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Land Reform Announcement Signal Changes In Sector

A consultation paper launched last week on the implementation of proposals from the Scottish Land Reform Group will bring significant changes to Scotland’s rural landscape, says a leading agricultural lawyer.

Colin Clark, partner at Pagan Osborne, warns that the level of detail at present is not clear and that it is too early to know what the terms of the final legislation will be. This uncertainty  will be unsettling for farmers and estate owners in the sector and he urges those with an interest to get involved with the consultation process now to ensure responses to the proposals are a true representation of the views of those who will be most affected by the changes.

Colin, who is accredited by the Law Society as a specialist in agricultural law, said: “There has been a lot of comment around the proposals outlined by Nicola Sturgeon and the consultation paper issued on 2nd December by the Scottish Government on the ‘Future of Land Reform in Scotland’. Representations for this can be made until 10th February 2015.

“While the consultation paper gives some more detail it is almost impossible to say at the moment exactly what changes to the law will actually apply. That will be determined by the responses to the consultation and the detailed amendments which will be made when the Land Reform Bill goes through the parliamentary process.

“We can be certain there will be changes. The Scottish Government’s aspirations are very clear, it wants “a fairer and more equitable distribution of land in Scotland where communities and individuals can own and use land to realise their potential. Scotland’s land must be an asset that benefits the many, not the few”. The sector will need to adapt to these aspirations which in some form or another will be introduced and will affect many, if not all, rural landowners.”

Two of the major issues already identified have been those relating to the reintroduction of rates for shooting and deerstalking businesses and changing the laws of succession.

At present, landowners do not pay ‘rates’ on shooting and deerstalking  as other urban and non-farming businesses do on their commercial premises. It is estimated that rates on shooting and stalking could raise up to £7m which would contribute to the Scottish Land Fund to provide support to community bodies for buying land or to help meet the costs of community projects.

Colin said: “A discussion around the reintroduction of sporting rates for shooting and deerstalking businesses has obviously caused concern for those who own and manage estates. Simply put, this move will impact profits, reduce the capital available to reinvest in the business and leave fewer resources for other expenses including wages and local services. The flipside of this is the Scottish Government has an ambitious aim of one million acres of Scotland’s land to be owned by communities by 2020 – for this to happen there has to be support and funding available from somewhere, either from general taxation or, as is proposed, partly from this very specific tax.”

Another issue is relating to succession law. Under current law the property will be distributed as per the wishes of the deceased laid out in the Will or, if they die intestate without a Will, as per current intestacy laws. The farm (or any other land or buildings – known as heritable property) can be passed to one child. The new proposals would enable close family, for example other children and spouses, to be able to claim a proportion of the value of heritable property (as well as moveable property which they have at the moment) irrespective of what is laid out in the Will.

Colin added: “Succession is always a hot topic in the agricultural sector. Farming businesses are still more often than not left to the eldest son with other children receiving assets often of lesser value which can lead to issues within families. Consequently, the Scottish Law Commission in 2009 recommended changes be made and the Scottish Government is now proposing to implement these.

“While alterations in the law would undoubtedly lead to a more equitable distribution of assets between children and other family members owning parts of a farm or estate, this is not necessarily as simple as it sounds. For example, farmers in particular often have estates of a high value but have fewer liquid assets.

“If the changes  lead to an equal share of assets the beneficiary of a farm valued at £2m would have to find £1m to buy one other sibling out of the business. This is unlikely to be affordable and may lead to the farm being sold or split between remaining family members. Running farms as modern businesses increasingly relies on economies of scale and farms have been growing in size for many years.

“Farmers tend to look at ownership of the farm continuing down the generations and the income which can be obtained from the farm rather than its capital value when deciding who is left the farm in their Will. The proposed changes may mean more people pass on at least some of their property during their lifetime rather than doing so under their Will.

“There are arguments on both sides over the need for a fairer and more progressive form of succession planning in the sector but there are many issues to consider.

“There may be a period of uncertainty in this intervening time before the details of the new law are known. I would advise people to consider their options now and talk to their legal advisors about their wishes for the future ownership of their farms and estates.”

The Scottish Government will be seeking consultation on the proposed changes in the coming months. Details of how to respond to the consultation can be found here: http://www.scotland.gov.uk/Publications/2014/12/9659.

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