Environmental farm business tenancies explained

18th May 2026

Author: Michael Bracegirdle

Many farmers renting additional land, particularly from organisations such as The Crown Estate, are being offered Environmental Farm Business Tenancies (EFBTs).

These agreements are designed to support environmental land management, biodiversity improvements and carbon sequestration, while still allowing agricultural use of the land. However, an EFBT often places additional obligations and restrictions on a Tenant compared to a standard Farm Business Tenancy (FBT).

In this article, Mike Bracegirdle explains the legal and practical implications of entering into an EFBT.

What is an Environmental Farm Business Tenancy?

An Environmental Farm Business Tenancy is a form of agricultural tenancy that combines traditional farming arrangements with environmental objectives. Landlords are increasingly using these agreements to support long-term environmental strategies and to position landholdings for future government schemes and funding opportunities linked to sustainability and biodiversity.

While many EFBTs follow a format developed in consultation with the Tenant Farmers Association, each agreement can differ significantly and should be reviewed carefully.

The increasing use of EFBTs reflects wider changes in agricultural support schemes, with greater emphasis now being placed on environmental land management, biodiversity enhancement and carbon reduction initiatives. As government funding continues to move away from acreage-based subsidy models, many Landlords are reviewing how their land can support environmental schemes and long-term sustainability objectives.

Length of term and restrictions on use

Many EFBTs are offered for terms of up to 15 years. While this can provide valuable long-term security for a Tenant, the agreements often include restrictions which may limit how the land can be used during the tenancy.

For example, some agreements restrict changes to farming practices or diversification proposals without the Landlord’s consent. This could become problematic if your business model changes during the tenancy term.

EFBTs may also contain strict provisions preventing assignment, subletting or sharing occupation of the land. Unlike Agricultural Holding Act tenancies, Farm Business Tenancies do not benefit from statutory succession rights, making it important for Tenants to understand the implications before entering into the agreement.

Some EFBTs include a Tenant break clause, often linked to rent review dates. This can provide greater flexibility if the arrangement no longer suits your farming business and should be considered carefully during negotiations.

Development termination provisions

Most EFBTs contain provisions allowing the Landlord to terminate the tenancy early if planning permission is obtained for development of the land.

The wording of these clauses is particularly important. Some agreements define the grant of planning permission very widely, which could entitle the Landlord to bring the tenancy to an end sooner than expected.

Tenants should ensure they fully understand the circumstances in which the tenancy could be terminated early.

Rent reviews

EFBTs commonly include rent review provisions at three-year intervals.

The better drafted agreements align the timing of any rent review with the Tenant’s right to exercise a break clause. This allows the Tenant to reconsider the viability of the tenancy if the revised rent becomes unsustainable for the farming operation.

Understanding how the rent review process operates is essential when assessing the long-term viability of the tenancy.

Schedules of condition and repair obligations

Where the tenancy includes buildings, structures or fixed equipment, the agreement will often include a schedule of condition.

Tenants should review this carefully before entering into the tenancy. Repairing or reinstating buildings to the required standard at the end of the term can involve significant cost.

You should ensure you fully understand:

• the condition of the property at the outset
• your repair and maintenance obligations during the tenancy
• the standard expected when the tenancy ends

Biodiversity and carbon baseline obligations

Environmental obligations are one of the defining features of an EFBT.

Some agreements allow the Landlord to revise biodiversity targets or carbon baseline figures during the tenancy term. This may require the Tenant to undertake additional work or incur further expense to meet revised environmental objectives.

These obligations should be reviewed carefully to ensure they are practical and commercially sustainable for your farming business.

Some agreements may also require the Tenant to actively improve environmental outcomes through habitat management, restrictions on chemical use or prescribed farming practices. Failure to comply with these obligations could place the Tenant in breach of the tenancy agreement.

Reporting and compliance requirements

Many EFBTs require regular reporting obligations, including:

• soil nutrition reports
• soil structure assessments
• environmental monitoring data
• evidence of compliance with environmental schemes

The cost of obtaining specialist reports and professional input can become significant over time and should be factored into your budgeting.

