Agricultural tenants fortunate enough to have a traditional tenancy under the Agricultural Holdings (Scotland) Act 1991 know that this type of lease can be passed on to the next generation provided certain statutory criteria are met. However, many farmers – both owner occupiers and tenants - will have a mix of either multiple tenancies or some tenanted and some owned ground. It is these types of mix that can cause very real danger to the prospects of a successful bequest of a 1991 Act tenancy when the tenant dies.
Following the bequest of a 1991 Act tenancy landlord can be entitled to end the lease where the subjects let, or any agricultural unit of which they form part, are not a viable unit. The term ‘viable unit’ has recently replaced the old ‘two man unit’, and means a unit that is able to provide full time work for the person occupying it and the means to pay the rent and for adequate maintenance. This means that those with their main farm on one lease and (say) a much smaller area of ground on another lease could risk losing the tenancy of the smaller area of ground following the tenant’s death, as that smaller area itself does not constitute a viable unit.
Alternatively, the landlord may object to the bequest of a tenancy on the premise that the person inheriting the lease has another viable unit at their disposal (i.e. the main farm).
Any farmers whose arrangements might fall within this in the above scenarios should sit up and take notice.
In 2003, the 1991 Act was amended to allow 1991 Act tenancies to be assigned (i.e. a lifetime transfer by the tenant) as of right, subject to compliance with certain statutory conditions. The grounds on which a landlord is entitled to object to a statutory assignation are far fewer than the grounds that would apply to the bequest of a lease. The fact that the tenant has another viable unit at their disposal is not grounds for objection to an assignation, nor is the fact that the let holding is not a viable unit. So a lease that would be at risk of being lost through succession may safely be assigned.
Tenants who have a mix of occupations such as this must give very real thought to whether the time is right for an assignation of a 1991 Act tenancy to be made, the risk being that if it is not, then the landlord may bring the lease to an end following the tenant’s death. Assignation is an enormously powerful tool in the tenant’s armoury. Landlords consent is deemed to be given if they do not object to a notice of assignation within a statutory time limit. As always, it is good practice that landlords and tenants should speak about future intentions, but there is no requirement for 1991 Act tenants to wait for a landlord to reply to a request for assignation before they exercise what is now their statutory right.
If you would like to discuss any of the issues raised in this article please get in touch with our agricultural and rural team.
This article was published in the December 2011 Southern Reporter.