SLDT - Urgent Action Required
It is hard to believe that the 5th anniversary of Short Limited Duration Tenancies, the new style tenancy introduced by the Agricultural Holdings (Scotland ) Act 2003, is fast approaching.
SLDTs cannot, of course, extend beyond a maximum of 5 years without defaulting to a Limited Duration Tenancy giving the tenant a further 15 years security. Thus, tenants who continue to occupy land beyond the end of the 5 year period will effectively have turned the tenancy into a 20 year term. Furthermore, in the event that an SLDT defaults to an LDT, other provisions of the 2003 Act come into force which may not suit the Landlords circumstances, are likely to reduce the capital value of the land and will reduce a Landlord’s options in respect of that land.
The creation of an LDT can be avoided by taking action to ensure that the tenant removes at the termination date. If a tenant does not remove then legal advice must be sought immediately to ensure that they vacate the land. It is worth bearing in mind that the five year period can be cumulative and be made up of several shorter periods, for example, ten 6 monthly SLDTs will equate to 5 years in total and default to an LDT. Good record keeping and accurate details of periods of occupation are essential!
At the end of the five year period what are the options? There would appear to be several, with varying degrees of risk. These are:
If you have two tenants each with an SLDT on the same estate then you could swap over the land they occupy. This only has to be done for one year and then the 5 year SLDT clock restarts for a further 5 year period. This option has obvious problems such as waygo, quality of land, levels of fixed equipment, location etc.
Probably the best option if practical. For pasture, a seasonal grazing let (for less than 364 days) could be granted with a further void period before entering into a new SLDT to ensure that there is a period in excess of 12 months between the original SLDT finishing and a new one commencing. For arable land, a contract farming arrangement might be considered.
Providing a different tenant occupies the land after the five year period – there should not be a problem. It has been suggested that the farmer's spouse could be such a person to occupy for a further period after an initial period has ended, but unless it is genuine, then we consider this to be a high risk strategy. It is important that the owner of stock, crop and SFP is a different party, as a court may still deem the original occupier to be the tenant.
Limited Duration Tenancy
It is possible to convert the original 5 year SLDT in to a further 10 years of occupancy under an LDT. This may be useful where you have ‘trialled’ the tenant for the initial term and are happy for it to continue.
CKD Galbraith would be delighted to advise on what options are available after the end of an SLDT. It is hoped that changes in legislation may be made to give more flexibility at renewals and greater freedom of contract. For further advice or information contact Chris Addison-Scott.