The Government hopes that the Agricultural Tenancies Bill will take effect from 1 September 1995.

For future tenancies, lifetime security of tenure under the Agricultural Holdings Act 1986 for the tenant farmer is abolished, in favour of the farm business tenancy for a fixed term, and then from year to year, subject to straightforward notices to quit.

The parties have greater freedom of contract under the Bill, and can even choose that the old regime shall apply.The new farm business tenancy must satisfy the business conditions and either the agricultural condition or the notice conditions.

The business conditions require all or part of the land to be farmed for a trade or business at all times.

The agricultural condition specifies that the character of the tenancy must be primarily or wholly agricultural.

The definition of 'agriculture' comes from the 1986 Act, and therefore excludes, for example, the keeping of horses which are not employed on the farm.

Provided that the character is primarily agricultural, diversification is permitted, allowing other activities, such as perhaps 'paint balling', motorcross and farm shops.Alternatively, the notice conditions are: (1) before the grant of the tenancy, the landlord and the tenant must exchange notices identifying the land; (2) the notices must state that the tenancy will be and remain a farm business tenancy; and (3) the character of the tenancy must at the beginning of the tenancy have been primarily or wholly agricultural.There will be a distinction between farm business tenancies for fixed terms of more than two years, and those for less, including periodic tenancies.

The Bill contains no statutory termination provisions for the latter, which will be governed by contract or, failing express provision, the common law.A tenancy for a fixed term of more than two years will continue from year to year unless either party serves notice not less than one year but not more than two years before the expiry of the term.

If notice is served, the tenancy will expire on the term date.

There will be no need for the landlord to cite or prove any grounds in his notice to quit and the tenant will have no right to serve a counternotice, or to contest the validity of the notice.

This is the starkest contrast with the current law, and is undoubtedly the heart of the new legislation.If no notice to bring the farm business tenancy to an end on its contractual term date is given, the tenancy will continue from year to year and can only subsequently be brought to an end on an anniversary - again on not less than one year's and not more than two years' notice.Contractual early resumption clauses - devices commonly incorporated in agricultural tenancies for the benefit of landlords wanting to secure possession of part for development or other non-agricultural purposes - are to be dealt a severe blow by the Bill if cl 7 remains as drawn: not less than one year's, not more than two years' notice must be given, instead of just two months under the 1986 Act.

However, the need for such artificial devices will not be so great under the Bill.

From this point of view the simplicity being offered by the Bill will be broadly welcomed.The Bill will also dramatically reduce the number of statutory heads of compensation which can be claimed by a tenant on quitting.The tenant of a farm business tenancy will be entitled to claim for any tenant's improvements which can be physical improvements or intangible advantages.

In either case, they must be made on, or obtained for, the holding by the tenant by his own effort, or wholly or partly at his own expense, and in the case of intangible advantages, they must become attached to the holding.Physical improvements would undoubtedly include (but not necessarily be limited to) all of the improvements for which claims can be made under the 1986 Act.

Intangible advantages would include not only unimplemented planning permissions, but also the benefit of quota, and possibly such tenant right matters as acclimatisation, hefting, or settlement of hill sheep on hill land.

However, landlord's consent to the 'improvement' will invariably be required before a claim for compensation can be considered.While it is probably unrealistic to expect landlord's consent to be obtained for tenant right matters, it is currently widely expected that compensation for tenant right matters without landlord's consent will return in the next revision of the Bill.To avoid duplication, compensation for loss of milk quota can only be claimed under the Agriculture Act 1986 by a tenant of an agricultural holding under the 1986 Act.Unless the tenant's improvement is planning permission, compensation will be 'an amount equal to the increase attributable to the improvement in the value of the holding at the termination of the tenancy as land comprised in a tenancy'.

It will be reduced, however, by the proportion which the value of any benefit given or allowed to the tenant in consideration for his providing the improvement bears to the total cost of providing the improvement, and also by the proportion which any grant from public funds bears to the total cost of providing the improvement.In the case of planning permission, the compensation shall be an amount equal to 'the increase attributable to the fact that the relevant development is authorised by the planning permission in the value of the holding at the termination of the tenancy as land comprised in a tenancy'.

However, where the relevant development has been carried out (whether a physical improvement or a change of use), compensation will be payable on the normal basis.The Bill makes no distinctio n between short term, old and long term new improvements.

