The Land Reform Bill ("the Bill") introduced by the Scottish Parliament in March 2024 contains a number of provisions which have the potential to impact on both new and existing option agreements for landowners. In particular, there are three provisions which could be relevant to landowners who are either subject to or contemplating entering into an option agreement in relation to their property.
Land Management Plan
As currently drafted, the Bill contains an obligation on landowners that own a single holding, or composite holdings, totalling more than 3000 hectares to prepare a publicly available land management plan. The intention is to promote community engagement in decisions relating to the land.
The precise details of the land management plan will be set out in regulations which the Scottish Ministers will be empowered to make when the Bill becomes law, but it is anticipated that the land management plan will require to contain details of how ownership is structured and the owner's long-term vision and objectives for managing the land. This could include any potential sale of the land.
Whilst further detail will follow in the potential regulations, the indication from the provisions in the Bill suggest that the existence of option agreements may need to be disclosed in order for a landowner to comply with their obligations.
It should also be noted that failure to comply with the obligation by a landowner could ultimately lead to a fine of up to £5,000 being imposed. Further detail on the land management plan provisions can be found in this previous blog.
Extension of the Community Right to Buy
Another provision which could impact on option agreements is the extension of the existing community right to buy which is contained in the Bill. The Bill extends the opportunity for community bodies to register an interest in land that is, or forms part of, a large landholding which the Bill currently defines as a single or composite holding extending to 1000 hectares or more. The reference to land forming part of a large land holding means that these provisions will still apply even where the area being sold is less than 1000 hectares and there is currently no proposal to have a minimum threshold.
The Bill imposes a prohibition on the transfer of, or on taking any action with a view to the transfer of, all or part of a large landholding. A landowner must apply to the Scottish Ministers to lift the prohibition. For the Scottish Ministers to lift the prohibition on transfer they are required to comply with publicity requirements which are set out in more detail in the Bill, but crucially there is a statutory period of 30 days which must be adhered to in order to comply with the publicity requirements. This period can then be extended where a notice of intention to register is received by the Scottish Ministers during the 30 day period to allow an application to be registered.
Landowners and developers should particularly note that the prohibition extends to any action with a view to a transfer of the land so parties will require to engage with the Scottish Ministers to take steps to lift the prohibition at an early stage in negotiations.
At this stage, the information which the Scottish Ministers must make publicly available in accordance with these provisions is to be set out in regulations, so it remains to be seen what information a landowner must disclose in order to comply with this part of the legislation.
For existing option agreements where the contract has concluded prior to the passing of the Bill into law but the land transfer has not yet taken place, the existing late application procedure will continue to apply which imposes an obligation on the Scottish Ministers not to consider any right to buy application submitted after missives are concluded or an option to acquire the land is conferred.
Lotting
The final provision of the Bill which could affect option agreements is the intended prohibition on transfers of large landholdings, again defined as a single or composite landholding exceeding 1000 hectares, without first receiving a lotting decision from the Scottish Ministers.
If the lotting provisions do apply, then the landowner is prohibited from transferring the land until the lotting decision is in effect and the transfer is conducted in accordance with the lotting decision. Landowners and developers may therefore need to consider whether option agreements properly reflect the potential for a lotting decision to impact on a proposed transfer.
A lotting decision could also impact on option agreements for renewable energy developments, where the developer will take a lease all or part of a holding. If the landowner subsequently decided to sell a landholding which is subject to an option agreement of this type, a lotting decision might in theory result in a situation where the option agreement requires to be reconstituted between multiple landowners who would each acquire separate lots from the original landholding. This will create logistical challenges where turbine sites end up in separate ownerships, or where land that is required for ancillary purposes (habitat management or wind protection areas for example) is separated from title to the operational windfarm area.
Although aspects of the Bill may change between now and the passing of the Bill into law, it is clear there are a number of provisions which may affect new or existing option agreements. If you are a landowner or developer that may be impacted by these provisions contact a member of the Rural Business and Natural Capital team or your usual Brodies contact.
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