Agriculture: The next land reform package

In July the Scottish Government issued a consultation, Land Reform in a Net Zero Nation, on further reform of Scotland’s land ownership and use. Its closing date has been extended to 30 October 2022.

The core aims of land reform policy are set out in the Government’s Land Rights and Responsibilities Statement (“LRRS”):

• to increase diversity of land ownership;
• to bring about changes in land use;
• to create more opportunities for communities to engage in decision-making about the land around them, including the benefits it brings.

The consultation is in 15 parts, of which part 9 is the most relevant to the agricultural tenanted sector.

Part 2 outlines a forthcoming bill that will deal with the impact of Scotland’s concentration of land ownership, based on a Scottish Land Commission discussion paper which included recommendations for changes in legislation such as:

• the requirement for significant land holdings to engage in, and publish, a management plan;
• a land rights and responsibilities review process, to take effect where there is evidence of adverse impacts; and
• a new public interest test that would determine whether significant land transfers or acquisitions are in the public interest.

The proposals are aimed at tackling perceived issues associated with large scale ownership and concentration of land ownership. The Government intends that these proposals would apply to large scale landholdings (part 4 sets out relevant criteria), and not to smaller landholdings and family farms.

Part 5 suggests ways to strengthen the LRRS; part 6 asks whether land management plans and strategy documents, which some landowners already proactively publish, should be made compulsory. Part 8 proposes the withdrawal of public funding for not adhering to LRRS requirements.

The Government proposes to take forward the Commission’s recommendation for a public interest test, which would assess, at the point of transfer of a large scale holding, the risk of a party holding excessive power which acts against the public interest. Part 7 considers this issue and what types of landholding would be in scope for such a test.

Land use tenancy

Part 9 emphasises the Government’s commitment to addressing climate change and biodiversity. It proposes a new form of flexible tenancy, the land use tenancy, which would help tenants to deliver multiple eligible land use activities within one tenancy. These could include woodland management, agri-forestry, nature maintenance and restoration, peatland restoration, and agriculture. This would allow tenant farmers to undertake a combination of agricultural and non-agricultural activities which support climate change mitigation and help to restore and preserve nature.

The current system of agricultural and small landholding tenancies is perceived to lack flexibility for a combination of agricultural and non-agricultural activity. This is an issue the Tenant Farming Commissioner has already identified in relation to carbon capture.

A land use tenancy would set out the terms and conditions of the tenancy for a tenant and their landlord, including:

• the key elements that both would agree to at the start of the tenancy;
• how benefits would be shared;
• the range of activities throughout the tenancy; and
• the process for bringing the tenancy to an end.

The consultation proposes that tenant farmers and small landholders would be able to convert their tenancy into a land use tenancy, to allow diverse land management activities to deliver climate and environmental objectives without leaving the landholding.

It is suggested this framework would provide a transparent system, encourage better use of land and aid retention of people in rural areas.

From a landlord’s point of view it is also suggested that the land use tenancy would provide a transparent framework for creating a hybrid of agricultural and non-agricultural land use. Landlords may have concerns at the prospect of existing contracts being rewritten.

Carbon capture

The Tenant Farming Commissioner has already identified concerns about inflexibility in relation to carbon capture schemes, and has issued an Interim Guide to Securing Tradeable Carbon Credits. It warns that anyone considering entering a carbon credit scheme needs to consider the implications relating to change of ownership of land over the course of a project.

It says: “Entering a scheme generally involves a long-term commitment, and disengagement part way through may prove difficult or expensive, so careful appraisal of all the implications is a necessity.”

The guide also highlights that a tenant or landlord wishing to acquire carbon credits from woodland creation or peatland restoration will face constraints not experienced by an owner-occupier.

Landlords need to consider who has the right to carbon which is normally comprised in the soil. Carbon capture does not easily fall within the definition of “agriculture”, and it is difficult to see how a tenant can take advantage of the carbon rights; or is carbon a mineral which is generally reserved to a landlord under an agricultural tenancy? Conservation activities fall within the rules of good husbandry, but that would not give the tenant a right to the carbon. The existing framework would seem to prevent both tenant and landlord taking advantage of carbon trading. The carbon is not part of what is leased, and harvesting it is not an agricultural activity, but unless it has been explicitly reserved, which is unlikely, the landlord would have no rights either. If there were a resumption clause, the extent of the rights required to be resumed may well be a fraud on the lease. It may be that both parties voluntarily agree something that looks similar to a land use tenancy.

The remaining parts of the consultation cover reform of smallholdings; transparency – who owns, controls and benefits from Scotland’s land; and other land related reforms (fiscal and taxation, community benefits and natural capital).