In Scotland, agricultural tenancies have been highly regulated for many years with various statutes setting out the "rules" relating to them. These rules differ to those in England. They are imposed on all agricultural tenancies which means that freedom of contract is heavily restricted with the relevant statutory terms taking precedence.
What is an agricultural lease?
In order to qualify as an agricultural lease, the land subject to the lease must be used for agriculture for the purpose of a trade or business.
Agriculture is defined in the legislation as including horticulture, fruit growing, seed growing, dairy farming, livestock breeding and keeping, use of land for grazing land, meadow land, osier land, market gardens and nursery grounds and woodlands (where the use of the land for woodlands is ancillary to another agricultural purpose).
Livestock is defined as including any creature kept for the production of food, wool, skins or fur or for the purpose of its use in farming of the land. Accordingly, letting out the land for grazing horses would not create an agricultural lease.
Types of agricultural lease
Initially the legislation regulating agricultural tenancies centred around providing the tenant with security of tenure which meant that the landlord's ability to terminate the lease and recover possession of the holding was limited.
As a consequence of security of tenure and the tenant's rights of succession, agricultural tenancies would often continue in a tenant's family for an unlimited number of generations. This led to various devices being developed which were designed to make leasing arrangements more flexible enabling a landlord to circumvent security of tenure and recover vacant possession of the holding.
In order to increase the amount of land let to tenants and to replace the forms of tenancy by which security of tenure was then being avoided, the Scottish Government introduced a number of agricultural tenancies which could only be created for a fixed duration.
The current types of agricultural lease which can now be granted in Scotland are:
- a 1991 Act tenancy (which affords the tenant with security of tenure);
- a Modern Limited Duration Tenancy ("MLDT") which is a fixed duration agricultural tenancy for a period of 10 years or more; and
- a Short Limited Duration Tenancy ("SLDT") which is a fixed duration agricultural tenancy for a period not exceeding five years.
It is also possible to let out land for less than a year for the purposes of grazing or mowing and we have commented on such arrangements below.
We have set out a summary of the main features of the various types of agricultural tenancies which can currently be granted in Scotland in our note which can be accessed here
Leases for Grazing and Mowing
Leases for grazing or mowing ("Grazing Leases") do not provide the tenant with the same level of protection as the other types of agricultural tenancy (mentioned above). A lease will be a Grazing Lease if the land is let out for less than one year for the purpose of grazing or mowing. If a tenant continues in occupation of the land for more than 364 days with the consent of the Landlord, the tenancy will become a Short Limited Duration Tenancy for a period of 5 years commencing on the start date of the original grazing lease.
Other agricultural leases
In 2017, the Scottish Government introduced various changes to the agricultural tenancy legislation by way of the Land Reform (Scotland) Act 2016. One of those changes was to replace the Limited Duration Tenancy with an MLDT.
Like an MLDT, the Limited Duration Tenancy was a fixed duration agricultural tenancy which could be granted for a minimum term of 10 years. Although both tenancies have the same minimum term, there are various differences. For example, if an MLDT is not validly terminated at the end of the contractual term it will automatically continue for a period of 7 years. A Limited Duration Tenancy, on the other hand, will continue on a 'cycle of continuations' if it is not terminated properly at the contractual term: the first continuation being for a period of 3 years; the second continuation being for a further 3 years; and the 'long continuation' being for a period of 10 years. This 'cycle of continuations' can be repeated without limit of times.
The 2016 Act also made provision for repairing tenancies, but these provisions are not in force.
Metamorphosis of agricultural tenancies
It should also be noted that what happens on the ground can influence / vary the type of agricultural tenancy in place without any written variation of the contractual terms being entered into between the landlord and the tenant. Given the complexities in this area we recommend that legal advice is sought to determine what type of agricultural tenancy is in place.
The legal position on points covered in this article are correct as at the time of writing, but this area of the law is often subject to change and taking legal advice is recommended. To check the up-to-date position, or for further information or advice, please get in touch with your usual Brodies contact.
