Real Estate Blog: Farmers - are you prepared for the inevitable? The transition from BPS to ELM

Prior to the UK’s exit from the EU on 31 January 2020, agricultural policy was driven by the EU’s Common Agricultural Policy (CAP).

This included subsidy schemes such as the Basic Payment Scheme (BPS), which provided payments to farmers who met relevant criteria. Overhauling this legal framework is the Agriculture Act 2020, which looks to replace the BPS with different payment options under the new Environmental Land Management (ELM) scheme.

Payment schemes under the ELM do not mirror those delineated under the CAP, so farmers will need to ensure that they are familiar with the upcoming changes. With the new legislation aiming to completely phase out the BPS by the end of 2027 (with numerous cuts to ongoing BPS payments during the transition period), it is important for farmers to look not only at improving the environmental currency of their businesses, but to also be adequately rewarded with a level of support under the ELM for doing so. 

The ELM introduces three new elements that reward sustainable environmental land management, namely the Sustainable Farming Incentive, Local Nature Recovery and Landscape Recovery. These schemes aim to encourage the industry to take steps toward improving the environment, animal welfare and to contribute towards the government’s push to reduce carbon emissions.

Farmers who wish to offset lost BPS payments will want to adopt some of these schemes to ensure their businesses are protected from avoidable subsidy reductions. For tenants under Agricultural Holdings Act (AHA) or Farm Business tenancies, it is important to check whether the ELM schemes breach any user covenants. Tenants may also need landlord’s consent to enter into new financial assistance schemes. If this is the case, a request to vary the tenancy or for landlord’s consent should be made before making any new applications under the ELM. Should consent be refused by the landlord, or granted subject to conditions, it is worth noting that AHA tenants now have rights under the Agricultural Holdings (Requests for Landlord’s Consent or Variation of Terms and the Suitability Test) (England) Regulations 2021 to refer the matter to an arbitrator or expert.

It is by no means a ‘one size fits all’ approach, and depending on the nature of their businesses, it is imperative for farmers to investigate possible alternative income streams or expansion opportunities. In any event, those that make the necessary preparations early will be better suited to navigate through the transition period and beyond.

For further information or specific advice on the new subsidy regime, please contact one of our Agricultural Property experts.