Implementation of 2016 Agricultural Holdings Reforms

13.09.17

The Land Reform (Scotland) Act 2016 (2016 Act) contained a host of reforms relating to agricultural holdings. Whilst the Act was given Royal Assent on 22 April 2016, a number of the reforms have not yet been brought into force. 

We have summarised below the reforms that have been introduced to date, as well as the reforms that we can expect to come into force over the next year. 

We understand that the Scottish Government had hoped to complete the task of implementing the agricultural holdings provisions contained in the 2016 Act by November 2018. However, given the amount of work still left to do in terms of drafting secondary legislation, it seems likely that the timeframe for completion will slip into 2019. 

What reforms are in force?

Tenant Farming Commissioner – Dr Bob McIntosh, the Tenant Farming Commissioner, took up his role on 1 April 2017. The Commissioner's functions, which are set out in the 2016 Act, include preparing and promoting codes of practice for landlords and tenants, investigating breaches of codes of practice, updating the Schedule 5 list of tenant’s improvements and carrying out a review of agents acting on behalf of landlords and agents. 

Assignation and Succession –  reforms to the process of assignation and succession of tenancies came into force on 23 December 2016. The most significant changes relate to secure tenancies (widening the classes of persons who can be eligible assignees/successors and restricting the landlord’s grounds of succession), however Limited Duration Tenancies (LDTs) are also affected by the reforms. 

Irritancy for Non-Payment of Rent – reforms to the irritancy process for LDTs and Short Limited Duration Tenancies came into force on 23 December 2016. These tenancies can now only be irritated on grounds of non-payment of rent where the landlord has given the tenant a written demand requiring rent to be paid before the expiry of a two-month period and that demand is not complied with (giving the tenant a two-month buffer). 

Diversification – reforms streamlining the process of diversification for secure tenancies and LDTs came into force on 23 December 2016

Landlord’s Improvements – a new process was introduced on 23 December 2016 for landlords proposing to carry out improvements to their holdings. The statutory notice procedure must be followed otherwise the proposed improvement cannot be rentalised by the landlord. 

Amnesty for Tenant’s Improvements – a three-year amnesty on tenant’s improvements commenced began on 13 June 2017. The amnesty is an opportunity for tenants to formalise any past improvements that are not eligible for compensation at termination of the tenancy because the statutory requirements were not complied with at the time that the improvement was carried out.

Please note that there are savings provisions that apply during the transitional reform period. If you have any queries about whether the reforms apply in specific circumstances, please get in touch with the Land and Rural Business Team. 

What reforms are not in force?

The reforms below were contained in the 2016 Act but have not yet been brought into force. We have given an indication of the timeframe for each provision coming into force based on reports from stakeholders in the industry (but these timeframes are only indicative and may change).

MLDTs – a new fixed term tenancy, known as the Modern Limited Duration Tenancy (MLDT), will be introduced. MLDTs will replace LDTs for new tenancies (though existing LDTs will continue). MLDTs will have a minimum period of 10 years, and  are expected to be introduced by the end of this year. 

Repairing Tenancies – a new “full repairing” tenancy is to be introduced with a minimum 35-year duration. During the initial “repairing period”, the tenant will be responsible for the provision of fixed equipment (as well as all maintenance, repair and renewal).  This tenancy is expected to be introduced  in 2018.

Changes to pre-emptive right to buy – secure tenants currently have a pre-emptive right to buy if they register an interest in the Register of Community Interests in Land. The process is to be reformed and secure tenants will no longer be required to register an interest – they will hold the pre-emptive right automatically. These changes are expected to come into force by the end of this year. 

Relinquishment and Assignation – a new measure will be introduced that will allow secure tenants to relinquish their tenancy to the landlord in exchange for compensation based on the capital value of the holding. If the landlord does not accept the tenant’s offer to relinquish, the tenant can assign the tenancy to a “new entrant” or an “individual wishing to progress in farming”. These provisions are is expected to come into force in 2018.

Forced sale of holding – a new measure will be introduced which allows a tenant to make an application to the Land Court for an order forcing the landlord to sell the holding. The tenant can only make such an application where the landlord has failed to comply with a Land Court order requiring the landlord to remedy a material breach of the landlord's obligations. These provisions are expected to come into force in 2018. 

Rent review – A new system of rent review is to be introduced based on a “fair rent”, taking account of the productive capacity of the holding. The new methodology is currently being “tested” by contractors appointed by the Scottish Government (Savills, Watson Bell Consultants and Hamish Lean of Shepherd & Wedderburn). The new system  is expected to come into force in November 2018 at the earliest. 

If you have any questions, please get in touch with Kate McLeish or your usual Brodies contact.