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DRAFT CROFTING REFORM (SCOTLAND) BILL: Consultation Paper

6 DRAFT CROFTERS (SCOTLAND) BILL: REGULATORY IMPACT ASSESSMENT

Overview

1 This draft Bill up-dates the Crofters (Scotland) Act 1993. The Bill proposes these changes:

• Modernisation and clarification of existing rights and duties of tenant crofters
• Modernisation of the constitution of the Crofters Commission
• Reduction in the bureaucracy of crofting regulation
• Provision for wider uses of tenanted croft land
• Improvements in information held on crofts and introducing public access to that information
• Introduction of a comprehensive system of appeal on regulatory decisions

2 The draft Bill seeks to clarify and extend the rights of tenants when using croft land for economic purposes, including reducing requirements to gain approval of both the Crofters Commission and landlords. It also creates a right to appeal Crofters Commission decisions where no such right previously existed but use of this right could lead to additional costs for those that exercise it. The overall effect of the draft Bill is therefore deregulatory and in only one area - the improving of information held on crofts - are additional responsibilities being created.

3 In clarifying and extending the rights of tenant crofters, it is inevitable that the rights of landlords vis a vis those of tenants would be reduced. However, there is no reason to expect that the practical effects of these changes will be considerable. Landlords would no longer enjoy:

• The right of consent to crofter forestry development
• The legally doubtful right of consent to crofters felling, using and selling trees planted by them on crofts and common grazings
• The right of consent to subdivision of crofts by tenants.

Consultation to date

4 The proposals of the draft Bill have already been subject to wide ranging consultation:

• The Land Reform Policy Group considered the future of crofting as part of its work in identifying and assessing proposals for land reform in rural Scotland. The Group published 3 papers for consultation between February 1998 and January 1999.
• The first consultation paper identified key issues.
• The second consultation paper assessed possible options for action to resolve those issues and
• The third consultation paper offered final recommendations for a comprehensive agenda for action.

5 The Executive took forward the Group's recommendations through papers and discussion with the Crofting Consultative Panel, involving both representative organisations and other interested and informed individuals.

6 A White Paper "Crofting Reform Proposals For Legislation" was issued for consultation in July 2002.

Issues for discussion

7 The Executive is now consulting on the detail of the draft Crofters (Scotland) Bill and this Regulatory Impact Assessment (RIA) is part of the consultation document. Comments on this RIA should therefore also be provided by 13 June 2005.

8 The purpose of this RIA is not to debate the merits of the draft Bill but rather to identify and analyse the benefits, risks, costs and compliance issues arising from alternative options for taking forward proposals that may create additional costs or burdens for business. We believe that the proposals listed in paragraph 3 above fall into this category.

9 This RIA seeks views on the Executive's provisional conclusions on the nature and extent of additional burdens on landowners and/or tenants that will or might arise from the draft Bill. Views on likely cost implications would be welcome, as would the identification of other aspects of the draft Bill which might create burdens or costs for tenants or landowners.

1 Improving information held on crofts

Issue

1.1 There are 17,700 crofts of varying sizes and shapes located within the Highlands and Islands of Scotland. In order to carry out its regulatory duties, the Crofters Commission maintains a Register of Crofts which holds information on each croft including the extent. This Register is also used by crofters and landlords, and by solicitors conducting sales of individual crofts. However, the Register is not map-based and therefore cannot guarantee that the boundaries of crofts are accurately defined. This does lead to problems for solicitors conducting the sale of crofts from landlords to tenants and on occasion for subsequent sales to new owners. It also leads to disputes between crofters.

1.2 There are various forms of plans of individual crofts in existence. Some landlords - including Scottish Ministers - hold well-defined maps of their estates which indicate each individual croft. Some plans produced by crofters applying for agricultural support funds would require little amendment to serve as boundary plans of the whole croft by including non-agricultural elements such as woodland. However, the establishment of a consistent map-based Register of Crofts would require that all plans were produced to the same scale to ensure consistency with the boundaries of neighbouring crofts.

Objective

1.3 The draft Bill proposal would provide for a comprehensive map-based Register of Crofts which would give certainty with regard to the extent and boundaries of each individual holding.

Risk Assessment

1.4 The potential risks arising from this change are:

• The process of mapping could uncover boundary discrepancies which leads to litigation in the Land Court.
• The discovery or decision that boundaries are different from those which were believed to exist may result in a loss of value to individual holdings.

