The final Report of the Agricultural Holdings Legislation Review Group was published on 27th January 2015.
The recommendations contained in the Report are not law, but the Report has been written with a view to addressing the Scottish Government's concerns regarding the tenanted agricultural sector. It is therefore probable that the Report will lead to legislative change, although the Report's authors confirm that some of their initial suggestions will require further investigation.
The following is a summary of the key recommendations:
1991 Act Tenancies – Right To Buy
Existing 1991 Act tenants have a pre-emptive right to buy. They must first register their interest and then obtain a right of first refusal on the landlord choosing to sell.
The Report advises against giving all 1991 Act tenants the"absolute" right to buy (i.e. the right to buy even where the landlord does not wish to sell).
The Report recommends that:
a) 1991 Act tenants should have an automatic pre-emptive right to buy rather than having to register first.
b) Where the landlord persistently fails to fulfil obligations under the lease, the tenant should be entitled to apply to the Land Court for an order requiring a sale of the holding to the tenant.
c) Consideration should be given to abolishing the ability to avoid right to buy by the use of interposed leases.
d) Consideration should be given to tightening the definition of what triggers the right to buy.
An updating of the criteria and process for review of rent, to bring it into line with modern farming and existing voluntary codes of practice, is recommended with rent being assessed on the basis of the productive capacity of the holding.
A three year"amnesty" for tenants' improvements is proposed, whereby the tenant can give notice of improvements not previously claimed, where these items ought to have been provided by the landlord at the commencement of the lease. This would enable the tenant to claim compensation for such improvements at the termination of the lease. The landlord would have a limited right of objection.
It is proposed that the list of items potentially subject to an improvements claim should be reviewed.
It is recommended that in future landlords should give tenants notice when the landlord is intending to carry out improvements, so that the tenant can object if, for example, the tenant considers the improvement unnecessary for the working of the holding.
The Report recommends that consideration should be given to allowing smallholders the pre-emptive right to buy, bringing them more into line with the rights of 1991 Act tenants.
The existing options under the 2003 Act comprise: (a) a grazing let of not more than 364 days with at least a clear day's break between a succession of grazing lets; (b) a Short Limited Duration Tenancy (SLDT) of up to five years; or (c) a Limited Duration Tenancy (LDT) of a minimum of 10 years if entered into post 22nd March 2011 or of 15 years if entered into pre 22nd March 2011.
The Report recommends"modernising" the LDT in the following ways:
(a) A 10 year LDT with a"break clause" at year five should be available to new tenants (and new tenants only).
(b) Tax incentives and new entrant schemes should be considered to assist incomers to the tenanted sector and to support young and/or inexperienced farmers.
(c) Landowners should be encouraged to let land on LDTs for a minimum of 35 years by tax disincentives for keeping land in hand and tax incentives for letting.
(d) Consideration should be given to full repairing LDTs of a minimum of 35 years' duration.
(e) Rent review would remain contractual, but the statutory process (only used where there is no contractual agreement) should be modernised and made fit for purpose.
(f) The termination procedures for LDTs should be reformed so as to allow LDTs to be terminated with at least two years, but not more than three years, notice against the contractual termination date, failing which they will relocate only one year at a time (cf the existing rather confusing cycles of continuation).
(g) Waygo procedures should be simplified and further consideration should be given to"rolling" improvements into an assigned tenancy so that the assignee purchases the improvements as part of the price for the tenancy.
(h) There should be a new form LDT with a minimum 35 year term where the tenant takes full responsibility for fixed equipment and where rent review is regulated by statute.
(i) Parties to a new LDT should be able to agree provisions with regard to fixed equipment where the fixed equipment provided by the landlord is sufficient to allow the tenant to farm for the purposes set out in the lease.
The Report recommends that it should be possible to let land for a period of up to one year for grazing, mowing or cropping subject to a declaration being given to the tenant that defined minimum soil nutrient and organic status standards are met and with the outgoing tenant confirming that this has been maintained.
Succession and Assignation
1991 Act tenants should be able to assign or bequeath the lease to a wider range of individuals (still within a defined statutory list).
The ability of a landlord to object to a successor tenant on the grounds that the holding is not a viable unit should be withdrawn.
A 1991 Act tenant should be able to convert the lease into a new LDT with a minimum term of 35 years and then transfer that lease to anyone on the open market for value.
The Report recommends that the Scottish Government should enter into a direct dialogue with the larger owners of agricultural land with a view to encouraging them to provide starter units.
The Report recommends the appointment of an ombudsman to attend to issues between landlords and tenants at an early stage, without requiring potentially costly recourse to the Land Court. This office would be supported by robust codes of practice created with reference to industry bodies.