A claim can be made in respect of tenant's improvements made during an earlier tenancy, and compensation may not be claimed on termination of a tenancy where it has already been agreed that the tenant may make a claim on termination of an earlier tenancy.If the landlord exercises rights in relation to part of the holding under an early resumption clause, or the landlord of a severed part of the reversion serves a notice to quit in respect of such part, that part shall be treated as if it were a separate holding.

The clause dealing with compensation in these circumstances is clumsily drafted, but seems to state that it will be an amount equal to the increase in the value of the original holding attributable to the tenant's improvement (of the relevant part).

Where the improvement consists of planning permission, compensation shall be equal to 'the increase attributable to the fact that the relevant development (of the relevant part) is authorised by the planning permission in the value of the original holding on the termination date as land comprised in a tenancy', the original holding being the holding which existed at the date on which either the landlord consented to the tenant's improvement, or the arbitrator approved the proposed improvement.Where the reversion has been severed, the tenant may, if he is quitting the entire holding, require that the compensation shall be determined as if the reversionary estate were not severed, in which case the arbitrator shall, where necessary, apportion the amount awarded between the landlords.

The tenant will remain entitled to quit the entire holding after receiving a notice to quit a severed part by virtue of s.140(2) of the Law of Property Act 1925.The parties will not be able to contract out of the tenant's right to claim statutory compensation.

However, the tenant will additionally be entitled to claim compensation under other heads for which the tenancy agreement may also provide.

It remains to be seen whether or not the tenant lobby will be able to secure contractual heads of compensation to mitigate the loss of tenants' statutory claims for tenant right matters, high farming and disturbance.With regard to rent review, parties can only contract out of the Bill's machinery if there is an express provision either that the rent is not to be reviewed at all during the term, or that the rent is to be varied at a specified time or at specified intervals by a specific amount, or in accordance with an objective formula.Reviews will generally be at not less than three yearly intervals, and will establish the open market rent on express assumption and disregards.

The review may be upwards or downwards, and may be referred to arbitration in the absence of agreement between the landlord and the tenant.The Bill's rent review provisions exemplify the government's endeavours to reduce legislative interference with the parties' freedom to contract as they think fit, by giving fewer directions to the parties and the arbitrator, and by not dwelling on comparables and being brief on disregards.While one stated aim of the Bill is to deregulate the agricultural landlord and tenant relationship, the continuing application of the 1986 Act alongside the Bill, though they are mutually exclusive, will lead to a number of anomalous situations.For example, the tenant of Blackacre, whose tenancy is an agricultural holding under the 1986 Act, may be able to claim substantial compensation on quitting pursuant to his landlord's notice to quit, f or disturbance and for loss of the value of any crops growing at the date of the tenant quitting the holding (ss.60 and 65 of the 1986 Act), while his neighbour who has a farm business tenancy of Greenacre (from the same landlord) will be unable to claim compensation on quitting under either of these heads, unless the parties have agreed to the contrary.

If the tenant of Greenacre is to be expected to invest in Greenacre to the same extent as might be expected of his neighbour at Blackacre, he will surely be reluctant to agree anything other than a farm business tenancy for a reasonably long fixed term.

Even then it may not be surprising if he invests little in later years, and towards the end of the fixed term does little to cultivate the land, or keep it in good heart.There is no doubt that in negotiating and drafting farm business tenancies, agents and solicitors will need to think afresh, and not slavishly follow the full repairing and insuring model agreements which have served well under successive Agricultural Holdings Acts.

Unless a common practice is established (as to the duration of lettings and the parties' respective obligations in particular) practitioners will be required not to follow one new model agreement but, much more than before, to tailor agreements to suit the circumstances of each case.One can only speculate about the practical implications of the new legislation.

Landlords' confidence will doubtless be buoyed up by tenants no longer enjoying lifetime security of tenure, and they will possibly prefer to grant tenancies for fairly short fixed terms, thereafter permitting tenants to hold over from year to year while all is well.

Tenants, on the other hand, will be reluctant to commit themselves to capital expenditure or other long-term investment unless they are able to negotiate longer fixed terms at the outset - something which will seem an alien concept to many landowners.

Even then, tenants' enthusiasm to invest toward the end of such fixed terms is understandably likely to wane.A solution may be for landlords to commit their own capital to the holdings in consideration for higher rents.

Tenants may then not be so concerned to secure longer fixed terms.

Non-corporate landowners' preference for their own capital investment will certainly have been given a boost recently by the chancellor's announcement that the Finance Bill will include provisions enabling them to secure 100% inheritance tax relief on agricultural land let under farm business tenancies.