Agriculture: Special status of the right to buy scheme

At Journal, December 2020, 24 I considered Sweeney, Noters [2020] CSIH 65, one of the rare situations where part 2 of the Agricultural Holdings (Scotland) Act 2003 (tenant’s right to buy land) has been invoked. Although there will have been many instances of farms being sold to or deals being done to buy out the sitting tenant, in practice there have been few situations where the statutory provisions have been used. 

There has been a history of litigation between the parties since 2001. In 2006, Amanda and Deanna Urquhart, as agricultural tenants, registered a notice of interest in acquiring the land, in terms of the 2003 Act. The notice was renewed in 2011, 2016 and 2021. In February 2019 the liquidator of the landlord, West Larkin Ltd, gave notice under the Act of a proposal to transfer the land. That was met by a timeous counternotice of the Urquharts’ intention to purchase. On the face of it, that obliged the liquidator to sell to the tenants at a valuation which might be substantially below the price available by open market sale with vacant possession. Matters were further complicated by a change of liquidator. 

In the 2020 decision the court held the liquidator entitled not to challenge the Urquharts’ right to buy. The Urquharts then lodged a note asking the court to direct the liquidator to transfer the land in accordance with the statute. The Sweeneys, who previously owned the company, contested the Urquharts’ interest in buying, claiming title and interest as creditors likely to suffer prejudice if the land was sold at a reduced value. They sought a proof to establish that any agricultural tenancy ended by at latest 2015, prior to the 2016 registration on which the former liquidator’s notice and tenant’s counternotice were based.  It was claimed that since 2006 the land had been abandoned by the Urquharts and left derelict. It had not been used for agricultural purposes and there was no agricultural holding within the Agricultural Holdings (Scotland) Act 1991. Although no notice to quit was served, the lease had expired at its term. The Urquharts’ position was that the agricultural tenancy had remained throughout and continued by tacit relocation; the notices under the 2003 Act created an enforceable right to buy.

After a debate the Lord Ordinary granted the order sought, holding that the statutory scheme created a discrete set of provisions introducing a right to buy for the benefit of a tenant. A claim that the tenancy had ended had to be raised as a challenge to registration under s 25(8), or if after registration by notice under s 25(13), failing which an extant registration and the exchange of appropriate notices crystallised an enforceable right to buy which could not be usurped by another process to prove that there was no agricultural holding. In any event, the Sweeneys were third parties and could not invoke s 25(12). On their position, they should have sought reduction of the ss 26 and 28 notices.

Appeal

On appeal, the Sweeneys contended that the Lord Ordinary should have held that s 25(12)(a) and/or (b) applied, with the result that by operation of law the registration automatically had no effect. No further procedure was required. Without a lease, the exchange of notices could not create a right to buy. The Sweeneys relied heavily on the proposition that only a tenant of a 1991 Act tenancy could register an interest to buy. Section 25(15), placing a requirement on the Keeper, presupposed that a registration could lose effect before it was removed from the register. There was no policy reason why, once the lease was terminated, the owner should be unable to transfer the property as they pleased merely because the termination was disputed. The tenant should not receive a windfall simply because the owner forgot to notify the Keeper. If the registration was ineffective the same must apply to notices served in reliance on it. Challenges to registration could not be exclusive to the owner of the land, as others might have an interest.

Decision

The court agreed with the Lord Ordinary that part 2 of the 2003 Act provides a coherent, self-contained statutory scheme: [2023] CSIH 16. If the Sweeneys’ submissions were correct, that structure would be wholly undermined. There having been no challenge under s 25(8) to the timeous, repeated registration of the Urquharts’ interest, and no notice of termination under s 25(13), the Urquharts enjoyed an enforceable right to buy in terms of the Act. It was too late for the owner to raise a challenge under s 25(8).

If the registration was unchallenged, the court added, it might subsequently cease to have effect if the tenanted land was reduced, or the registration was rescinded, or the lease terminated, or five years passed without renewal of the registration. None of these had happened. Section 25(12) addressed post-registration changes of circumstances: if a notice of tenant’s interest in acquiring the land was inaccurate, for example by claiming an agricultural tenancy when this had already ended, the owner’s remedy was to challenge it in terms of s 25(8).

There was nothing inherently wrong or nonsensical in the proposition that an owner or third party might be able to prove there was no tenancy, or any tenancy had ended, but an extant registered interest plus operation of the notice provisions nonetheless created an enforceable right to purchase. In other words, a tenant’s right to buy was a statutory right wholly dependent on the part 2 scheme. If an owner neglected their own interests, they had to take the consequences.

Commentary

While writing this article, it occurred to me to wonder if there is always compliance with s 25(13), notifying the Keeper when a tenancy is terminated. It is not impossible to imagine a situation, particularly if the termination was amicable, where the landlord assumes the registration is defunct. Registration in such circumstances will expire after five years. However if the owner wants to sell before its expiry, the landlord must take steps to have it removed otherwise there would, on the face of the register, be an existing registration requiring intimation in terms of s 26. It is perhaps unfortunate that the online RCIL, including agricultural tenant’s right to buy, is no longer available except by contacting customer services at Registers of Scotland, as I think it might be prudent, if acting for a landlord, just to check that there are no registrations sitting there which should be removed.