Demand is growing for farm business tenancies

Demand for farm business tenancies (FBT) is strong as they are in short supply, so new entrants to the industry face stiff competition

John Robson, managing director of H&H Land and Property
John Robson, managing director of H&H Land and Property

Demand for farm business tenancies (FBT) is strong as they are in short supply, so new entrants to the industry, and farmers looking to expand their holdings, face stiff competition.

Durham and Carlisle firm H&H Land and Property has just let three farms in Cumbria and for each received more than 20 completed tenders. The three properties were all completely different but were all for 10-year terms.

FBTs are the predominant form of agricultural rental agreements and are being let on 10 or 15-year terms.

The huge demand for rented land, and the longer-term FBTs, means that applicants need to put a lot of time, planning and careful thought into their tender documents and submissions if they want to be seriously considered.

John Robson, managing director of H&H Land and Property, said: “The volume of applications we received for the three Cumbrian farms demonstrates that the demand for rented land remains strong. Therefore, preparing a robust document to take on a tenancy is vital if you are to be in with a chance. This is especially so if you are a new entrant to the industry.

“The initial submission form, which is the first stage of the application process, is the only information that the landlord or agent holds before selecting who makes the shortlist into round two.”

To help an FBT tender stand out for the right reasons, Mr Robson has put together a summary of the issues that potential tenants should cover in detail.

He said: “Key to a successful application is a well-rounded and complete offer, backed up by a viable business plan. Landowners want to let their land to secure farming businesses, with a good track record and a strong business plan for the property they want to take on.

“It is not in the landlord’s interest to rent land to an applicant who has only a vague idea of what they want to do with it. Equally, if you do not already hold a tenancy, or own a farm that you want to expand, it’s imperative that you can make a good business case.

“If you are a new entrant to the industry, you must be able to demonstrate compelling reasons why the landlord should go with your application rather than one from someone who already has a good track record.”

Getting on to the shortlist is one of the biggest challenges and, of course, money does come into it.

Landlords are running businesses and they want to reap the best rewards they can from their property, so it stands to reason that applicants should offer a rent in the top quartile. If you are unable to do this, you must be able to justify why your offer is lower.

Mr Robson added: “If you demonstrate that you have previously been a tenant on a well-farmed and well-maintained unit, this will go a long way towards convincing a landlord that you are the right person to take on the tenancy – even if your offer is financially not the highest.

“Most landlords are also keen to let to a tenant family that will fit into the community, and not cause problems that the landlord will be required to solve. Being able to demonstrate good relations with your previous landlord – or if you are new to the industry, other businesses you have worked with – will stand you in good stead.”

The details of your business plan should showcase your experience, but it’s important to be realistic. Your plans for the tenancy should be sustainable and not put either the land, or the amount of capital you are able to commit to it, under too much pressure.

Landlords are looking for business plans that are likely to be successful, not overly-ambitious proposals that contain too many risky elements which could go awry.

As part of this, your document should show an awareness of any limitations in your offer and address them.

Mr Robson concluded: “If, for example, you are tendering for a dairy farm, but you have no previous involvement in running such an enterprise, you must be able to present excellent reasons why your offer is better than an application from an experienced dairy farmer.

“It is so important to be able to offer a solid business case to back up your application, which should be tailored to the farm that is being offered, not just a generic application that you intend to submit to every available tenancy that you’re interested in. Creating a compelling tender for an FBT requires work.”

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