Farm letting uncertainty drives tenancies to new lows

Farm tenancies are becoming shorter and less land is returning to the rental market as uncertainty over tax, policy and agricultural finances weighs on the sector.

The latest Agricultural Land Occupation Survey from the Central Association of Agricultural Valuers recorded a net loss of 4,510 acres from the let sector in England and Wales. Drawing on information from all 27 CAAV local associations, it covered decisions affecting 88,384 acres in the year to 31 October 2025.

The survey found a sharp decline in the proportion of Agricultural Holdings Act tenancies being re-let when agreements ended.

Historically, between 75% and 80% of these tenancies have returned to the rental market, but that figure fell below 53% in 2025. Meanwhile, almost 23% of units were sold when tenancies ended, compared with a typical rate of 8% to 10%.

The average length of Farm Business Tenancies also fell from 3.97 years to 3.38 years, its lowest level since 2021. When agreements lasting less than a year were excluded, the average declined from 5.05 years to 4.65 years, the lowest figure since 2018.

CAAV secretary and adviser Jeremy Moody said previous surveys had shown that periods of uncertainty were associated with shorter agreements.

“Over the years, these surveys have shown that periods of policy uncertainty see the average length of letting shorten,” he said.

Mr Moody said shorter-term arrangements were usually the most affected, while longer tenancies involving greater investment tended to remain more stable.

The survey found that most activity continued to involve bare land rather than complete farms with homes and agricultural buildings.

“Activity in the let sector remains overwhelmingly in terms of bare land,” Mr Moody said.

Only 6.8% of lettings in 2025 involved what would conventionally be regarded as a farm with a house, buildings and land.

Larger holdings were more likely to be offered on longer terms than smaller units. New entrants also tended to secure longer agreements, with 79% obtaining tenancies lasting more than two years, compared with 62.5% of other tenants.

They accounted for 30% of new lettings involving a change of tenant, placing the figure at the upper end of its usual range. Mr Moody said this “could indicate the market opening up a bit”.

Flexibility was the most common reason landlords gave for choosing a tenancy length, cited by 37% of respondents compared with 27% a year earlier. Five per cent referred directly to uncertainty, up from 2% in the previous survey.

The CAAV said concerns increased following the inheritance tax proposals announced in the October 2024 Budget, alongside uncertainty over agricultural schemes, farming economics and the weather.

However, it said few tenancy decisions in 2025 were directly attributed to the tax proposals.

“Very few decisions were made in 2025 because of the Inheritance Tax changes but they infused the wider mood of uncertainty,” Mr Moody said.

The contraction was more pronounced in Scotland, where tenancy changes affected 20,804 acres, down from 29,590 acres in the previous year. The tenanted sector recorded a net loss of 10,455 acres, while the proportion of holdings being re-let fell from 75% to 60%.

The average length of new Scottish tenancies dropped from 4.31 years to 3.35 years, the lowest level since the survey was extended to Scotland in 2011.

Short bare-land agreements remained the dominant form of letting, often providing interim management before land was moved to another use. Only 5% of Scottish lettings included a house in 2025, below the usual range of 10% to 15%.

The CAAV said seasonal grass lets, informal agreements and contract farming continued to offer flexibility, with some owners preferring non-tenancy arrangements when withdrawing from agriculture.

Mr Moody warned that access to rented land remained important for new entrants and agricultural productivity.

“Access to land is a key tool to raise productivity, and the tenanted sector has a potentially salient role in answering British farming’s productivity challenge,” he said.