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By Ben Allman, Head of Agribusiness and Business Services Partner
Farm Business Tenancy rents rose by 4% in current prices to an average £230 per hectare in England in 2024/25, while Full Agricultural Tenancy rents fell by 6% to £174. Whether a rent is competitive against those averages matters far less than whether the business can pay it, meet everything else the agreement commits it to, and still have the cash to reinvest in the holding.
Those figures come from Defra's Farm Rents in England statistics, updated in March 2026 and covering the survey year to February 2025. They are the numbers being quoted across the table this autumn, roughly eighteen months after the period they describe.
What the averages do not tell you
The 2024/25 data shows a market pulling in different directions. Farm Business Tenancy rents rose 4% in current prices, close to flat once inflation is taken out. Full Agricultural Tenancy rents fell 6%, a 10% drop in real terms. Informal agreements rose 8% to £253 per hectare, the highest nominal level in a decade. Seasonal agreements rose 2% to £166.
The spread underneath those headlines is wide. Across all agreement types the West Midlands recorded the highest average rent at £259 per hectare, against £151 in the North West. Dairy farms averaged £285 per hectare, while grazing livestock farms in less favoured areas averaged £93. On lowland grazing livestock farms the average Farm Business Tenancy rent came in below the average Full Agricultural Tenancy rent, which reverses the assumption most parties bring into a negotiation.
An average blends together land quality, buildings, obligations and the commercial circumstances of the parties. It tells you what other businesses agreed. It says nothing about what this holding can produce or what this business can carry. A rent £20 per hectare under the regional average is not cheap if the tenant funds the repairs, and a rent above it can be perfectly affordable where the holding comes with buildings that would otherwise have to be built.
"The question is not whether the rent is competitive. It is whether the business can pay it in a poor year and still fund the next thing the farm needs."
Start with what the business can actually pay
The useful starting point is a budget for the holding as the tenant intends to farm it, not a calculation of rent against a notional gross margin. That means output at realistic yields and prices, variable costs, labour, machinery, finance costs, drawings and tax, with rent taking its place among them rather than sitting outside the exercise.
When a tenant asks me to look at a proposed rent, the first thing I ask for is not the agreement. It is three years of accounts and a cash flow that runs beyond the next review date. A rent that works on an annual budget can still cause difficulty if it falls due in a month when the milk cheque is low or the harvest has not yet been sold, so the timing of the rent days against the timing of the income matters as much as the annual figure.
It is also worth separating the return to the land from the return to everything else the tenant brings. Machinery, working capital, labour and management all need to earn something. Where a bid is built on the farm's total expected surplus, the rent quietly absorbs the return on the tenant's own capital and effort. That can be sustainable for a year or two. It is rarely sustainable across a term.
The rent is not the only commitment
Most agreements carry obligations that cost real money without appearing in the rent. Repairing and maintenance duties on buildings, fencing, drainage and roadways can be irregular and substantial, and an agreement that puts more of that burden on the tenant is more expensive than its rent suggests. Insurance, professional costs, compliance and the condition in which the holding must be handed back all belong in the same calculation.
Working capital deserves particular attention. Taking on additional land usually means funding a crop or a stock cycle before it generates anything, at a point when the rent is already payable. Where borrowing covers that gap, the interest cost is part of the cost of the tenancy and should be budgeted as such.
Terms, break clauses, repairing obligations and improvement rights all drive these figures, so the agreement itself should be reviewed by an agricultural solicitor before anything is signed. The financial question that sits alongside that advice is a different one. Given what these terms require and permit, what does this tenancy actually cost the business each year, and can the business carry it?
Can the investment be recovered in the secure period?
Most holdings need money spending on them. Drainage, buildings, handling systems, tracks, irrigation, slurry storage or technology may all be necessary to farm the land the way the budget assumes. The test is whether that spend can be recovered within the period of genuine security, which is not always the headline term. Where a break clause or a short review period shortens the horizon, the recovery period shortens with it.
Set the economic life of the asset against that horizon and the answer is usually obvious. A grain store with a 20 year life does not recover over a five year secure period. A reseed or a drainage scheme might. Where the recovery period falls short, the options are to fund it differently, agree compensation or consent arrangements in advance, share the cost with the landlord, or accept that the budget cannot assume the improvement at all. Any of those is better than committing capital and discovering the position afterwards.
The same applies to income the budget depends on. Where a scheme payment forms part of the case for taking the holding at the proposed rent, it is worth confirming the tenancy supports the commitment before the figures are relied on, because the Sustainable Farming Incentive requires management control of the land for the duration of the agreement.
Test the figures against a difficult year
Most of the budgets I am asked to look at are built on a reasonable year. That is a fair basis for a decision, but it is not the only one the tenancy has to survive. A term of any length will contain at least one poor harvest, one period of weak prices or one sharp movement in input costs.
Sensitivity testing does not need to be elaborate. Take the budget, move output prices down by 10%, then reduce yields, then push fertiliser, feed, fuel or finance costs up, and look at what happens to the cash position rather than to the profit figure. A business can absorb a loss for a year. It cannot absorb a cash shortfall on a rent day.
What that exercise usually produces is a view on headroom. If the rent is affordable only when everything goes to plan, the position is fragile regardless of how it compares with the Defra averages. If it holds through a poor year with the reinvestment still fundable, the agreement is one the business can live with.
The practical test
Rent should not be judged in isolation, and it should not be judged against a regional average either. The questions that decide whether an agreement works are whether the business can meet the rent alongside its other obligations, whether it can withstand a difficult trading year without running out of cash, and whether the investment the holding needs can be recovered over the period of real security.
Those questions are answerable before anything is signed, and they are considerably cheaper to answer then than three years into a term. A tenancy that passes them is one both parties can build on. A tenancy that fails them will surface the same problem later, usually at the point when neither side has much room to move.
If you are testing the budgets and cash-flow assumptions behind a proposed tenancy or a rent review, the agribusiness team can help you work through what the figures need to stand up to.
This article has been prepared for information purposes only. Formal professional advice is strongly recommended before making decisions on the topics discussed in this release. No responsibility for any loss to any person acting, or not acting, as a result of this release can be accepted by us, or any person affiliated with us.
Sources:
2024/25 rent figures by agreement type, region and farm type: Defra, Farm Rents in England 2024/25, updated 12 March 2026.
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