Today marks an important milestone in the implementation of the Land Reform (Scotland) Act 2016 - the 3 year amnesty on tenants' improvements has commenced.
What is the amnesty on tenants' improvements?
The amnesty is one of the key agricultural holdings provisions contained in the 2016 Act. It is an opportunity for agricultural tenants to take steps to formalise improvements which they have completed prior to today which currently do not qualify for compensation at waygo (for example, because the correct notice procedure was not followed at the time the improvement was carried out).
If the improvement qualifies for the amnesty and the statutory procedure is followed, the improvement will be eligible for compensation at termination of the tenancy. I previously blogged about the scope of the amnesty and the improvements which will qualify here.
From today, it will be possible for agricultural tenants and landlords of secure tenancies, LDTs and SLDTs to follow either of the 2 routes set out in the 2016 Act -
- The landlord and the tenant can reach an "amnesty agreement" under section 117 of the 2016 Act. The agreement will set out the improvements which will qualify for compensation at termination of the tenancy (please note - compensation will only be payable at termination of the tenancy and the usual rule of value of the improvement to an incoming tenant will apply for determining the level of compensation).
- The tenant can serve an amnesty notice under section 114 of the 2016 Act specifying the improvement and setting out the reasons why it is fair and equitable for compensation to be payable in respect of the improvement at termination of the tenancy. Section 112sets out circumstances when a tenant cannot serve such a notice. The landlord has 2 months to object to the amnesty notice (and if the parties cannot reach agreement, the 2016 Act provides that the parties can refer the matter to the Land Court - the tenant needs to make the referral within 2 months of receiving the landlord's objection).
Tenant Farming Commissioner - Code of Practice on the Amnesty
The Tenant Farming Commissioner, Dr Bob McIntosh, released his first Code of Practice yesterday in connection with the amnesty.
The Code distinguishes between legal requirements (steps which must be carried out by landlords or tenants in order to comply with the legislation) and actions which are required in terms of the Code of Practice (steps which should be carried out by landlords and tenants - failure to comply with these steps may be a breach of the Code).
The Code sets out how amnesty discussions should be conducted (please note - failure to follow this procedure will not be a breach of the legislation but may constitute a breach of the Code):
- Landlords and tenants should meet on the farm to discuss improvements which may qualify for the amnesty and a record of the meeting should be produced.
- Where the parties agree what improvements should qualify, they should enter into an amnesty agreement.
- Where the parties cannot reach agreement, the parties should agree to involve mediation, expert determination or arbitration (unless both parties agree that this is unnecessary or would be unlikely to help achieve agreement).
- Where the parties still cannot reach agreement, the tenant may issue an amnesty notice setting out why it is fair and equitable for the improvement to be eligible for compensation.
The Code places heavy emphasis on the parties reaching an "amnesty agreement" and advises that tenants should only be serving an amnesty notice where all attempts to reach agreement have failed.
The Code also encourages landlords and tenants to reach agreement outwith the scope of the amnesty. For example, the amnesty does not apply to improvements which are not currently listed in Schedule 5 of the 1991 Act - this means that the amnesty will not apply to any improvements which will be added to Schedule 5 when it is updated by the Tenant Farming Commissioner.
Status of the Code of Practice
The Tenant Farming Commissioner has the power to investigate alleged breaches of the Code under section 30 of the 2016 Act and publish a report on whether the Code has been breached. A report published by the Tenant Farming Commissioner is admissible in evidence in any proceedings in the Land Court but there are no legal sanctions for breaching the Code of Practice. The Tenant Farming Commissioner can, however, impose sanctions if a landlord or tenant fails to comply with a request to provide information.
If you have any queries in connection with the amnesty, please get in touch with your usual contact in the Land and Rural Business Team.