Rural Law

My colleague, Lorna McKay, blogged in December about the first batch of agricultural holdings provisions in the Land Reform (Scotland) Act 2016 coming into force.

A further set of commencement regulations relating to the amnesty on tenants’ improvements was laid before parliament on 26 January 2017.

When does the amnesty come into force and what does it mean?

The amnesty on tenants’ improvements will come into force on 13 June 2017. The amnesty will last for 3 years.

To give a quick summary, the amnesty allows an agricultural tenant to rectify any procedural errors in respect of past improvements. If the improvement qualifies for the amnesty and the tenant follows the statutory procedure, the improvement will be eligible for compensation at termination of the tenancy.

What is the process?

From 13 June 2017, it will be possible for a tenant of a secure tenancy, a limited duration tenancy and a short limited duration tenancy to serve an amnesty notice. Once the provisions relating to modern limited duration tenancies contained in the 2016 Act come into force, a tenant of a modern limited duration tenancy will also be able to serve an amnesty notice.

The amnesty notice must set out the details of the improvement and why it is fair and equitable for compensation to be payable at termination of the tenancy (even though the correct procedure was not followed at the time the improvement was made – for example, the correct notice was not served).

A landlord can object to the amnesty notice on specified grounds (which include that it is not fair and equitable for compensation to be payable). If the landlord does not object, the improvement in question will qualify for compensation at termination of the tenancy.

The legislation provides specific circumstances in which an amnesty notice cannot be served. These include where a landlord’s consent was required for the improvement and it was not given or where notice was correctly served on the landlord for the improvement to be carried out but it was then carried out in a substantially different manner.

When is compensation payable and how much?

It is perhaps worth mentioning that compensation would only be payable for the improvement at the termination of the tenancy (not during the amnesty period). The usual rules for payment of compensation will apply – compensation for the improvement is not guaranteed and it will only be payable at termination of the tenancy if there is deemed to be a value to the incoming tenant.

What guidance is available on the amnesty?

The Independent Adviser on Tenant Farming released guidance last week on how to prepare for the amnesty.

In addition to summarising the main legal provisions, the guidance highlights the importance of collecting evidence and sets out the kind of evidence that might be relevant (for example, if your records show that you, the landlord, paid for part of the cost or if there was a benefit given to the tenant in exchange for carrying out the improvement).

If you have any questions in connection with the amnesty and how it might affect your business, please get in touch with your usual contact in the Land and Rural Business team.

Kate McLeish

Associate at Brodies LLP
Kate is an Associate in Brodies' Land and Rural Business team.She advises on a range of rural property matters including the acquisition and sale of land and agricultural tenancies.She grew up on a farm in South West Scotland and continues to be actively involved in the family business.
Kate McLeish