Some EFBTs also include provisions allowing the Landlord or managing agent to monitor environmental performance using digital mapping, satellite imagery or other data gathered from the holding.

Insurance obligations

Where buildings or structures form part of the tenancy, the Tenant may also be required to maintain insurance cover and provide evidence of that insurance to the Landlord or managing agent.

It is important for Tenants to check precisely what risks you are responsible for insuring and whether any additional cover may be required. Failure to maintain adequate insurance cover could place the Tenant in breach of the tenancy agreement.

Environmental schemes and diversification

Most EFBTs require the Landlord’s consent before the Tenant can enter into grant schemes or environmental stewardship arrangements.

If you are already farming the land under an existing FBT and participating in schemes linked to that land, it is important that these arrangements are properly documented within the new tenancy agreement.

Some EFBTs also encourage diversification opportunities. In certain cases, the Landlord may agree to contribute towards diversification costs in return for a proportionate share of the income generated. These arrangements are usually considered on a case-by-case basis.

Land Registry and SDLT considerations

One of the most important areas for Tenants to understand is whether the tenancy triggers Land Registry or Stamp Duty Land Tax (SDLT) requirements.

A tenancy granted for more than seven years must be registered at the Land Registry. Registration formally records the Tenant’s legal interest in the land and helps protect those rights during the term of the tenancy.

SDLT requirements should always be considered separately from Land Registry requirements. Depending on the length of the tenancy, the rent payable and other terms within the agreement, an SDLT return may still need to be submitted even where no tax is payable.

Failure to submit an SDLT return on time will result in penalties and interest, even where no SDLT is ultimately due.

It is therefore essential that Tenants obtain legal and tax advice at an early stage.

End of tenancy considerations

Tenants should also consider whether they will be entitled to compensation for environmental improvements, soil enhancement or participation in environmental schemes at the end of the term of the tenancy. The position will depend on the wording of the agreement and should be reviewed carefully before the tenancy is entered into.

Why early legal advice matters

Environmental Farm Business Tenancies can offer valuable opportunities for both Landlords and Tenants, but they are often more complex than standard agricultural tenancy agreements.

Early legal advice can help you:

• understand your long-term obligations
• identify hidden costs and risks
• negotiate more workable terms
• avoid unexpected SDLT penalties or registration issues
• protect the future flexibility of your farming business

The Agriculture & Rural Affairs Team at Butcher & Barlow advises both Landlords and Tenants on Environmental Farm Business Tenancies, Agricultural Holding Act Tenancies and wider rural property matters. If you are considering entering into an EFBT, obtaining legal advice at an early stage can help you identify potential risks and negotiate terms that work for your farming business.

 

Frequently asked questions

1. What is an Environmental Farm Business Tenancy?
2. An Environmental Farm Business Tenancy is an agricultural tenancy agreement which combines traditional farming use with environmental management obligations and sustainability objectives.
3. Does an EFBT need to be registered at the Land Registry?
4. A tenancy granted for more than seven years will usually need to be registered at the Land Registry.
5. Is SDLT payable on an Environmental Farm Business Tenancy?
6. Depending on the terms of the tenancy, an SDLT return will need to be submitted and SDLT may be payable, even where the tenancy does not need to be registered at the Land Registry.
7. Can a Landlord terminate an EFBT early?
8. Many EFBTs contain development break provisions allowing the Landlord to terminate the tenancy if planning permission is obtained for development of the land.
9. Can a Tenant enter environmental schemes under an EFBT?
10. This will depend on the wording of the agreement. Many EFBTs require the Landlord’s consent before a Tenant enters into environmental or stewardship schemes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The information in this article was correct at the time of publication. The information is for general guidance only. Laws and regulations may change, and the applicability of legal principles can vary based on individual circumstances. Therefore, this content should not be construed as legal advice. We recommend that you consult with a qualified legal professional to obtain advice tailored to your specific situation. For personalised guidance, please contact us directly.