Appeal Decision Supports Landlords Approach To Moonzie Rent Review

The Lord Justice Clerk has issued his decision in the important rent review case on Moonzie Farm. In a far reaching decision the Court has overturned the Land Courts earlier decision to discount the Single Farm Payment from rent review calculations and instead only taking into account land at a rental rate equivalent to naked acres and 80% of farm profit.

Whilst in the current economic climate this would have suited landlords of arable units it would have been to the detriment of many tenants on other types of farm and especially hill units.

Lord Gill disagreed with the methodology of the Land Court in their original decision, finding instead that in the real world of a subsidised market place, single farm payment "may go to the heart of the hypothetical bidder's assessment of rent."

The Court supports that the primary methodology for setting rents is open market comparable evidence taken from new lets under Limited Duration Tenancies and Short Limited Duration Tenancies, followed by rents agreed on other farms, and in particular 1991 Act tenancies and finally the use of budgets.

Interestingly the Court acknowledged that rents offered for traditional tenancies (which can now only be created with specific agreement between the parties) might attract a premium. This has been our view for sometime and it goes some way to reduce other necessary adjustments to open market lets, such as marriage value and scarcity.

This common sense approach to rent reviews will go along way to re-establishing confidence in the let agricultural land sector and in doing so will encourage landlords to let agricultural land. Whilst the vast majority of rents are agreed amicably the small proportion of cases that go to the Land Court can result in both parties paying disproportionately high costs. The clarification which this decision provides to the rent review process is therefore to be welcomed.

A full copy of the Court of Appeal decision can be seen at:

http://www.scotcourts.gov.uk/opinions/2012CSIH10.html

Our Rural Team would be happy to assist you in interpreting the implications of this decision and how it may affect you on 01786 434601.