The sudden and dramatic increase in prices for corn and other farm produce in late spring 2007 boded extremely well for the impending 2007 harvest. Landlords who had experienced difficulty justifying rent increases in previous years began serving 12-month rent notices, particularly on Agricultural Holdings Act tenants but also on some Farm Business tenants, with a view to increases taking effect in autumn 2008 or spring 2009.
However, few landlords could have foreseen the events which followed and which have caused turmoil in the current farm rent market. The increase in produce prices was, as usual, followed by increases in the costs of fuel, fertilizer, sprays and seed corn. However, these were far greater than anticipated, although fuel prices have now reduced somewhat.
The dilemma in forecasting a rented farm’s profitability was exacerbated by a sudden lack of confidence in prices for corn, oil seed rape etc. This gave tenants less cause for concern and, in some cases, the prospect of a reduction in rent.
Some landlords ignored their own Notices and let them expire. Other landlords stalled and applied for the appointment of an arbitrator to 'buy' time until the uncertainty about rental levels would become clearer. However, this was only possible when details of other settlements were known, or following an arbitrator’s award on rent. The result was that the Dispute Resolution Service (DRS) of the Royal Institution of Chartered Surveyors was inundated with such applications. At Michaelmas 2008, a reported 650 applications were received, up to 10 times more than the usual number in each of the previous 10 to 15 years. Unfortunately, the DRS had reduced its panel of arbitrators from 60 plus to 30 plus by examination. Fisher German has four members on this panel.
Two further influences on landlords seeking an increase are the Mason v Boscawen case regarding VAT on rents and the values attributed to farmhouses and cottages.
Great efforts are, at last, being made by both the landlords and tenants to agree rents amicably. If a revision is thought to be appropriate, it is likely to be settled at a figure much lower than landlords anticipated. Some - but only a small number - may result in a full-scale arbitration. However quite a large number may be postponed pending a new Notice, possibly served by tenants seeking a reduction!
John Hopkinson comments: “In over 20 years as an arbitrator I have never received so many appointments (over 60 at present). With four panel arbitrators at Fisher German, we have great experience in such matters. We would be pleased to assist if informal advice is required by either landlords or tenants, provided that we are not conflicted out.”
For further information, contact John Hopkinson on 01949 851815 or email john.hopkinson@fishergerman.co.uk
