Esslemont was the tenant of a 1991 act lease of Muirton of Corsindae, Sauchen, Inverurie. The farm extended to 213 acres of which 83 acres were arable with 130 acres of hill ground. The lease commenced in January 1944 with the current tenant inheriting the tenancy from his father. A condition within the lease was that the farm was to be "used for agricultural purposes only", however to supplement his income the tenant had taken on various jobs off the farm. The landlord had no objection to tenant's off farm work, but with the passage of time the agricultural activity carried out by the tenant lessened and the farm had become a base for a non-agricultural business.

Through the vehicle of Monarch Conservatories Scotland Ltd, the tenant set up and ran a home improvement, double glazing and conservatory business from the farm. Since around 1996 the farm steading was used as premises for the delivery, storage and distribution of materials for projects. As the non-agricultural activities expanded it was apparent that the predominant economic activity undertaken from the farm was no longer agricultural. The tenant's position was that while he derived the bulk of his income from Monarch, he was also still carrying out agricultural activity on the farm in the form of letting land out each year for seasonal grazing or mowing and that he wintered sheep on the farm. We have also blogged about the Court's views on letting land for grazing lets and via contract farming agreements.

In 2015 the tenant issued the landlord with a Notice of Diversification seeking to use parts of the farm for the non-agricultural purpose of "the storage of building materials in connection with conducting building activities and the administration of the business" of Monarch, a limited company of which the Tenant and his son are the directors and the tenant the sole shareholder. Within The Agricultural Holdings (Scotland) Act 2003, is a procedure to follow if a tenant of a secure tenancy wishes to use the holding for a non-agricultural purpose. The landlord is given the opportunity to review the tenant's proposed diversification and there are several grounds of objection that may lead to a landlord being justified in rejecting the tenant's notice. This includes if the diversification would significantly lessen the amenity of the land or surrounding area or substantially prejudice the use of the land for agricultural purposes. In Fyffe v John Esslemont, the Court was of the view that the number of vehicles movements on the private estate roads (estimated at 50 movements per day) together with the use of the steading for Monarch business had altered the nature of the tenancy significantly.

In this case the landlord successfully proved that the tenant had wholly or substantially abandoned the agricultural use of the farm, bringing about a change in the character of the tenancy from agricultural to commercial. The upshot is that the tenant loses the statutory protection afforded by the Agricultural holdings legislation. This case demonstrates that when a tenant goes well beyond the primary use of "agriculture" there is a point at which the Courts will support the notion that the tenant should lose security of tenure. While many legitimate diversification projects on let farms have and will continue to be supported by landlords, this case shows there is a balance to be found. In undertaking such a project, the legislation does provide a statutory framework for diversification which should be followed.

For further information about this topic, please contact your usual Land and Rural Business advisor.

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