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01st August 2017

The Livelihood Condition Requirement in Agricultural Tenancies Confirmed by the Upper Tribunal

In the recent case of Kingsbridge Pension Fund Trust v David Michael Downs [2017] UKUT 237 (LC), The Upper Tribunal have turned their attention to the issue of the “livelihood condition” that must be satisfied on an application for succession of an agricultural holdings tenancy on retirement. In a meticulous and helpful decision the Tribunal have clarified the time for satisfying the livelihood condition test.

The general rule is that all tenancies of agricultural holdings granted prior to 12 July 1984 carry with them succession rights and that, on the death or retirement of the tenant, an eligible person may apply for succession. A right to succeed to the tenancy of an agricultural holding on the death of the tenant was introduced by the Agricultural (Miscellaneous Provisions) Act 1976 which enabled certain “close relatives” of a deceased tenant to apply to the Tribunal for a direction that a successor should be entitled to a tenancy of the holding. The Act, however, made no provision for a tenant who was elderly or sick to retire and who wished to nominate a person as his successor. One of the objectives of the subsequent legislation was the facilitation of planned retirement and succession on retirement so that tenants need not hang on to their tenancies into old age at the expense of standards of good husbandry. The succession on retirement code was introduced by the Agricultural Holdings Act 1984 which provided for a tenant, on attaining the age of 65 or upon becoming permanently incapacitated, to serve a retirement notice nominating an eligible person as his potential successor. The whole of the 1984 Act has been repealed and re-enacted in the Agricultural Holdings Act 1986.

The succession on death provisions apply in the situation where the tenant, or joint tenants, of a relevant tenancy gives a notice to the landlord of the holding that he wishes a single “eligible person” named in the notice to succeed him as tenant of the holding. Such a notice is referred to as a retirement notice. The nominated successor must be both eligible and suitable for succession. The tenant can nominate only one successor in respect of his holding and if the application is made and fails, for example, because the nominee fails the livelihood test or is found unsuitable, no further notice may be served by the tenant who wishes to retire because he has reached the age of 65 or more. Instead, the tenancy continues.

Only an eligible person named in the retirement notice may apply to the Tribunal for a direction entitling him to a tenancy of the holding. In order to be eligible, the nominated successor must be a close relative of the retiring tenant, namely the retiring tenant’s wife, husband, civil partner, brother, sister, child, or any person who was treated as a child of the family in relation to the tenant’s marriage or civil partnership, as well as must satisfy the “livelihood condition” and must not be an occupier of a commercial unit of agricultural land, unless he occupies it as a licensee only. In order to satisfy the “livelihood condition”, the nominated successor must show that during five of the last seven years his only or principal source of livelihood was derived from his agricultural work on the holding in question or an agricultural unit of which the holding forms part. The 1986 Act refers to the principal source of livelihood test in “the last seven years”, but it does not specify whether the seven-year period expires on the date of the retirement notice, or on the date of the application or the date of termination by the Tribunal. In the recent case of Kingsbridge Pension Fund Trust v David Michael Downs [2017] UKUT 237 (LC) the Upper Tribunal (Lands Chamber) addressed the statutory lacuna.

The Appellant was the freehold owner of an agricultural holding to which the succession provisions contained in the Act 1986 applied. The Respondent was the tenant’s son. On 30 March 2011 the Respondent’s father served on the Appellant a retirement notice under the Act stating that he wished the Respondent to succeed him as tenant of the holding. On 19 April 2011 the Respondent applied to the First-tier Tribunal for a direction entitling him to a tenancy of the holding. The application was opposed. As there was a 6 year delay between the date of the retirement notice and the hearing, the Appellant argued, amongst other things, that the Respondent had to satisfy the livelihood condition both at the date of the retirement notice and the date of determination of the application. A few years earlier, in the case of Shirley v Crabtree [2007] EWHC 1532, the Agricultural Lands Tribunal, the statutory predecessor of the First-tier Tribunal, held that the livelihood condition needed only be satisfied for the period of 7 years expiring on the date of the retirement notice. The Appellant challenged the correctness of that decision. That decision was, however, binding on the Tribunal which subsequently ordered to strike out that part of the Appellant’s case. The Appellant appealed to the Upper Tribunal (Lands Chamber). Before the Upper Tribunal the Appellant argued that the livelihood condition would need to be met over two separate periods of seven years, firstly in the seven-year period running up to the retirement notice and again in relation to the seven-year period leading up to the date of determination of the application. The Upper Tribunal was not impressed with that argument. The Tribunal expressed a great deal of concern that if the suggested construction was adopted, there would be an incentive for landlords to adopt delaying tactics as part of a process of attrition in order to make more difficult and costly for an applicant to satisfy the livelihood condition. In short, the Tribunal held that the natural reading of “the last seven years” refers to a single, finite period of 7 years and that there is no rolling period of time. It therefore follows that there is no need to satisfy the livelihood condition in respect of two seven periods and the livelihood condition need only be satisfied in relation to the seven year period running up to the date when the retirement notice was given, and not also in relation to the seven years up to determination of the successor’s application.

There are not many cases on the interpretation of the succession codes so the Upper Tribunal’s clarification of the livelihood condition in the context of the succession on retirement code is highly welcome. The Tribunal’s comments also send a strong warning to landlords not to pursue hopeless and unreasonable applications or arguments as a means of delay and attrition as such conduct puts a great strain both on other litigants and on the finite resources of tribunals, and courts and tribunals may well need to develop a range of sanctions to address such problems.

For more information please contact Anna Gora on 01604 461133 or click here to email Anna.