Contract Farming Agreements And Grazing Lets In The Context Of Secure Agricultural Tenancies

We recently blogged on the case of Richard Fyffe (Applicant) v John Esslemont (Respondent) to highlight what can happen where an agricultural tenant goes beyond the primary use of "agriculture". In this case, the tenant used the farm as a base for a home improvement, double glazing and conservatory business.

In addition to considering what constitutes abandonment of use for agricultural purposes, the case looks at the use of contract farming agreements and grazing lets in the context of secure tenancies.

Firstly, the tenant had argued that he had continued to farm the land via a contract farming arrangement.

Whilst the Court reserved judgement on whether an agricultural tenant can perform his obligations under the lease through a contract farming arrangement, it commented that the doctrine of delectus personae applies to agricultural leases. The doctrine assumes that a landlord has deliberately chosen his/her tenant for their personal qualities and skills. The decision therefore suggests that a tenant should proceed with some caution when putting in place a contract farming arrangement.

The Court's judgement also has wider relevance for anyone putting in place a contract farming agreement. The Court was only able to reserve judgement on the legal point because, based on the facts, it found the agreement was a sham:

it was an entirely artificial ex post facto paper exercise that had as its principal object making it look as if the Respondent was using the farmland for agriculture for the purposes of a trade or business, when in reality such use was that of the contractor, a stranger to the lease, in relation to which use the Respondent himself played no meaningful party, whether by management control or otherwise.

The Court provides a useful summary of the key features of a contract farming agreement and puts the emphasis on the farmer assuming risk with regard to his income. If the farmer does not assume any risk, he/she is at risk of creating a sub-tenancy. The Court considered the arrangement was "a zero sum game" in which no money...