Sugar Beet Outgoers' Scheme: Tenancy Implications

Sugar Beet Contracts in the UK

Many tenant farmers are concerned that participation in the new outgoers' scheme, in England and Wales, could lead to a breach of their tenancy agreements.

Quota or contract?

Although sugar beet contracts are often referred to as 'quotas', they are personal 'grow and deliver' contracts between farmers and British Sugar. The contract tonnage entitlement is therefore personal to the contract holder and is not attached to the holding.

On a change of grower British Sugar does not have to offer a new contract, even if the land being farmed remains the same. British Sugar has always claimed an absolute discretion over the granting of contracts.

The key principle of the new scheme

Subject to British Sugar's approval, the outgoers' scheme will allow contract holders to transfer their tonnage entitlement privately to other growers.

Will entering into the outgoers' scheme breach the tenancy agreement?

This will depend on the wording of the tenancy agreement.

If the agreement is silent on the matter of sugar beet contracts or quota there will not be a breach.

If there is a restriction in the tenancy agreement which refers solely to 'basic quota' there will not be a breach.

If there is a clause that refers to 'quota attached' or 'allocated to the holding', there may be a breach and advice should be taken.

If the clause talks of 'maintaining' and 'not disposing of contracts' 'in respect of the holding' there may be a breach of the tenancy agreement and advice should be taken.

What remedies are available to the landlord?

The following remedies may be available to the landlord if there is a breach of covenant.

Forfeiture

Most tenancy agreements reserve a right for the landlord to forfeit the lease for breach of covenant. If there is a breach of covenant the landlord may therefore forfeit the lease.

The tenant may apply to the court for relief against forfeiture. However, a tenant who intentionally commits an irremediable breach is unlikely to get relief. Even if relief is granted the tenant may have to pay both sides legal costs.

Notice to Quit

The landlord will need to show not only an irremediable breach of covenant but that this has caused 'material prejudice'. It is doubtful that a reduction in sugar beet contract...