Options

1.5 In broad terms, 3 options are available:

(1) Do nothing

(2) Provide government funding to carry through the mapping process.

(3) Require individual tenants and owners of individual crofts to provide accurate map based plans of their crofts when the croft first changes hands following the introduction of the new legislation. Landlords should be required to produce a plan when re-letting a croft when no plan is currently held in the Register of Crofts. (This is the option advanced in the draft Bill.)

Benefits

1.6 Option 1 involves no change, would bring no benefits compared with the present situation and would leave questions of disputed boundaries unresolved.

1.7 Option 2 would allow for a managed programme of change to be completed within an agreed period.

1.8 Option 3 would allow for change to be completed over a longer period on an as and when basis.

Costs

1.9 Option 2 would have costs to the Scottish Executive which are difficult to quantify as it is not known how many of the 17,700 crofts have already been adequately identified by use of map based plans. It is reasonable to expect that owner-occupied crofts would have such plans as a consequence of existing requirements relating to land registration, thus reducing the potential number requiring plans to 14,000. This estimate is likely to be high, as it is most probable that some crofters will have suitable plans, or will have others capable of adaptation e.g. from those produced in connection with IACS claims. However, the actual number cannot be predicted, and it is therefore safest to proceed on the assumption that plans of most of these holdings will require to be created or upgraded.

1.10 Estimates obtained by the Crofters Commission suggest that the costs of preparing a map based plan of an individual croft could average £300 to £400. This takes account of straightforward instances where there is an OS map of the locality to the required scale and the croft boundaries are fenced correctly and so marked on that map. However, the cost of preparing suitable plans of crofts which are relatively large and possess irregular boundaries could be much higher than the average.

1.11 Given that some crofts could be straightforwardly identified from boundaries marked on available OS maps, Option 2 is expected to have a potential cost of up to £5m. There would be no apparent gain to the public interest from this expenditure. There are also clear risks to the public purse in connection with this option as the Scottish Executive might be held liable for any errors or deficiencies in plans it has provided.

1.12 Option 3 would have costs to individual tenants and owners of crofts averaging out at between £300 and £400 per croft where adequate plans are not available to the occupant. It is unlikely that individual landlords would be responsible for the preparation of many plans on re-letting (there are over 300 crofting estates recorded in the Register of Crofts and only 88 applications for re-letting were made in 2002/03) and their costs are therefore unlikely to be much greater. However, it should be noted that some crofters hold multiple tenancies, which implies that they might be required to produce more than one croft plan.

1.13 Both Options 2 and 3 would have costs for the Crofters Commission in filing and storing plans and making copies available to the public on request. We envisage that the Commission should be able to recoup the costs of providing copies by making a charge of around £5.00 to meet each request.

Consultation

1.14 The issue of croft mapping was raised with the Crofting Consultative Panel. As was to be expected, there was considerable resistance from crofting interests to the idea that crofters should pay for the preparation of plans of their own crofts. Many respondents believed that the Executive already had suitable map based plans of their crofts through applications for agricultural support grant. However, these plans exclude non-agricultural croft land areas such as houses and gardens and would require amendment before the Crofters Commission could accept them.

Equity and Fairness

1.15 There are no barriers of race, age, sex, income, religion or disability in crofting legislation, nor are these to be found among croft tenants, owners of individual crofts or landlords of multiple crofts. The proposals in Options 2 and 3 do not therefore raise issues of equity and fairness.

Small Firms Impact Test

1.16 The interests of crofters and owners of individual crofts are represented by the Scottish Crofters Foundation and the National Farmers Union of Scotland. The interests of landlords are represented by the Scottish Rural Property and Business Association (formerly the Scottish Landowners Federation). All three organisations have been consulted at each stage of the Bill process and have had private meetings with officials on subjects arising, including the issue of preparing map based plans of crofts. While the proposal that occupiers should pay for the preparation of these plans is not welcome, it has not been shown that the expected costs would have much impact on croft-based businesses. Whilst Option 2 would have no effect on the sector, Option 3 would have only the minimal effect identified at paragraph 1.12 above.

Competition Assessment

1.17 The 17,700 crofts are tenanted or owned by around 12,000 individuals. Crofts are almost invariably limited to a few hectares with shares in grazing land. Tenants and owners operate on an individual basis, largely in small-scale agricultural production and none enjoy significant market share. All croft tenants and owners, including those of any new crofts created, eventually would be subject to the one-off requirement to produce a plan. No comparative advantage or disadvantage within the sector would be created by the requirements of Options 2 or 3, nor would there be advantage or disadvantage by comparison with non-crofting agricultural production.

