New rights for farm tenants

The Agricultural Holdings (Scotland) Act 2003 has become reality following the Agricultural Holdings (Scotland) Act 2003 (Commencement No 3, Transitional and Savings Provisions) Order 2003, made on 12 November.

This brings into force, from 27 November 2003, the following provisions of the Act:

Part 1 – allowing 1991 Act tenancies to be converted to limited duration tenancies, abolishing section 2 cropping licences, modifying the law re grazing and mowing leases and introducing “short limited duration tenancies” (maximum of five years) and “limited duration tenancies” (not less than 15 years).

Part 3 – conferring on tenants the right to diversify into non-agricultural activities which do not lessen amenity, or prejudice the use of the land for agricultural purposes, are not detrimental to sound estate management and do not cause the landlord undue hardship.

Part 4 – modifying the law on compensation. Chapter 1 abolishes agreements for writing down compensation and brings in new provisions where grant aid is made to a tenant. Chapter 2 removes the upper limit (two years’ rent) on compensation for disturbance and introduces compensation for diversification (including provision that, if diversification reduces the value of land, the landlord is entitled to compensation from the tenant). Chapter 3 covers compensation following compulsory acquisition and Chapter 4 allows the landlord and tenant to enter into an agreement whereby, on the tenant quitting the holding, he will share in the uplift between tenanted and vacant possession values.

Part 5 – introducing miscellaneous amendments to the 1991 Act, the most important of which outlaw future post-lease agreements; and permit tenants to opt out of existing post-lease agreements following rent review, to obtain Land Court orders permitting withholding of rent while landlords fulfil obligations in relation to fixed equipment, to reside off the holding, to assign the lease to their intestate heirs, and to carry out certain conservation activities without being guilty of bad husbandry.

Part 6 (so far as not already in force) – allowing a partner in a partnership (not just a limited partnership) to claim security of tenure in his own right where another partner, being the landlord or an associate of the landlord or a partnership or company in which the landlord has an interest, dissolves the partnership; and

Part 7 – giving the Land Court primary jurisdiction in dispute resolution re agricultural holdings.

These provisions have, of course, been well trailed and I have, purposely, only skipped through them, picking out the most important.  What is said above is not, therefore, comprehensive. I will, in future articles, go into various provisions of the Act in more detail.

Part 2 of the Act, the tenant’s pre-emptive right to buy, has not, however, been introduced but is expected to come into operation next spring. Nevertheless, Part 2 has not escaped attention in the Order, which brings into force provisions enabling Ministers (a) to prescribe forms for tenants’ notices of interest and landlords’ (or heritable creditors’) notices of intention to transfer land; (b) to issue guidance in relation to valuation; and (c) to make further provisions in connection with the appointment of valuers and valuations.

The Order also brings into force those subsections which permit Ministers to modify the transfers which do not give rise to right to buy and to define what is to be regarded as “action… with a view to a transfer of land”. So all those ingenious schemes we have been working on, with a view to defeating right to buy, may yet prove ineffective!

Finally, the Order makes important transitional and saving provisions relative to arrangements which have been put in place, or proceedings which have been commenced, under the old law but which will not be possible now that the Act is operating, namely:

• section 2 licences and grazing leases in effect on 27 November 2003 are continued until their expiry;
• interdict proceedings by a landlord to prevent a tenant disposing of produce or practising a system of cropping raised before 27 November 2003 may be continued;
• a record made before that date by a person appointed by Scottish Ministers is deemed to be a record made in terms of the 2003 Act;
• notices to quit issued by landlords and notices of intention to quit issued by tenants before 27 November remain effective, but, in the case of notices to quit only where the landlord has already applied to the Land Court for consent;
• where a 1991 Act tenancy has terminated before 27 November 2003, compensation is to be dealt with in terms of the 1991 Act;
• arbitrations commenced before the due date fall to be determined under Schedule 7 to the 1991 Act; and sheep stock valuations already commenced are to be determined in accordance with the old rules.

Alasdair G Fox, Anderson Strathern WS