Posted on Jul 14, 2014
The Review was established by the Cabinet Secretary for Rural Affairs and the Environment in 2012, following an announcement by him in June 2013 that the question of Absolute Right to Buy for 1991 Act secure agricultural tenants was back on the table. This followed the work of the Rent Review Working Group which had reported on the working of section 13 of the Agricultural Holdings (Scotland) Act 1991 after the "Moonzie" judgement which clearly set out the procedures for carrying out rent reviews under the existing legislation. That Group did not recommend far reaching changes to the principles behind section 13, but there has been continuing pressure from sectors of the industry to change the basis on which rents are reviewed, particularly to reflect the productive capacity of the holding.
The Review Group, chaired by the Cabinet Secretary, has spent the first 6 months touring the country and taking evidence from stakeholders, landowners and tenants and members of the public. It is to be commended on the transparent and open nature of its work to date.
The Group's Interim Report was published on 20 June 2014 and can be accessed at: www.scotland.gov.uk/Publications/2014/07/5054
The Executive Summary as set out on the Scottish Government website states:
"The Scottish Government's vision is for a Scottish tenant farming sector that is dynamic, getting the best from the land and people farming it and provides opportunities for new entrants, forming part of a sustainable future for Scottish farming.
The Interim Report details the Review Group's work to date, including their research and wide-ranging discussions with stakeholders across Scotland. The Interim Report goes on to identify those issues that are currently a barrier to a vibrant tenanted sector in Scotland and to detail the work the Review Group will undertake over the next 6 months to develop recommendations to help overcome those barriers.
A number of research reports have been commissioned to support the Review Group's work, some will also be published shortly and others are still on-going."
The Interim Report clearly sets out the revised objectives of the Group, summarises concerns of key stakeholders, and asks some questions about the best way forward for the sector. It is also clear that the Group is looking for a balanced consultation process which will help inform recommendations for legislative and policy change in its full report which is expected in December 2014. The Group has clearly recognised that there are many good and successful relationships between landlord and tenant within the industry and it has not, as yet, concluded that the system is broken.
One of the difficulties for the Group will be reaching fully considered conclusions on a complex and varied subject within such constrained time scales.
The stated aims of the Review Group are to:
Many concerns are shared across the industry; these include shortage of let farmland, suppressed investment by both landowners and tenant farmers, and ongoing, protracted landlord and tenant disputes particularly in relation to rent review and lease obligations which may result in lengthy and expensive cases in the Land Court and, potentially, in the appeal courts.
The report acknowledges that many of the problems stem from uncertainty. One clear example is the threat of the Absolute Right to Buy (ARTB) which has undermined confidence to let land for long periods. The language in the Report makes it pretty clear that we can expect the final recommendations to "represent a coherent, if radical, package of policy proposals that "hang together" and bring stability to the sector for an extended period of time." (para 33). The Report clearly identifies certain priorities and has posed a number of questions which it must address in order to reach a conclusion. It appears that there is a perceived need to "fix" the 1991 Act to ensure that there is
The Review Group has clearly stated that it will continue to welcome comments from stakeholders and other interested parties leading up to its final report in December 2014.
It is impossible to predict what form the final recommendations will take and the position is complicated by the Report from the Land Reform Review Group which looks at issues which affect agricultural tenancies such as Right to Buy, Capital and Land Value Taxation and Succession. That having been said, we might perhaps expect a clear signal that there should be significant legislative change in the short term. Changes might include:
What is clear is that neither landowners nor tenants can be certain what the future holds. In making decisions as to the use of land which is not required for in-hand farming, landowners must bear in mind that there will be changes within the short to medium term to the legislation surrounding existing and future tenancies. There may also be changes to taxation which may affect strategic planning decisions. Until the way forward is clear, it is likely that the industry will continue to see short term letting vehicles (Short Limited Duration Tenancies or Grazing Leases) or contract farming as the safest choice.
Contact a member of the Land & Rural Business Team for more information.
Categories: Land and Rural Business