the commercial unit test that previously prevented some successors with larger, separate, businesses from taking on the tenancy. The removal of this previous barrier to succession will widen the opportunity for larger businesses to secure tenancies going forward.

The eligibility tests will still require the applicant to prove a close relationship with the tenant and pass a principal source of livelihood test. The suitability test, however, is being tightened up to require the applicant to demonstrate how they are going to farm the holding commercially, with or without other land, considering the need for higher standards of efficient production and care for the environment.

The test will consider the applicant’s experience, training and skills in business management, financial standing and character.

Commenting on the changes, Matthew Anwyl, partner and Chartered Surveyor at leading property consultancy Berrys said: “The new suitability test introduces a higher bar for those wishing to succeed to a tenancy.

“It is now not enough to just demonstrate you can farm and have the experience; you will have to demonstrate your commercial ability to be able to farm the holding as well as the ability to farm in a manner that cares for the environment.

“Abolishing the commercial unit test will also pave the way for farmers operating on a larger commercial scale to succeed if all the other conditions are met.”

Mr Anwyl added: “If you have an AHA agreement and are starting to think about the next generation, then it is vitally important to start preparing for the changes now.

“It is essential you consider which set of rules is most favourable to your circumstances. One of the rules requires the applicant to demonstrate their income source for the previous five years, so acting now and planning will ease the process from 2024 onwards.”

Mr Anwyl also highlighted the impact of the withdrawal of Basic Payments, describing it as “the elephant in the room.” He commented: “By 2027 the payments will be gone, so it is important to look at how you are going to replace BPS; look at what your cash needs are and get a handle on your costs, budgets and business overall.”

Over recent years many companies and organisations have committed to the global pledge to secure net zero greenhouse gas (GHG) emissions by 2050. The agricultural sector, which is responsible for around 10% of GHG emissions in the UK, has made a similar pledge, with the NFU setting an ambitious target of reaching net zero GHG emissions across all agriculture in England and Wales by 2040.

With sustainability and combatting climate change high on the agenda, natural solutions are becoming more popular with agricultural businesses. They are both cheap and attractive, as well as helping businesses to meet their environmental responsibilities. Three of the most relevant to farmers and landowners are renewable energy, carbon removals and the Environmental Land Management scheme (ELMS), all of which off er an attractive combination of both environmental and fi nancial benefi ts.

RENEWABLE ENERGY

The most popular sources of renewable energy within the agricultural industry are solar, wind and anaerobic digestion. From a fi nancial perspective, the use of renewable energies such as these can reduce the expenses and fi xed costs faced by farmers and landowners through improved energy effi ciency. Similarly, the use of renewable energy can also provide an income stream through the sale of renewable energy stores.

From an environmental perspective it can help to combat climate change and support progress toward the ‘net zero’ target. It is suggested that through renewable energy, farmers and landowners can also displace greenhouse gas emissions by coupling bioenergy with carbon capture and storage.

CARBON REMOVALS

Carbon removals have long been hailed as the most logical approach to achieve the ‘net zero’ pledge. Some of the most effi cient and attractive carbon removal initiatives for those in the agricultural

NATURAL SOLUTIONS IN AGRICULTURE

Reshaping the future of farming.

industry include tree planting, peatland restoration, soil improvements and coastal and marine restoration.

Farmers and landowners could easily enter the carbon market and use their land to capture, utilise and store carbon. The carbon removal initiatives listed above tie in very neatly with ELMS, suggesting that farmers and landowners could benefi t from both a private and public form of income.

ELMS

ELMS is being introduced to replace the current Basic Payment Scheme (BPS), which will be gradually phased out over the next seven years and stopped altogether in 2028. ELMS will pay farmers and landowners to produce ‘public goods’ and require land, water and livestock to be managed in a way that “mitigates or adapts to climate change”. This means farmers and landowners will receive an income stream based upon improvements to the environment, the protection and enhancement of biodiversity, building resilience against climate change and increasing sustainability in the farming sector.

DEFRA is currently rolling out pilot ELMS across England and Wales. ELMS consists of three mechanisms: 1. Sustainable Farming Incentive (farm husbandry): payment will be provided for actions that manage land in a sustainable way. The pilot scheme has already begun and it will offi cially launch in 2022. 2. Local Nature Recovery: payment will be provided for actions such as creating, managing or restoring habitats, natural fl ood management

and species management. The pilot scheme will begin in 2022 and offi cially launch in 2024. 3. Landscape Recovery: payment will be provided for large-scale forest and woodland creation, peatland restoration and creation/restoration of coastal habitats. The pilot scheme will begin in 2022 and offi cially launch in 2024.

