On 23 September 2010 the Scottish Government launched a consultation over their proposed amendments to the current law on agricultural holdings. It is a widely held view that the current legislation is in need of an overhaul, and it is certain that the proposals put forward by the Government will be studied with interest.
The main proposals are as follows:-
Converting SLDTs to LDTs
A tenant under a SLDT can agree in writing with their landlord that their SLDT will convert to a LDT prior to the expiry of the SLDT. The resultant LDT will then have effect as if it had commenced when the SLDT commenced. This is in contrast with the current position, whereby a tenant who continues to farm under an expired SLDT with the consent of his landlord is at risk of creating a LDT which would run for 15 years from the end date of the SLDT – potentially a 20 year arrangement.
The minimum duration of a LDT will be reduced from 15 years to 10 years.
In an aim to clear up the current ambiguities surrounding the provision of fixed equipment the proposals provide that the landlord's responsibilities in relation to fixed equipment are to be determined by reference to the "purpose of the lease", with a schedule of fixed equipment (at the joint cost of the landlord and tenant) specifying the fixed equipment which the landlord is obliged to provide and recording its condition being entered into in writing. That schedule will then form part of the lease, with provision being made for its amendment to reflect changes in circumstances. The tenant's liability for maintenance of the fixed equipment is also re-stated.
Two man rule
The old “two-man unit” rule, which is currently used to determine the viability of agricultural units in the event that a landlord serves a notice to quit following a near relative acquiring right to a lease through succession, is to be replaced by the “viable unit” test. The usefulness of the two-man rule has diminished in recent times with the modernisation of farming and it is the case that few farms now have two or more workers earning a full time living. A “viable unit” will be an agricultural unit which in the opinion of the Scottish Land Court is capable of providing full time employment for the individual occupying it and giving that individual the ability to (a) pay the rent due under the lease and (b) adequately maintain the unit.
As it stands, tenants can benefit from annulling an existing post-lease agreement following a rent review. The rent review will have taken into account the tenant’s extra financial responsibilities under the post-lease agreement, and consequently the rent may have been set at a lower rate. When the tenant annuls the post-lease agreement, the financial responsibilities shift back to the landlord – but there is no provision which allows the landlord to instigate another rent review. Under the new proposals, the tenant will now require to give written notice to the landlord intimating an intention to nullify a post-lease agreement, at least six months before the date from which any variation of rent will take effect. The result will be that the annulment of the agreement and the consequent shift in financial responsibility will be properly reflected in the reviewed rent.
Responses to the consultation paper are invited up to the closing date of 8 December 2010.