Living with land reform

The Land Reform (Scotland) Act 2016, passed by the Scottish Parliament in March, is a flagship piece of legislation for the Scottish Government and has wide-ranging implications for many different types of rural businesses, from family farms to large estates.

The Act is in 10 different parts. We will look at the legislation in two broad categories: parts 1 to 9 cover wider land reform issues including community-based provisions, deer management and information about who owns and controls land, while part 10 covers agricultural holdings legislation.

Although the Act received Royal Assent in April, the actual starting dates for provisions within the legislation vary depending on the particular provision. The Scottish Government has made clear, and has the support of the other parties at Holyrood, that land reform is an ongoing process and various aspects will be revisited.

There are many complexities within the new legislation and the consequences may not be appreciated fully for years to come. However, as the legislation is now a reality, land businesses need to adapt and take steps to understand how it may affect them.

Parts 1-9

1. Land Rights and Responsibilities
   The Scottish Government is to publish a statement on land rights and responsibilities and review it every five years. It will contain a set of principles to guide the development of public policy on the nature and character of land rights in Scotland.
   
   
2. Scottish Land Commission
   This will look at key land-related matters including the management and use of land and will support five appointed Land Commissioners and a Tenant Farming Commissioner.
   
   
3. Information about persons with controlling interests in owners and tenants of land
   A public register of those with a controlling interest in land to increase the transparency around land ownership.
   
   
4. Engaging Communities in decisions relating to land
   The Scottish Government wants better collaboration and engagement between landowners and communities. Ministers will issue guidance about the circumstances in which persons with control over land should carry out community engagement.
   
   
5. Right to buy land to further sustainable development
   This enables Scottish communities to buy land to further sustainable development and where certain conditions are met. It also enables Ministers to intervene to enable such a buy-out.
   
   
6. Non-domestic rates on sporting land
   This provides for the entry on the valuation roll of all deer forests and shooting rights. The proposed re-introduction is due to take effect from April 2017.
   
   
7. Change of land use of land forming common good land
   This gives local authorities the power to change the use of common good land. 
   
   
8. Deer management
   Scottish Natural Heritage has been given additional powers to intervene where the management of deer by landowners and occupiers is not delivering in the public interest.
   
   
9. Access Rights
   The Act has amended procedure on the progressive statutory framework for improved public access over land in Scotland.
   
   There are two elements of the category above that are particularly contentious:

• The power for Ministers to intervene and facilitate the sale of land to a community group to further sustainable development. This may affect all kinds of farming and estate businesses that own land and would be required to demonstrate that their ambition for that land includes sustainable development.
• The re-introduction of non-domestic rates to sporting subjects has potentially significant implications. The legislation provides for all shootings and deer forests to be valued and entered in the valuation roll. Consequently they will be liable to business rates. The task of identifying and valuing all sporting subjects is considerable and the assessors themselves estimated that there may be more than 50,000 subjects to be valued.

Part 10

This part of the Act heralds significant changes in agricultural holdings legislation including:

• Tenant right to buy
  Removes the requirement for a tenant to register their interest in purchasing their holding with Registers of Scotland.

• Relinquishing and assignation of 1991 tenancies
  Enables a 1991 Act tenant to assign their tenancy on the open market to a new entrant or a progressing farmer, with the landlord having the pre-emptive right to buy.

• Rent reviews
  Provides a new rent review system moving away from a predominantly 'open market' calculation to one based on the agricultural productivity of the holding.

• Enforced sale
  Enables a tenant of a secure 1991 Act agricultural tenancy to apply to the Scottish Land Court to seek an order for the sale of the land where their landlord fails to meet their legal obligations under the tenancy.

• Succession and assignation
  Widens the class of people that a tenant farmer can assign their tenancy to and also who they can leave their tenancy to upon death.

• Modern Limited Duration Tenancies (MLDT)
  Creates a new tenancy type of 10 years' duration. It also provides a break clause at five years for new entrants to farming.

• Repairing tenancies
  Creates a new tenancy type for a duration of at least 35 years. This tenancy makes provision for a 'repairing period' of at least five years.

• Amnesty for tenant improvements
  Creates an amnesty period for 1991 Act tenancies, allowing a tenant farmer who has not previously served a notice or has no written consent to serve new formal notice of improvements.

• Improvements by landlord
  Provides a right for tenant farmers to object to a proposed landlord's improvement.

There are a number of provisions within Part 10 of the Act that are particularly significant for the tenant farming sector, most notably the new right to relinquish and assign a 1991 Act tenancy, the widening of the class of people who can succeed to tenancy and a new system for rent reviews.

The relinquishing and assignation of 1991 Act tenancies has understandably caused the most controversy. Agricultural landlords may well exercise their right, if they can afford it, to intervene and buy out tenants. However, the consequence may well be that land will be lost to tenant farming if the landlord does not have the confidence to re-let it on a long-term basis for fear of losing access to it in the future.

Many landlords will simply be unable to afford to buy out tenants by having to pay the compensation set out in the new legislation. Equally, tenants anxious to retire may struggle to find 'a new entrant' or a 'farmer wishing to progress' with the resources to purchase such a tenancy.

Rent reviews, too, have been particularly contentious and there have been a number of suggestions that land agents are not carrying out rent reviews fairly. It is in everyone's interests for there to be dialogue between landlord and tenant and when a land agent is employed on behalf of a landlord or tenant, a review should be conducted in accordance with industry guidance and the code of conduct set out by the Royal Institution of Chartered Surveyors.

The agricultural provisions of this Land Reform Act will have an effect on both tenants and landlords and in the coming years it will be more important than ever that all parties are fully appraised of their rights and responsibilities under the new legislation.