Small holdings, big complexities

The law relating to leases of rural property in Scotland has long been an area replete with special considerations. There is a surfeit of statutory regulation in relation to crofting and agricultural holdings, but rural considerations flow from before that surfeit: for example, a rule about delectus personae to restrict assignation (Bell’s Principles, 1216).

Crofts (governed by the Crofters (Scotland) Act 1993, as copiously amended), and agricultural holdings (whether a “1991 Act” tenancy or one of the more recently introduced fixed-duration tenancies in terms of the Agricultural Holdings (Scotland) Act 1991 or the Agricultural Holdings (Scotland) Act 2003, both as extensively amended) are relatively well known. Those dabbling in rural matters can normally be on guard for these. But for the unwary and perhaps even unlucky solicitor, a small landholding might be chanced upon in a transaction.

Small landholdings are a type of rural lease that can be found outwith the traditional crofting counties (of the Highlands and Islands) that are not quite governed by the agricultural holdings regime. They have not – yet – been much affected by Holyrood legislation, save for s 6 of the Crofting Reform etc Act 2007, which amended the Crofters (Scotland) Act 1993 to allow small landholdings to be converted into crofts in areas outwith the traditional crofting counties but now designated as new crofting areas (namely Moray, the Cumbraes, Arran and Bute, per the Crofting (Designation of Areas) (Scotland) Order 2010, SSI 2010/29), and now part 11 of the Land Reform (Scotland) Act 2016. It is as a result of that more recent amendment that small landholdings will now find themselves subject to a bit more legislative attention.

History and current status

The statutory system of crofting was introduced to parts of Scotland by legislation passed in 1886, but the rest of Scotland had to wait until 1911 before its smallholdings were subjected to similar, and rather powerful, statutory control. The Small Landholders (Scotland) Act 1911 essentially expanded the system introduced by the Crofters Holdings (Scotland) Act 1886 to the whole of Scotland, bringing in control for matters like compensation for improvements (namely what a landlord would have to pay a tenant for any works introduced by the tenant) and security of tenure (meaning the ability of a tenant to hang around on land even at the end of the original term of a lease, provided rent was being paid and other obligations complied with). The Crofters (Scotland) Act 1955 then reintroduced the division between Highland and Lowland Scotland, leaving the 1911 Act and the 1886 Act (and indeed many other Acts) to govern leases of small landholdings outwith the crofting counties.

To this far from simple system, an extra layer of complexity can be introduced. The 1911 Act actually introduced two different regimes, where someone who rented a smallholding could be a “landholder” or a “statutory small tenant” (in terms of s 32 of that Act), depending on whether it was the landlord or the tenant (or indeed a predecessor of either of them) who had built the structures used for that smallholding. Generally speaking, a statutory small tenant has less in the way of statutory rights than a landholder.

For a variety of reasons, there are not that many of these regulated leases still in existence. Notwithstanding that relatively low number – which seems to be settled at 74 (yes, seventy-four) – there has been a perception that these leases have been ignored when other leases have not. In part, any neglect is ably demonstrated by the mass of legislation about crofting and agricultural holdings, but of course the low number of small landholdings also explains that lack of legislative attention. That point notwithstanding, it may be the case that parties to such leases do not have a particularly clear handle on what arrangement they have, not to mention that there are arguments about whether such arrangements are suitable for the present day, and as such it is a worthwhile exercise to have a look at small landholdings.

Modern reform?

To this mix, s 124 of the Land Reform (Scotland) Act 2016 can now be added. This was the result of a Scottish Green Party amendment at stage 3 of the then bill. It committed Scottish ministers to: (a) review the legislation governing small landholdings; and (b) lay a report of that review before the Scottish Parliament no later than 31 March 2017. This the Scottish ministers have done. The report can be found here.

The report is an impressive piece of work. (I declare an interest, in that I had some limited input to it: a couple of drafts were circulated to me and I commented on them. To be clear though, I declare that interest to give the credit to those that deserve it.) A lot of people inputted to this document, and of course those directly affected by the proposals (the landlords and tenants) provided data for the exercise, so any credit is due to them. This post has skimmed over some of the details about small landholdings, whereas the report goes into the background, the current regime, and the potential for the future in detail.

To offer some selected thoughts on the report’s interpretation of the future, it essentially narrows down three options, namely:

• the status quo;
• conversion to another type of tenancy; or
• reform and modernisation.

The report then suggests two of them are not appropriate, as: maintaining the status quo would lead to further diminution of numbers of small landholdings (with unclear effects on rural Scotland); whilst mass conversion of small landholdings into another type of tenancy is just not quite suitable (as, for example, you could end up with crofts outside traditional and even recently expanded crofting areas, not to mention that it could have an uncertain effect on already settled positions between landlord and tenant). In passing, the report also tells us (at para 133) that to date, no small landholder in one of the new designated crofting areas has converted. Such small landholdings would be prime candidates for conversion, so this seems to show either that there is no appetite for conversion or that the existing conversion process is not appealing.

That leaves the reform and modernise option. Much could be said about this, but the two key issues that came up in consultation with respondents related to clarity of legislation (which is a bit of a bùrach across many statutes at present) and a right to buy. As regards the potential for a right to buy of any sort, irrespective of the undeniable politics of such an option it is clear that small landholdings missed out on such rights in 1976 (when an absolute right to buy was conferred on crofters) and 2003 (when a right of first refusal was given to secure 1991 Act tenants of an agricultural holding).

What next?

The Scottish Parliament will get the chance to ponder the report, but para 170 sets a number of future steps. Some of these might involve the Scottish Law Commission, the new Tenant Farming Commissioner, and the Crofting Commission. Other steps could involve researchers looking into historical data and trends relating to small landholdings, and (either related to that historical research or independently) the likely socio-economic impact of them in the present day.

To conclude, despite the relatively low numbers of small landholdings in Scotland, there is a lot of work to be done in relation to them. I will be watching carefully to see what happens next. Meanwhile, anyone who has to deal with the legislative regime will be praying a more user-friendly system emerges at the end of this process, while those directly involved with Scotland’s remaining small landholdings will be watching even more carefully than me to ensure that any new regime is workable both for modern agriculture and as a part of a healthy rural environment in Scotland.