Now that the dust has settled following publication of DEFRA’s Agricultural Transition Plan 2021-2024, here are a few thoughts about how the latest proposals for delinking might affect Farm Business Tenancy negotiations and drafting, from a landlord’s perspective.
DEFRA propose to delink direct payments from land for all farmers, so that they would not need to farm land in order to receive payments, in 2024, subject to consultation. That would mean that from 2024 to 2027 delinked payments may be received by someone who chooses to stop farming altogether. DEFRA propose that eligibility for delinked payments will be based on a ‘reference period’. So it may be necessary to have claimed, and been eligible for direct payments, in a particular scheme year or years. We are expecting consultation from DEFRA in 2021 before they set the reference period and decide when to introduce delinked payments.
In the meantime, some negotiation and drafting considerations for Farm Business Tenancies include:
- How long is the tenancy? Is this likely to continue for the whole of the transition period (until and including 2027) or to end during the transition period? In particular would that be before 2024? Manipulating the length of the tenancy is a way of controlling the impact of the changes.
- If a delinked payment is received by the tenant during the term should the landlord be entitled to any part of that payment? If so, when and on what basis? Does this depend on when the tenancy ends?
- As delinking would mean the end of cross-compliance as the regulatory baseline, do you want to agree particular additional requirements about how the tenant will manage the holding?
Careful consideration of the circumstances of the holding and the tenant will help inform drafting, though there is still considerable uncertainty around when and how the proposals will be implemented. We expect greater clarity on the details in the consultation due in February – May 2021.