I have previously looked at the case of Fyffe v Esselmont SLC/67/15 where, in very short summary, the Scottish Land Court concluded that the tenant’s particular activities on the farm amounted to a departure from agricultural activity as the principal activity, and so it was no longer an agricultural holding protected by the Agricultural Holdings (Scotland) Act 1991 or a ‘secure agricultural tenancy’ for short.
While you might think that recognising a secure agricultural holding would be subject to the ‘elephant test’ it is not always as easy to spot as it might seem! One person’s secure agricultural holding may be another’s grazing let or short fixed-term tenancy and, if parties cannot agree, ultimately the Land Court may need to decide.
Although it is not yet law at the time of writing (because of an administrative hold up in connection with the transfer of data from those registrations already in the system from one government department to another) there is an intention under new legislation to abolish the need for secure 1991 Act tenants to register in order to take advantage of the pre-emptive right to buy. All 1991 Act tenants would have such a right on the land subject to their tenancy coming up for sale, subject to limited exceptions. It is therefore all the more important for landowners, land occupiers, and their professional advisers to be able to recognise secure agricultural tenancies and the risk of such a tenancy being claimed.
There have been some interesting cases from the Land Court in recent years on this subject.
Consensus between the parties
In Gunn v Luyken SLC/156/16 the Land Court held that an unwritten secure agricultural tenancy had not come into being because there was no agreement between landlord and would-be tenant as to duration or rent (two of the four cardinal elements of any lease). The respondents’ attempts to argue that giving the former landlord produce grown on the land in question was a ‘rent equivalent’ failed in circumstances where there was no evidence that parties gave or received the produce on the basis of a consensus between them that it constituted rent. The case was decided on that one factor. The Land Court went on to comment that, had a lease been created at common law, it was highly unlikely to constitute a secure agricultural holding in circumstances where: (a) the area let was very small (although there is no minimum size for a secure agricultural holding); and (b) the activity was not commercial, but principally to provide food for the would-be tenants’ family.
In J & S Wight Ltd v McGowan SLC/16/16 the Land Court again found that the evidence did not support a finding of a tenancy of a secure agricultural holding having been created either by deliberate intention of the parties from the outset but not set out in writing or by ‘accident’ as a result of ‘overstaying’ with consent of the landowner beyond the statutory maximum period for a grazing let. Further procedure (failing agreement of the parties) was required to finally dispose of the case but the preliminary view expressed by the Court on the evidence they had heard at the point of writing up the case was that there was likely to be a limited duration tenancy in place on its first continuation.
In terms of legislation introduced in 2003, all new tenancies entered into after 27 November 2003 and intended to be a ‘new’ secure agricultural tenancy must be constituted in writing in advance of commencement and clearly state that the 1991 Act applies. However, complex litigation does still arise where an occupant has farmed land over a period without any clear understanding between the parties as to exactly what type of tenancy is in place, either because it does not seem to matter at the time, because the lease contract is badly drafted, or because there is no contract of lease at all. Usually such claims predate 27 November 2003 and result from the continuation of a grazing lease outwith the statutory period. However, the same issue can arise where what was a smallholding (a rare form of tenancy akin to a croft outwith the crofting counties) has been let on a secure agricultural tenancy by agreement between landlord and tenant and without objection by the Board of Agriculture which was responsible under the historic legislation for regulating smallholding tenure.
Trustees of Gibsone of Pentland’s Trust v Telfer SLC/86/17 was an application by a landlord to resume two smallholdings for the purpose of a film studio development, which the Land Court declined to authorise. One of the preliminary arguments advanced for the tenant was that one of the two holdings was not in fact a small landholding but a secure agricultural holding. There was a contract of lease some terms of which pointed to a small landholding others of which pointed to a secure agricultural tenancy. The court commented that had they only required to consider the written lease they would have found that it was a secure agricultural holding. They were particularly persuaded by the fact that a new written contract of lease indicated parties were trying to agree to something other than the lease which had gone before (the small landholding tenancy). However, as evidence was available which showed the tenancy offered for let by newspaper advert which clearly demonstrated the tenant was invited to take over the existing (ie small landholding) tenancy, their decision was that the tenant held two small landholding tenancies. This one piece of extrinsic evidence was crucial in demonstrating that there was no secure agricultural tenancy on the particular facts of this case.
In Scots law a partnership has separate legal persona to its individual partners and so, on the change of constitution of the partnership (usually on the demise of one of the partners) the tenant (the partnership) ceases to exist and so does the tenancy. This can lead to an abrupt termination of what would otherwise have continued as a secure agricultural tenancy, unless the lease is ‘to the house’ (to the partnership howsoever constituted from time to time). Again, recognising when a lease is in favour of a partnership and when it is not can be complex.
In Oag v Oag’s Executors SLC/172/12 the Land Court held that the lease of the secure agricultural holding was in favour of a partnership and had come to an end on the death of one of the partners. It found that the designation in the lease including the words ‘farming in partnership under the firm name of…..’ demonstrated a lease in favour of the partnership, there being no clear contrary interpretation in the body of the lease, despite a number of potential contra indicators being presented to them by senior counsel. While in this particular case the court acknowledged that the lease was not very well drafted, it was sufficiently clear from the terms of the contract of lease itself that the tenancy was in favour of the partnership and not the individuals with the result that there could be no succession of the tenant’s interest.
In some cases, as a result of a course of action or inaction by one or both parties over a period of years, claims can arise to the ‘continuance’ of tenancies after the termination of a tenancy in favour of a partnership, terminated by the partnership ceasing to exist. Usually this arises where one individual formerly in partnership with another who has died, continues to occupy the land and pay the rent. Where this emerges after 27 November 2003 the relevant legislation provides that any new lease needs to be in writing and provide that the 1991 Act applies for it to be a secure agricultural tenancy. Otherwise it might ‘default’ to one or more of the fixed term tenancies under the 2003 Act (which is another topic for another day). The date on which the termination of the partnership and reconstitution of a lease ‘implied’ by a course of dealing between the parties is very significant, since if it predates 27 November 2003 it might be a secure agricultural tenancy; if it post-dates 27 November 2003 it cannot be. In James Richardson & Sons v The Kipp SLC/33/16 the Land Court held that, where a partnership which held a secure agricultural tenancy had come to an end after 27 November 2003, nothing in the Partnership Act 1890 nor the contract of partnership could enable the sole surviving partner to retain the secure agricultural tenancy and because of the date that individual could not obtain a secure agricultural tenancy informally either.