Land Reform in Scotland can encompass a wide range of principles and ideas that impact on use and ownership of land. While legislation to date has mainly focused on farm tenancies and facilitating greater engagement with community groups, some proponents of land reform have sought to use this as a platform to raise awareness of issues including taxation and foreign ownership.

The concentration of land ownership in Scotland has long been a concern to some individuals and stakeholders, perceived as being symptomatic of wealth inequality and a barrier to those who live and work in an area being able to exert sufficient influence over the decisions that affect them. This particular aspect of the Land Reform discussion has recently been given greater prominence. In March of this year, we reported on the publication of the Scottish Land Commission discussion paper on the concentration of land ownership in Scotland and we can expect the recommendations to be given consideration by the Scottish Government during its new term of office.

The discussion paper is exactly that – a discussion - and identifies that significant further work and stakeholder consultation is required before proposals can be developed into functional legislation. However, as lawyers operating in the rural sector we are already being asked how the proposals might impact on clients' businesses and private concerns; specifically the proposed Public Interest Test for significant land transfers or acquisitions.

The discussion states that the purpose of the Test is to determine whether or not a specific and significant acquisition of land is likely to create or perpetuate a situation where "excessively concentrated power" could act against the public interest. It would apply at the point when control of a landholding transfers from one party to another.

Typical questions include:

Could this prevent me from leaving land to my children in my will?

Potentially, yes. For the Test to be effective the SLC paper acknowledges that it must apply to all forms of transfer of control, specifically including transfers of inheritance. Transfer of an estate's ownership to the next generation is not a process that the SLC appears to take issue with in principle, and indeed it is difficult to envisage how the asset would otherwise be dealt with on the owner's death. However, the detail of any resulting legislation will be important in determining how the law might apply to inter-family transfers, on death or otherwise.

How might this affect a future sale of my 700-acre farm?

The SLC recognises that uncertainty and disruption of process would be unhelpful for the property market in Scotland and should be minimised. In practice this may mean that properties below a certain size are automatically exempt from the Test - 1,000 hectares was given as an example of where the threshold might be, although we could expect that to be the subject of debate. The SLC also envisages a scoping process whereby a potential land disposal could be notified to the authorities in advance so that it may be considered in the context of the Test before being put to the market.

As the Test is focused on excessive market power arising as a consequence of the sale, the buyer's identity is of utmost importance, so any pre-marketing scoping may be of limited use. The nature and duration of the scoping process will be important in ensuring that it does not significantly delay the sale process once a buyer is identified.

The narrative to date suggests that the sale of an owner-occupied farm is unlikely to be affected by any legislation that may be passed as a consequence of the SLC's recommendations. The paper states, "it is intended that the test should only ever need to be activated in a small number of targeted circumstances with the vast majority of land transfers and acquisitions remaining unaffected".

Will this affect the forestry investment market?

Not obviously. There is anecdotal evidence of investment funds and corporates acquiring more of the forestry ownership share that has traditionally been held by individual investors. However, the growing corporate interest in forestry and planting land is bringing new entrants into the sector, which will reduce the likelihood of one owner having what might be considered to be a a 'monopoly' in one geographical area.

Scale of ownership alone will also not prevent a potential acquisition, so long as it would not otherwise create structural risks that could harm the public interest. Examples given by the SLC are where one party holds excessive control of local employment, infrastructure, housing land supply or local housing stock. These potential concerns do not obviously relate to forestry or downstream processing sectors in their current forms.

Restrictions on a party's freedom to acquire or sell land will always need to be considered in light of the European Convention on Human Rights and there will clearly be a lot of detail to be debated and considered, if any or all of the SLC's recommendations are to be enacted as legislation by the Scottish Parliament.


Graeme Leith