Sugar Beet Contracts in the UK
Many tenant farmers are concerned that participation in the new outgoers’ scheme, in England and Wales, could lead to a breach of their tenancy agreements.
Quota or contract?
Although sugar beet contracts are often referred to as ‘quotas’, they are personal ‘grow and deliver’ contracts between farmers and British Sugar. The contract tonnage entitlement is therefore personal to the contract holder and is not attached to the holding.
On a change of grower British Sugar does not have to offer a new contract, even if the land being farmed remains the same. British Sugar has always claimed an absolute discretion over the granting of contracts.
The key principle of the new scheme
Subject to British Sugar’s approval, the outgoers’ scheme will allow contract holders to transfer their tonnage entitlement privately to other growers.
Will entering into the outgoers' scheme breach the tenancy agreement?
This will depend on the wording of the tenancy agreement.
- If the agreement is silent on the matter of sugar beet contracts or quota there will not be a breach.
- If there is a restriction in the tenancy agreement which refers solely to ‘basic quota’ there will not be a breach.
- If there is a clause that refers to ‘quota attached’ or ‘allocated to the holding’, there may be a breach and advice should be taken.
- If the clause talks of ‘maintaining’ and ‘not disposing of contracts’ ‘in respect of the holding’ there may be a breach of the tenancy agreement and advice should be taken.
What remedies are available to the landlord?
The following remedies may be available to the landlord if there is a breach of covenant.
- Forfeiture
Most tenancy agreements reserve a right for the landlord to forfeit the lease for breach of covenant. If there is a breach of covenant the landlord may therefore forfeit the lease.
The tenant may apply to the court for relief against forfeiture. However, a tenant who intentionally commits an irremediable breach is unlikely to get relief. Even if relief is granted the tenant may have to pay both sides legal costs.
- Notice to Quit
The landlord will need to show not only an irremediable breach of covenant but that this has caused ‘material prejudice’. It is doubtful that a reduction in sugar beet contract would have a substantial impact on the landlord’s interest.
- Damages for breach
A damages claim may occur where there is a loss of opportunity to acquire part or the whole of the contract.
A loss may arise if before quitting a holding a tenant under the outgoers’ scheme transfers its contract to a party other than the landlord or incoming tenant. The level of damages is likely to reflect the diminution in the value of the landlord’s reversion.
In order to quantify damages the Court will consider the likely timescale for securing vacant possession of the holding. The greater the period the greater the likely discount in damages.
- Dilapidations
The landlord will need to show a dilapidation or deterioration of the holding or anything in or on the holding.
As a sugar beet contract is not attached to the holding, a reduction in the tonnage entitlement is unlikely to be classed as a deterioration of the holding.
It is also suggested that compensation for dilapidations is concerned with physical damage to the holding and not economic loss caused in respect of the holding.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.