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BLOG - Rural Report Important Step for Agricultural Sector

Partner and agricultural law specialist Colin Clark discusses the potential implications of the recently issued Agricultural Holdings Report.

The much-anticipated Agricultural Holdings report has now been issued and contains 49 recommendations for Scottish Ministers to consider.

The group’s aim was to look for a way to resolve some of the major issues affecting agricultural tenancies and encourage more land to be let out. This is a notoriously complex area of law with five existing separate pieces of legislation, with the potential addition of a further one if the recommendations are included as part of the Land Reform Act. A very sensible proposal is that these separate pieces of legislation should be consolidated into a single Act. Although this would  take more time  and could not be done within the current Parliamentary term, it is preferable to have good clear law which stands the test of time rather than law introduced in haste which may have unintended consequences or lead to a need for further amendments in the near future.

A recent example of this was one of the clauses in the 2003 Agricultural Holdings Act which resulted in the Supreme Court deciding in the Salvesen case that the Scottish Parliament had acted out with its legislative competence. Legislators, the Scottish Government, lawyers and the industry will be keen to avoid that happening again.

One surprise in the report is that Short Limited Duration Tenancies (SDLT) of five years or less will not continue. The two main periods of lease will be a one-year grazing, mowing or cropping let or a 10 year minimum modern Limited Duration Tenancy (LDT).  It seems likely that anti avoidance provisions will be introduced to prevent a series of annual leases being given to the same person. In many cases a five-year lease suited both landlord and tenant whereas a 10 year lease may not.

The report’s recommendation that tenants leasing under 1991 Act tenancies be allowed to convert into a 35-year LDT which can then be assigned to non-family members goes some, but not all, of the way to meeting tenants’ demands for more flexibility. A benefit of this move would be that elderly tenants are able to retire more readily and it would perhaps allow for more new entrants into the industry. On the other hand, some landlords may be concerned around the length of these leases and of losing their existing right to get the land back should an elderly tenant not have near relatives to pass the lease onto.

There is also a proposal for new rent review procedures for 1991 Act tenancies to be based on the productive capacity of the farm instead of the open market test of the farm’s rent - the rent someone would offer if a tenancy was offered for public tender. This has been welcomed by those who feel the existing rent review process isn’t fair. However, there is a worry this may lead to disputes about farm budgets replacing those on open market rents. It is not clear what will happen if the budgets produce only a very small profit or, given the state of some farming sectors at the moment, a loss.
Dispute resolution has been an area of great concern, particularly to tenants.  Many feel that although they have a right to have a dispute determined by the Land Court, the costs of doing so are prohibitive and there is not an affordable dispute resolution forum.

While new codes of practice and the proposed Tenant Farming Commissioner may help to prevent disputes arising, there is no recommendation for a cheaper and quicker alternative form of dispute resolution.

There are many other very sensible recommendations in the report but it remains to be seen how many of these, and in what form, they will eventually appear in the statute book.  The true test to be passed will be whether the changes which are eventually introduced will increase the amount of land available for let and the ability for newcomers to enter the industry or not.

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