Grazing Land: Licence or Tenancy?
It’s the time of year when farmers look to take on grazing land, but is it best to take the land under licence, a short-term tenancy or another form of arrangement?
Julie Liddle, director of rural
chartered surveyors Robson & Liddle, considers the options.
Taking grazing land under licence
Using grazing land under licence means you take the grass for grazing livestock or mowing for a limited period, traditionally April to October (although these can be arrangements created over the winter months). You do not have security of tenure as you share occupation of the land with the owner.
The owner will continue to have responsibility to undertake fencing repairs (unless one of your animals breaks through a fence, then you must repair), stone picking and weed spraying.
There may also be restrictions on the type of animals on the land, for example cattle only, sheep only, no horses, no bulls, and so on. The landowner claims the Basic Payment Scheme income.
Sometimes you will be responsible for putting fertiliser on the land, but this will be reflected in the price paid. Having said that, if the land is in a popular area it may still command a higher price irrespective of who applies the fertiliser.
Taking the land
under a tenancy
A tenancy differs from a licence primarily in respect of exclusivity of occupation and from this everything else falls into place. The term can be anything agreed by the parties, and not necessarily limited to the traditional grazing season.
As the tenant you may have to take full responsibility as far as repairing and insuring are concerned, but you will be able to claim the Basic Payment Scheme income. There will be obligations to keep the land in good order. Tenants must consider the condition of the property before taking it on. You may be obliged to ‘put and keep’ the property in good order. If it’s in poor condition this cost should be reflected in the rent.
It is essential to read the tenancy agreement carefully because, as ever, the devil is in the detail. No one likes surprises, you need to know exactly what you’re signing up too.
Profit a Prendre and other arrangements
Profit a Prendre is a right granted by a landowner for a third party to take something from the land, which in the case of sheep, cattle or horses is grass by grazing. No tenancy of land arises, but the arrangement is different from a grazing licence in that, usually, a grazing licence allows you to mow the grass while a profit a prendre typically does not. This distinction is perhaps more important from the landowner’s perspective as there could be tax implications if granting the right to mow means they cannot prove they are responsible for the crop.
Contract and share farming arrangements require special consideration as they revolve around there being two businesses operating on the same land. They can be ideal for new entrants and special situations but each one has to be carefully worked out and documented.
The benefits of professional
When it comes to taking land, good advice is imperative. For a tenancy it is even more important as you are tied in for possibly a longer period of time and with more obligation. Relying on verbal agreements or entering into something without careful review and consideration, could prove costly.
As a general rule, the more onerous an agreement looks, the more care it requires. There are also many other reasons, not least the tax considerations, why it is important to take professional advice. Don’t underestimate what a little expenditure now can save you in the long run.