The case, which was due to be heard before the Scottish Land Court, was regarded as one with potentially major significance for both landlords and tenants. CKD Galbraith's client, a Fife based landlord, was faced with a farm rent review under the Agricultural Holdings (Scotland) Act 2003.
The case was of special significance because the agents acting on behalf of the tenants argued for a rent reduction of 35% over the passing rent on the premise that the Single Farm Payment (a subsidy paid directly to farmers in respect of their occupation of land as opposed to a production subsidy) was a tenant's improvement and should be wholly discounted from the basis on which rent is calculated at review. Had this argument succeeded, the implication for landlords would have been very serious as Single Farm Payments comprise a substantial part of net farm income.
CKD Galbraith, acting on behalf of the landlords, argued that the rent should be increased. Using our access to rental information across Scotland, we were able to provide evidence relating to rents agreed on review on traditionally let farms as well as rent achieved for new lettings under Limited Duration Tenancies and Short Limited Duration Tenancies. The weight of this evidence ultimately led to the rent review being settled by negotiation and resulting in a 16% increase over the passing rent.
Although this case did not reach the Land Court, it sets an important precedent. The tenants had been supported by Scottish Tenant Farmers Association but were unable to produce either factual information that the Single Farm Payment should be treated as a tenant's improvement or relevant rental evidence to support their case for a rent reduction. Consequently, they ultimately came to realise that they did not have a case that they felt they could argue in the Land Court, preferring to settle at an increased rent by negotiation.
For further information contact Chris Addison-Scott