Enforcement and Sanctions

1.18 Option 3 requires that where a plan of the croft has not already been provided to the Crofters Commission, the Commission will be able to require that one is provided where the occupier of the croft changes. The Commission will be empowered to refuse to process applications under crofting legislation where the occupier does not produce a plan. This has the effect of preventing legal change to the croft e.g. a change of tenant would not be recognised or be valid. Option 2 would require no sanctions.

Monitoring and Review

1.19 Monitoring and review of the process of preparing plans under Options 2 or 3 will be conducted by the Crofters Commission.

Summary and Recommendation

1.20 The requirement under Options 2 or 3 to provide plans of crofts would not have significant impact on occupiers or raise other issues. The lack of public gain by the provision of croft plans and the potential liabilities suggests that the expenditure estimated for Option 2 could not be justified. The expenditure on Option 3 is minimal and should not have noticeable impact on croft businesses. In the long term it will be occupiers of these crofts who will gain benefits from this process in terms of reduced transaction costs and certainty over boundaries.

1.21 Option 3 - the provision of a plan when the croft changes hands - is recommended.

References in the Draft Bill

1.22 Section 8: "Maps and schemes of charges".

Review

1.23 The impact of these proposed changes would be reviewed by SEERAD within 10 years of their coming into force as legislation. A new Regulatory Impact Assessment would be conducted at that point.

2 Comprehensive Right of Appeal to the Land Court

Issue

2.1 The current legislation only makes piecemeal provision for appeals from the Crofters Commission to the Land Court, and there is no consistency within the appeal mechanism. The lack of a comprehensive right of appeal raises the question of whether the present provisions are compliant with the European Convention on Human Rights (ECHR).

Objective

2.2 To provide a right of appeal to the Land Court against each regulatory decision by the Crofters Commission. This right of appeal should be extended to interested parties as well as the applicant.

Risk Assessment

2.3 The potential risks of change are that the exercise of a right of appeal would have potential cost implications for parties involved. These would, however, be voluntary as the Bill does not introduce a requirement to either appeal or to defend against an appeal. There is no requirement for legal representation at a Land Court hearing and costs may therefore be minimal. Where the services of a solicitor or advocate are retained by a party to the appeal, costs would be incurred. However, where there is a legal dispute in the courts it is normal for costs to be awarded in favour of the successful litigant. So, in the event of a successful appeal, the appellant's legal costs would most likely fall to be met by the Crofters Commission.

Options

2.4 In broad terms, 2 options are available:

1. Do nothing

2. Introduce the comprehensive right of appeal.

Benefits

2.5 Option 1 would involve no change and would therefore bring no benefits compared with the current situation. It is likely that at some point there would be a challenge to the legislation's failure to provide for appeal against Commission decisions.

2.6 Option 2 would introduce the rights of appeal which are necessary to meet ECHR requirements.

Costs

2.7 Option 2 could result in costs to appellants and other interested parties appearing at a Court hearing but in the case of appellants normally only if they lose the appeal. Although there is no requirement to engage legal representation to appear before the Court, the costs of retaining a solicitor could be around £1000, and with an advocate costs could rise to around £5000. The Land Court has indicated that, subject to the provisions of the Bill (1) enabling the Crofters Commission to review its own decisions prior to an appeal to the Court and (2) avoiding the need for the Court to hear appeals de novo, the costs to the Court should be held within current resources.

Compliance

2.8 We see no compliance issues arising. Indeed this provision is intended to resolve existing compliance concerns.

Consultation

2.9 The issue of a system of appeal was raised with the Crofting Consultative Panel and in the White Paper. There was strong support for the proposal and for the role of the Land Court.

Equity and Fairness

2.10 There are no barriers of race, age, sex, income, religion or disability in crofting legislation, nor are these to be found among croft tenants, owners of individual crofts or landlords of multiple crofts. The options of introducing a comprehensive appeal system does not raise issues of equity and fairness within a crofting context. Indeed it enhances the possibility of ensuring equity and fairness by extending existing rights of appeal. Leaving matters as they stand would retain the existing unfairness of the present situation.

