While there may be some way to go in the political debate on Scotland’s Land Reform Bill, it is increasingly clear that the laws surrounding agricultural tenancies are poised to shift significantly. And, although there is no need to put the cart before the horse with immediate action, landowners would be wise not to overlook their potential impact while business planning.
Among the most notable departures from existing legislation on agricultural tenancies are the proposals surrounding resumption. If agreed as it stands, both secure and fixed duration agreements would be affected.
Resumption is the means by which landlords can take land back in hand, removing it from the tenancy.
When it comes to 1991 Act tenancies, the right to resume land must be in writing - with a minimum two months’ notice - and is part of the lease agreement. Our experience is that the resumption provision generally allows for a fairly constructive conversation between landlord and tenant about any land to be resumed.
The Bill, however, proposes extending the minimum notice period to resume land to at least one year, overriding existing leases with shorter notice periods. At its most basic level, such a shift could dramatically alter the pace at which landowners may be able to access land to pursue the likes of new diversification projects.
The situation where Option Agreements - or other contractual arrangements - are already in place before any new Act comes into force could be more complex. Where they state that vacant possession can be obtained within a period of less than a year, there is a question about whether that would place the landowner in breach of contract. This may be the case with housing and property / renewables developers exercising their option after securing planning permission for a development.
Also worth noting is the proposal for an additional compensation payment to the tenant - a half share of the difference in value between land subject to the tenancy and the land with vacant possession, along with disturbance and reorganisation payments. The Tenant Farming Commissioner would be responsible for appointing the valuer to determine the level of compensation, with the landlord meeting the costs.
Should you take action now?
The fine detail of any changes will not be confirmed until the final Bill is voted on by MSPs.
While landowners should always obtain tailored legal advice, our advice would be to continue with Resumption clauses as they are in the meantime.
It could be that political debate leads to the changes not taking effect as currently proposed - or that it may not be retrospective. It is, however, something to be mindful of when drafting agreements where the landlord would need to be able to give vacant possession of land. It would also be wise factoring in the financial impact of the compensation that may be payable to tenants to obtain vacant possession in any considerations.
The wider agriculture agenda
Looking at the broader picture, there are questions about how Scotland’s Agriculture and Rural Communities Bill may factor into all of this.
This Bill, which is also going through the legislative process, was created to provide assistance to farming and rural communities - developing a framework of support payments. Its objectives are to prioritise food production, climate mitigation and biodiversity gain.
Amid a myriad of uncertainty facing Scottish landowners, one thing is certain: change is coming. And it is important not to lose sight of what may be heading along the track for estate owners, farmers and crofters.
The detail of what legislation could be introduced should be borne in mind when making longer-term plans.
Published 10 June 2024.
