Regulations were laid before the Scottish Parliament yesterday which will bring theprovisions of the Land Reform (Scotland) Act 2016relating to Modern Limited Duration Tenancies(MLDTs) into forceon 30 November 2017. The regulations can be found here.

From30 November 2017,MLDTS will replace Limited Duration Tenancies (LDTs) and it will no longer be possible to create new LDTs.

The regulationscontain savings provisions which mean that:

  • LDTswhich exist before 30 November 2017 will continue as LDTs after 30 November 2017.
  • A landlord and tenant can convert a secure tenancy to an LDT after 30 November 2017 where they reach agreement prior to 30 November 2017 under section 2 of the Agricultural Holdings (Scotland) Act 2003.

New entrants

The key feature of MLDTs is the minimum duration of10 years.However, an MLDTmay containa break clause where the tenant is a new entrant (ie the parties would need to agree to includea break clause). Thebreak is exercisableafter 5 years(subject to the requirement to give notice) but can only be exercised bythelandlord if the tenant is not using the land in accordance with the rules of good husbandry or is breaching a term of the lease (whereas the tenant can exercise a break without giving reason).

A further set of regulations were laid before Parliament which set out the definition of "new entrant" for the purposes of MLDTs.

The regulations contain the following list of factors which, if applicable at any point within the5 years prior to the MLDT being entered into, mean that the tenant is NOT a new entrant:

  • The person is a tenant under an LDT; or
  • The person is a tenant underanotherMLDT; or
  • The person is a tenantunder a secure 1991 Act tenancy; or
  • The person is a small landholder; or
  • The person is a crofter; or
  • The personhas beena tenant under an SLDT for 3 years or more within the preceding 5 year period; or
  • The person owns more than 3 hectares of land in aggregate.

This means that a person will be a new entrant unless one of the above exclusions apply.

Thetenant will also be disqualified from being a new entrant if they have control of a legal entity which meets any of the above criteria. The regulations contain detailed provisions about what is meant by "control".

The regulations also make provision for MLDTs which are granted jointly or in common. If the majority of the joint tenants or tenants in common are excluded from being a new entrant, the tenants will togethernot qualify as new entrants.

The term "new entrant" is also relevant to the new relinquishment and assignation procedure which is introduced by the 2016 Act (but is not yet in force). The procedure allows a secure tenant to offer tosell the tenancy to the landlord or, if the landlord does not accept the offer, assign the tenancy on the open market to a new entrant or an individual wishing to progress in farming. At this stage, it is not knownwhether the same definition of "new entrant" will be used for relinquishment and assignation.

If you have any queries regarding MLDTs or agricultural holdings in general, please get in touch with your usual contact in the Land and Rural Business team.