Small Firms Impact Test

2.11 The interests of crofters and owners of individual crofts are represented by the Scottish Crofters Foundation and the National Farmers Union (Scotland). The interests of landlords are represented by the Scottish Rural Property and Business Association (formerly the Scottish Landowners Federation). All three organisations have been consulted about this matter and so far have not raised any concerns about this proposal. This does not impose any new burden on the business interests of crofters and landowners as they are not compelled to appeal a decision made by the Crofters Commission.

Competition Assessment

2.12 Maintaining the status quo or extending the right of appeal to all with a clear interest in the decisions of the Crofters Commission does not introduce advantage or disadvantage to any person. Nor does it have an impact compared with other businesses involved in ownership or tenure of agricultural land since agricultural holdings are also subject to a regulatory regime.

Enforcement and Sanctions

2.13 No enforcement requirements exist and none are proposed.

Monitoring and Review

2.14 Monitoring and review of both options would fall to the Crofters Commission.

Summary and Recommendation

2.15 Maintaining the status quo is not sustainable. A comprehensive right of appeal would secure the legislation against challenge on the basis that the lack of a right of appeal does not meet ECHR requirements. The proposed appeal provisions should not lead to significant costs to be met from public funds.

2.16 The option of introducing a comprehensive right of appeal to the Land Court against decisions of the Crofters Commission is recommended.

References in the Draft Bill

2.17 Section 5 (58A)(10)(b)(ii): "Obtaining Commission approval or consent" and section 33: "Appeal to Land Court and jurisdiction of that court".

Review

2.18 The impact of these proposed changes would be reviewed by SEERAD within 10 years of their coming into force as legislation. A new Regulatory Impact Assessment would be conducted at that point.

3 Landlord's Right of Consent to Crofter Forestry Development

Issue

3.1 The current legislation requires that, in order for a Grazings Committee to proceed with a Crofter Forestry development on common grazing, the consent of the owner of that common grazing is required. As a result, the ability of crofters to diversify and develop their common grazings through afforestation has been dependent on the attitude of the particular person who owns that common grazings.

Objective

3.2 To give tenants the right to undertake forestry development on their common grazings, subject to a right by the owner to refuse to consent to the proposal on certain specified grounds. Where tenants have been refused consent for a forestry proposal by either the owner of the common grazings or the Crofters Commission, to give those tenants the right to apply to the Land Court to have the refusal of consent overturned.

Risk Assessment

3.3 The potential risk of change is that approval of a crofter forestry development may have some adverse effects on the owner's sporting rights. This is not possible to quantify, but if it resulted in one stag less shot in each year, the loss of value to the estate could be in the order of £20K (valuer's standard estimate). However there is the possibility that once the trees matured, a degree of shelter would be available for deer.

Options

3.4 In broad terms, three options are available:

1 Do nothing.

2 Remove the owner's right to refuse consent and introduce a right for owners to seek compensation from crofters for loss resulting from crofter forestry.

3 Modify the owner's right to refuse consent to make it a qualified right. The owner would continue to be able to refuse an application in certain circumstances, but grounds for any refusal must be given and these grounds could be tested in the Land Court if challenged by the crofters concerned. The refusal could be overturned by the Court if the Court determines that the circumstances under which consent can be refused do not arise. (This is the option advanced in the draft Bill).

Benefits

3.5 Option 1 would involve no change and would therefore bring no benefits compared with the current situation.

3.6 Option 2 would discourage crofters from forestry development.

3.7 Option 3 would allow for final determination of a forestry proposal by the Land Court and would ensure a proper legal process of determining whether the owner's concerns are sufficient to prevent the proposal going ahead.

Costs

3.8 Option 2 would have unquantifiable costs for crofters but, given that one stag shot on a crofting estate is judged by valuers to be worth £20K to the estate, could be considerable.

3.9 Option 3 could have costs in resorting to the Land Court. Although there is no requirement to engage legal representation to appear before the Court, the costs of retaining a solicitor could be around £1000, and with an advocate this could rise to around £5000. However, all of the costs of court action are likely to be awarded against the party that loses the case - either the crofters or the owner.

Compliance Issues

3.10 With the involvement of the Land Court as final arbiter, we see no compliance issues arising.

Consultation

3.11 The issue of ending the owner's right of final consent was raised with the Crofting Consultative Panel and in the White Paper. There was strong support for the proposal and for the role of the Land Court, other than from the Scottish Landowners Federation (now the Scottish Rural Property and Business Association) and one individual landowner. The matter of compensation was not raised in responses.

