What do we know about the UK’s Environmental Land Management Scheme, a.k.a. “ELMS”? And how may it impact farming landlords and tenants?

Over a year after “Brexit Day”, the future of agri-environmental subsidies in the United Kingdom is still far from clear. Although we know the name for the new UK regime (the Environmental Land Management Scheme, or “ELMS”) and that it will probably be divided into three tiers, almost no detail has been published about the structure of the scheme or how it will function in practice.

First ELMS tier – the Sustainable Farming Incentive

A recent step forward was the Government’s announcement that it was opening a pilot scheme for the lowest of the three ELMS tiers, the Sustainable Farming Incentive (SFI).

Broadly, the SFI appears to be designed as a replacement for the EU’s Basic Payment Scheme – it is intended to be accessible to as many farmers as possible, and to support year-on-year good practice rather than support for larger scale or longer term capital improvements.

Expressions of interest for taking part in the pilot need to be submitted by 11.59pm on 11 April 2021 and you can find more information here.

One of the more interesting aspects of the pilot is the condition that tenant farmers will only be eligible to take part if they:

  1. Have a tenancy which runs for longer than the pilot; and
  2. Obtain their landlord’s consent if required by the terms of the lease.

When the government consulted on the introduction of ELMS, a number of responses from industry and environmental groups suggested that tenants would need to be allowed to enter into agreements lasting longer than their lease and to disregard provisions to the contrary in their agreement with their landlord.

The justification given for these suggestions was that ELMS needs to be available to as many farmers as possible, and that the Government’s overall aspiration of sustained, long term improvement in environmental land management was incompatible with the short-term nature of many farm business tenancies.

Although the Government have decided against overriding the landlord-tenant relationship for this pilot, it does not mean that they will not reach a different conclusion on the point when it comes to rolling out the SFI, and in particular when they start to design the middle and higher ELMS tiers.

Potential Impact of Second and Third Tiers

These two tiers are designed to achieve more ambitious environmental improvements, including both near-permanent capital works such as re-forestation and landscape restoration schemes, which cover wide areas in multiple ownership.

If the Government’s ambitions in this area would be stymied by tenant farmers being unable to participate, then it would not be entirely unsurprising if legislation was introduced to override landlords’ objections.

This is just one potential future issue for both landlords and tenants raised by the current uncertainty over ELMS – clarity would also be welcome on other points, including the question of whether tenancy agreements will be allowed to specify whether it is the landlord or the tenant who will receive the subsidy payments and take responsibility for implementing the agreed management scheme.

In the meantime, tenancy agreements will need to be drafted carefully to cover the various possibilities, and both landlords and tenants would be well advised to discuss these points both before and after entering into a tenancy.

If you’re concerned about how the Environmental Land Management Scheme may impact you or your business, please get in touch with our Rural team.