A limited partnership agricultural tenancy (LPAT) was, historically, a common way of creating a fixed-term 1991 Act tenancy. The parties to the limited partnership were the general partner who was the farmer on the ground and the limited partner who was the landlord or an associate of the landlord.

A limited partnership has a separate legal personality to its individual partners and, on the limited partnership competently terminating, the tenant ceases to exist and the 1991 Act tenancy comes to an end. Following reform of the agricultural holdings legislation in 2003 new LPATs can no longer be used in this way. LPATs that were in place in 2003 continue but with amended termination procedures.

The Land Reform (Scotland) Act 2016 (2016 Act) gives 1991 Act tenants (which include all leases to limited partnerships) a right to offer to relinquish their lease (ie surrender it to the landlord at a price fixed by an independent valuer) and if the landlord declines to buy out the tenant, the tenant would have a limited right to assign the lease to a ‘new entrant’ or an ‘individual wishing to progress in farming’.

This is not yet law but it is expected that it may become law towards the end of 2019 or early 2020. There is a provision in the 2016 Act which would allow the Scottish Government to permit general partners in LPATs to exercise this right (ie the general partner may be able to offer to relinquish (and to receive the payment should the landlord elect to buy him out) or to assign if relinquishment is not accepted).

If this provision becomes law and the general partner assigns the lease it would be to an individual which would mean that the landlord would lose the right to terminate the tenancy by means of the dissolution of the limited partnership and the tenancy would become a secure 1991 Act tenancy in favour of that individual.

The Scottish Government seem committed to proceeding in this way but we will not know if the ‘limited partnership option’ will be taken forward until the relinquishment provisions come into force.

Further advice

For more information on agricultural holdings, please contact us on 0131 228 8111 or through the website.