Equity and Fairness

3.12 Owners and crofters each have well-defined interests in use of common grazing land. The owner has rents, sporting and mineral rights, together with rights of access to the land at any time and a right to apply to the Land Court to resume the land from crofting tenure and thus end crofters' rights on that land. Crofters have the right to graze animals and apply to the owner for permission to seek the consent of the Crofters Commission to plant trees. Retaining the status quo which allows owners to refuse crofters' applications reflects the traditional balance of rights and responsibility in crofting but gives the owner an absolute veto on proposals from the crofters. However, it is inconsistent with current public policy which aims to encourage greater community involvement and control over land resources in crofting areas.

3.13 Allowing crofters to proceed with forestry developments without the owner being able to prevent these, subject to the owner being eligible to compensation from crofters where trees are planted, might appear equitable and fair in that the owner would not suffer financial loss. However, although compensation is paid, the owner's rights in the property would effectively be overridden by the tenants rights to plant trees. This is not likely to be viewed as fair and equitable by owners and raises questions about the owner's rights to enjoyment of property. This approach is bound to be opposed on grounds of fairness. In any case there are mechanisms for acquisition of croft land in the Land Reform (Scotland) Act 2003 by which crofting grazings can be acquired and these can be used if the intention is to undertake crofter forestry on a scale which would result in depriving the owner of any effective right to use the land.

3.14 Allowing the crofters a right to request the Land Court to determine whether or not an application to plant trees may be made to the Crofters Commission does to some extent impact on the owner's rights. However, the legislation provides for a reasonable refusal to be upheld. This approach would provide a greater degree of equity and fairness between owner and crofters' rights than exists currently. It will not impact unfairly on the owner to the same extent as option 2 because it would be reasonable for the owner to refuse an application if the proposal has a significant impact on his interests.

Small Firms Impact Test

3.15 The interests of crofters and owners of individual crofts are represented by the Scottish Crofters Foundation and the National Farmers Union (Scotland). The interests of owners are represented by the Scottish Rural Property and Business Association (formerly the Scottish Landowners Federation). All three organisations have been consulted on the issue of forestry. The crofters' representatives favoured the introduction of a right to request the Land Court to determine whether a owner's refusal was justified. The owner's representatives favoured retention of the status quo.

Competition Assessment

3.16 The ending of the owner's right to refuse planting of trees by crofters without challenge would apply to all owning grazing land under crofting tenure. The right to seek compensation discussed at Option 2 would equally apply to all such owners. There is no competition issue as the costs of forestry development are the same for all.

Enforcement and Compliance

3.17 Both the option of allowing owners to seek compensation from crofters and that of permitting crofters to challenge an owner's refusal of permission would be bound by Land Court decisions.

Monitoring and Review

3.18 Responsibility for monitoring and review of the effects of an end to the owners' unchallenged right to refuse an application will be the responsibility of the Crofters Commission.

Summary and Recommendation

3.19 The first option of making no change would not produce an improved balance between the rights of owners and those of crofters.

3.20 The second option of discontinuing the owner's right of refusal and allowing landlords to seek compensation from crofters would be costly, open to challenge and would give the tenants unfettered control.

3.21 The third option of allowing crofters to request the Land Court to approve or over-ride an owner's refusal permits the arguments for and against an application to be heard and determined. The costs of going to the Court and the possibility of losing a court action should encourage parties to seek consensus rather than conflict.

3.22 The third option is recommended.

References in the Draft Bill

3.23 Section 29(1)(2C): "Use of Common Grazings".

Section 33: "Appeal to Land Court and jurisdiction of that court".

Review

3.24 The impact of these proposed changes would be reviewed by SEERAD within 10 years of their coming into force as legislation. A new Regulatory Impact Assessment would be conducted at that point.

4 The untested right of owner consent to crofters felling, use and sale of trees

Issue

4.1 The wording employed in section 50 and paragraph 13 of Schedule 2 to the Crofters (Scotland) Act 1993 allows the possibility that an owner of a common grazing or landlord of a croft could adopt the position that crofters who plant trees require a specific permission to cut them down or sell or otherwise use the timber produced.

4.2 This as yet legally untested right of an owner appears to have been an oversight in the framing of legislation rather than an intention. Were these provisions to be tested in a court, it is highly likely that the conclusion would be favourable to a crofter's implicit right to fell and use the trees which he had planted. The prospect of clarification was raised in the White Paper and no adverse comments were received.

