Are your grazing arrangements due a spring clean?

As we head into Spring, attention for many landowners will turn to managing their pasture for another year, whether this is buying stock, mowing, or contracting out to a local grazier or contractor. In this blog post we set out the importance of ensuring you have a well drafted licence agreement in place.

As we see the long-awaited return of the longer and (hopefully) warmer days of spring and summer, many clients attention will turn to how their grassland is managed.

Written by Matthew Sawdon April 28, 2024

Whilst many of these arrangements are long standing and often agreed under the age of tradition of a handshake, it may be worth considering the arrangement in more detail to ensure that both parties are clear on the terms. This can save a lot of time, frustration and money in the long term. Having clearly defined terms and principles for any occupation is important, ultimately your land is a valuable asset, nowhere else would you allow someone onto your property for a period of time without a written agreement.

The most suitable form of written agreement for this scenario is a grazing licence which grants rights to graze and mow the land from one party to another for a defined period of time. The licence should cover a maximum period of 12 months and will detail clauses in relation to the rights of either party and how the land is to be managed during the licence period. Careful drafting of a licence agreement is essential to ensure the parties are aligned on their respective requirements. Examples of clauses to consider when drafting a grazing licence may include whether water is available on the land and which party is (wholly/partially) responsible for the cost of the supply, the suitability and number of livestock the land is able to accommodate and who is responsible for the upkeep of the fencing and gates.

There are financial implications too

A licence agreement has many advantages for both the licensor and licensee and not just in the event of a dispute. For the licensor, there are potential tax and income benefits to having a formal agreement in place.

With a licence agreement, the landowner is still able to claim agricultural subsidies, such as the Sustainable Farming Incentive (SFI) or Countryside Stewardship, whilst the grazier has no commitment to the land beyond the right to graze or take a hay/silage cut.

An important benefit of a written licence is that the landowner is able to use the agreements as evidence that the business is trading when potentially making a claim for Agricultural Property Relief (APR) from Inheritance Tax. This is because land subject to a grazing agreement can be classified as being actively farmed as the agreement creates a relationship with the grazier whereby, they are buying the grass from the landowner.

In order to claim APR, it is important for the landowner to be seen as the active farmer, rather than the grazier. This can be achieved by the landlord being responsible for actively producing the grass crop through the fertilisation, seeding and weed control of the land. Where possible, the landowner should be responsible for some of the day-to-day animal husbandry, such as checking the grazier’s stock daily. Keeping record of expense and time, through retaining relevant receipts and documents, or even keeping a diary, will serve as good evidence.

It is important to seek a well drafted, up to date agreement to ensure the terms reflect the ever-evolving legislation. In addition, the parties must be careful to ensure they undertake the works stated, such as the landowner undertaking management and keeping the relevant records to demonstrate this, ensuring a strong case for an APR claim as well as inadvertently creating a tenancy agreement rather than the original intention.

When letting land, we will ensure that the most suitable form of agreement is selected to maximise the land's potential.

Sophie Walker Rural Surveyor