Farmers will initially only be eligible for ELMS if they receive BPS. However it will eventually be opened up to all farmers and landowners. The scheme will give farmers an opportunity to secure a complementary income stream to their farm business by undertaking sustainable farming actions that benefi t the wider environment.

It is clear that with the agricultural industry following and hoping to surpass the global ‘net zero’ pledge, the sector will undergo many changes over the next few years in its bidto achieve sustainability and combat climate change. Although these changes are largely unknown, it is clear that a focus on the sustainability agenda will bring with it many avenues for income and capital that farmers and landowners should consider as part of their longer-term business planning.

ALEX COSGROVE

Partner, Brachers LLP

T: 01622 776442 E: alexcosgrove@brachers.co.uk

www.brachers.co.uk

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FIRST HOMES – A NEW

DEVELOPMENT OPPORTUNITY?

As of 28 June 2021, national policy in England prioritises the delivery of First Homes as part of developer contributions as well as on ‘exception sites’.

A key strand of the new First Homes policy is ensuring that more new homes are available at a discount to local people who would otherwise struggle to buy a home on the open market.

The initiative is a feature of the Government’s ‘levelling up’ agenda.

Over the past 23 years, the average house price in the UK has increased from £58,854 in August 1996 to £235,298 in November 2019, quadrupling the deposit needed to buy. With new homes priced beyond the means of many people, communities have little incentive to support new housing developments in their areas.

Yet by contrast, when the benefi ts to local fi rst-time buyers are clear, local support for development is high: almost three in four (73%) people in England support the building of more aff ordable homes in their local area.

The Ministry of Housing, Communities and Local Government aims to sell at least 10,000 homes at a discount through the First Homes scheme in years to come if there is enough demand.

WHAT IS A FIRST HOME?

A First Home is: • discounted in perpetuity by a minimum of 30% against the market value, with councils able to set 40% or 50% in perpetuity discounts where need is evidenced and developers permitted to off er higher in perpetuity discounts • one with a fi rst sale price no higher than £420,000 in Greater London or £250,000 elsewhere in England after the discount has been applied, with councils able to set lower price caps

Could your land have development potential? Find out more about land promotion ED BARRETT

Associate Director, Planning

T: 01926 836910 E: edb@catesbyestates.co.uk W: www.catesbyestates.co.uk • sold with a mortgage or home purchase plan for at least 50% of the discounted purchase value to a person meeting the First Homes eligibility criteria • a primary residence, not used for investment or commercial gain, although it may be let for up to two years.

WHO IS ELIGIBLE?

First Homes are to be “prioritised” for fi rst time buyers (as already defi ned in legislation for the purpose of stamp duty relief).

Councils will be able to prioritise key workers and people with a local connection when deciding who is eligible for the scheme.

If no local tests are set, the purchaser must be a fi rst-time buyer borrowing at least 50% of the discounted purchase value. The purchaser (or purchasers) should not have a combined annual household income greater than £80,000 (or £90,000 in Greater London) in the tax year immediately preceding the year of purchase.

FIRST HOMES EXCEPTION SITE POLICY

The First Homes exception site policy could create new opportunities for land which would not normally be supported for development.

First Home exception sites can come forward on unallocated land outside a Local Plan (albeit not in the Green Belt, National Parks, a limited number of designated ‘rural areas’, or Areas of Outstanding Natural Beauty).

Exception sites have to deliver primarily First Homes - but not exclusively. Schemes on these exception sites can include a proportion of market homes. The policy says that “First Homes exception sites can deliver a small proportion of market housing, provided that it can be demonstrated that this is necessary in order to ensure the overall viability of the site”. Exception sites also should be adjacent to existing settlements and proportionate in size to them and need to comply with any local design policies and standards.

Local planning authorities are told to support the development of these exception sites unless the need for such homes is already being met within the local authority’s area.

As a specialist land promoter, Catesby Estates has studied the First Homes policy in detail and can advise landowners on situations where it could be used as part of a promotion strategy.