FBT rent review

Discussion in 'Tenant Farming, Subsidies, BPS & Legal Issues' started by Mixedupfarmer, Sep 21, 2018.

  1. Mixedupfarmer

    Mixedupfarmer Member

    Location:
    Norfolk
    We are currently under review for FBT rents on the majority of our farm, and despite a good deal of negotiating, are not quite agreed on the new rent. With the new subsidy proposals, it looks as though the next two years will continue as is, with 2021 being decoupled and at reduced levels. We are trying to agree the rent for the next three years, and it looks like in theory year three could well need to be lower, but obviously we cannot do this on a three year cycle on an existing tenancy. This is without the drop in sugar beet price, and any effect Brexit will have going forward. What are people's thoughts? English arable lowland.
    It would probably have been better if the review was next year after Brexit, but as they have given notice of a review this year, we have little time left to sort it.
     
  2. It's a strange one because as I understand it the payments from 2021 to 2027 are going to be divorced from the land and based on the immediate past so in theory the tenant can take the payments off the landlord and leave the land payment less.
    Be interesting to see what the legal people say about FBT's where the subs have to be left behind upon vacation of the land, if the subs don't belong to the land?
     
    chipchap likes this.
  3. Mixedupfarmer

    Mixedupfarmer Member

    Location:
    Norfolk
    Yes, this is what I understand. I guess the devil will be in the detail for many, but in this case, and indeed on all our tenancies, the entitlements are all mine (many purchased on entry), but this seems to make little or no difference to rents around here.
     
  4. chipchap

    chipchap Member

    Location:
    South Shropshire
    It is quite obvious to me that heavy handed and greedy land agents will reap just deserts for their clients in many cases. Tenants will retire or walk with the decoupled subsidy payments, leaving the land possibly worthless.
     
    glasshouse likes this.
  5. Mixedupfarmer

    Mixedupfarmer Member

    Location:
    Norfolk
    I guess it all depends what options are available to landowners with environmental schemes. It could well be a nail in the coffin for new tenancies if it is easy to access money for doing little work / expense putting a bottom in rents which is too high. Let's hope not
     
    glasshouse likes this.
  6. chipchap

    chipchap Member

    Location:
    South Shropshire
    The landlord and tenant system has been damaged by FBTs in my opinion. In many cases the land gets raped for short term gain from both sides. There are however numerous landlords who have a more sensible long term approach. The old adage " live as you are going to die tomorrow; but farm as if you will live forever" comes to mind.
     
  7. David.

    David. Member

    Location:
    J11 M40
    I think landowners get the tenants they deserve.
     
    wurzell1976, Brisel, chipchap and 5 others like this.
  8. chipchap

    chipchap Member

    Location:
    South Shropshire
    That is pretty much the size of it.
    Managing any asset is a responsibility and some effort is required.
    If an agent is employed and not managed correctly problems may well ensue.
     
  9. Frank-the-Wool

    Location:
    East Sussex
    I would suggest that you renew (be careful of any clauses put in about the new subsidy system and having to surrender entitlements) and after the first day give notice that you want a review. That will give you the two years and all may be clearer. As has been said if you can take all the payments on the land you have been farming and the tax situation is favourable then it could be temting to take the money!
    .
    I have given notice on all our FBT's.
     
  10. Mixedupfarmer

    Mixedupfarmer Member

    Location:
    Norfolk
    The tenancies still have a few years to run It is really where to agree the rent level, compared to what would have been agreed last year, what with the lower sugar beet prices, and more particularly potentially decoupled (from land area) payments, and reducing level in 2021, along with Brexit. I guess we are going to have to agree to something similar to our current rate, and like you suggest serve notice for a review as soon as possible, which will be in three years. We could potentially be paying far too much rent, if Brexit goes badly, especially in the third year, but we don't really know enough at this point in time.
    It is a pity really that it could not be rolled on until next year when we will hopefully know more, but I doubt the landlords would do this as they will be keen to lock into a good rent for the next three years now. I could stall it but I am pretty sure that they will appoint an arbitrator next month if we don't agree, and it could end up getting expensive.
     
  11. If brexit goes badly £ falls prices go up

    2019 2020 payments same
    2021 payments are capped but total amount for ag is the same so 2021 may be only reduced by the capping system which is based on the 5%for the first bit then 10 %next bit and soon
    Having a review in 2021 could be a good time as we will know what the brexit outcome is
    2019 reviews may be the worse as next review is 2022

    All landowners will get reduced income farming it them selves or let
    Tenants will have reduced rents to help with reduced income
     
    Last edited: Sep 24, 2018
    Mixedupfarmer likes this.
  12. Wigsthorpe Charles

    Wigsthorpe Charles New Member

    How did your review work out in the end, or is it still going on?
     
  13. dairyrow

    dairyrow Member

    if its anything like ours. Its still going on and the goal posts are forever changing
     
  14. Mixedupfarmer

    Mixedupfarmer Member

    Location:
    Norfolk
    We had considerable negotiations over the rent as well as the lack of maintenance on buildings by the landlord. A few days before an arbitrator was due to be appointed we managed to agree on a small increase of under 2% on the existing rent, which was considerably below the level of increase they wanted. A small amount of building maintenance started, which has since gone quiet.
    I guess as long as the agent got an increase he was happy. Whether it was the right, time will tell.
     
  15. Wigsthorpe Charles

    Wigsthorpe Charles New Member

    Thanks for the update. Under 2% sounds like a tolerable outcome in the circumstances, and probably a better situation than dairyrow seems to be having.
     
  16. Mixedupfarmer

    Mixedupfarmer Member

    Location:
    Norfolk
    It was a better outcome than I feared but was hard work. I just wish they would maintain the buildings as stated in the tenancy.
     
  17. dairyrow

    dairyrow Member

    im afraid our estate a mess. The new agent come in wanting more money. After a new tenant put in a stupid rent for the farm across the way. Houses have been condemned and farm sheds are falling apart. Now all the kids have been put in charge it looks like theyre all buggering off to all parts of the world and they havent sorted out a bloody thing. Its been an interesting last few years!
     
  18. Brisel

    Brisel Member

    Location:
    Dorset
    Ouch. (n)
     
  19. Brisel

    Brisel Member

    Location:
    Dorset
    How about a rent escalator based on BPS? Negotiate a rate that is a % of the change in the payment rates? We all know that BPS underwrites rents so why not stop tiptoeing around the issue.

    An example would be a £100/acre FBT rent - BPS drops £20/acre so the rent drops £15/acre The landlord & tenant share the pain, or gain if the £ goes right down and commodity prices go up (reminding them that input prices also go up too).
     
    glasshouse likes this.
  20. chipchap

    chipchap Member

    Location:
    South Shropshire
    Sounds very sensible; but sadly lots of land agents are not sensible.
     
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