We are closing in on Michaelmas, 29th September, which will normally mean Tenants receiving a dreaded rent review notice! but why should it be this way, with the current state of the agricultural markets should Tenants be serving notices on the Landlords and look at the possibility of a rent reduction?
Traditionally if the rent was to be discussed the tenant is the one to lose and end up paying more. Over the past few years we have seen un-sustainable rents tendered for agricultural land. Rents over £200/acre have been common across the south west region even reaching £250/acre plus for regular grade 3 arable land.
When I discuss rents with my clients they all agree that this level is not healthy for a business or the agricultural rent market. So why are we not seeing more honest rents?
Well I believe we are! We are stilling seeing high rents tendered but recently these are back in the region of £175/acre rather than £250. Tenants are willing to pay a competent agent to negotiate with the Landlord for a serious rent reduction. Where a Landlord understands the value of a capable tenant negotiating a reduction in today’s market can be a much more amicable affair.
With Wheat prices hovering around the £100/ton mark farm business financials need to be under close scrutiny and this includes the farm rent. If the farm is efficiently only making a £80/acre profit before rent then it does not make business sense to be paying £160/acre rent.
The argument I always here is my agent fees will be more than the rent I save! This may be true but a good agent will be able to manage expectations and know if the discussion is worth having. In terms of figures if you rent 150 acres at £200/acre and your agent can negotiate a reduction of £20/acre saving you £3,000 per annum on rent then a fee of £2,000 would still see a saving along with a reduced rent for the next couple of years.
Any tenancy should be fair and the majority of Landlords or their agents will understand the current market and should be willing to discuss rental levels.
If you have any questions leading up to Michaelmas 2016 please do call Chris Powell in the Marlborough office, 01672 515 252.
Rural Practice Surveyor