Objective

4.3 The draft Bill proposal would make clear that crofters would have the right to cut, sell and use timber and other woodland products derived from trees which they themselves had planted either on their own crofts, or as part of a crofter forestry scheme.

Risk Assessment

4.4 No potential risks of change have been identified.

Options

4.5 Two options are available.

1 Do nothing

2 Clarify legislation as identified above.

Benefits

4.6 Option 1 involves no change, would bring no benefits compared with the present situation and would leave the question of whether the landlord does in fact have a right to give permission to be eventually resolved in the Courts.

4.7 Option 2 would clarify the position and remove the question as to whether the landlord does in fact have the right to withhold consent to crofters' use of woodland and woodland products.

Costs

4.8 Option 1 would, if the right to consent was ever to be tested in the Land Court, result in the crofters and owner involved incurring expenditure on legal proceedings.

4.9 Option 2 has no identifiable costs.

Compliance Issues

4.10 Under Option 1, it is not known whether compliance issues would arise. Under Option 2, no issue of compliance would be raised.

Consultation

4.11 The issue of clarification was raised with the Crofting Consultative Panel and in the White Paper. There were no objections to the proposal advanced as Option 2.

Equity and Fairness

4.12 It seems difficult to argue that there is equity and fairness in the current uncertainty whether a landlord, in addition to his rents, may take for himself the profits accrued by a crofter's investment. On the other hand, it seems clear that equity and fairness require that a crofter receive the full value resulting from his investment.

Small Firms Impact Test

4.13 The interests of crofters and owners of individual crofts are represented by the Scottish Crofters Foundation and the National Farmers Union (Scotland). The interests of owners are represented by the Scottish Rural Property and Business Association (formerly the Scottish Landowners Federation). All three organisations have been consulted and both crofters' and owners' representatives were content with the proposal.

Competition Assessment

4.14 There is no competition issue as the costs of forestry development are the same for all.

Enforcement and Sanction

4.15 The proposed change should not require enforcement or sanction.

Monitoring and Review

4.16 The proposed change should not require monitoring and review.

Summary and Recommendation

4.17 Option 1 of leaving matters as they stand would continue a degree of uncertainty which may inhibit crofter forestry schemes and result at some future point in legal costs to resolve the issue. Option 2, by clarifying the right of crofters to receive the full value of their investment would remove these potential difficulties and raise no objections from organisations in the field.

4.18 Option 2 is recommended.

References in the Draft Bill

4.19 Section 29(1)(3B): "Use of Common Grazings".

Review

4.20 The impact of these proposed changes would be reviewed by SEERAD within 10 years of their coming into force as legislation. A new Regulatory Impact Assessment would be conducted at that point.

5 The right of landlords to give or withhold consent to division of a croft by the tenant

Issue

5.1 The current legislation requires that, in order for a tenant to successfully divide his croft, the consent of his landlord is required. As a result, the ability of tenant crofters to create another holding from their own croft has been dependent on their landlord's attitude. This can mean a crofter is unable to provide a separate holding for a family member or other person to build a house and remain in the community.

Objective

5.2 To enable the retention and growth of rural population by giving croft tenants the right to divide their crofts. This would be subject to a right by the landlord to object to the proposal and so require the Crofters Commission to determine whether it should go ahead. To give a right to appeal to the Land Court against that decision to the croft tenant, landlord and - where a share in the common grazings is involved - other shareholders. Where a croft is divided, the rents for the resulting units will be a matter for agreement between landlord and tenant. Where no agreement can be reached, either of the parties could request the Land Court to set a new rent. The reasonable legal costs of this exercise would be borne by the tenant. Where setting that rent, the Land Court should be able to set a rent which would offer the landlord an acceptable margin of revenue over reasonable costs of collection.

Risk Assessment

5.3 The potential risks of change are that recourse to the Land Court on appeal against a decision by the Crofters Commission, would have cost implications for landlord and tenant. Recourse to the Land Court on rent alone would have costs for the croft tenants and, although the legal costs would be borne by the tenant(s), the landlord would require to put some degree of effort into preparing a case.

Options

5.4 In broad terms, 2 options are available:

1 Do nothing.

2 Remove the landlord's right of consent to a subdivision and replace it with a right of objection.

Benefits

5.5 Option 1 would involve no change and would therefore bring no benefits compared with the current situation.

5.6 Option 2 would exclude veto by landlords of division of crofts. This would further enable the retention of population in rural crofting communities while guaranteeing landlords a fair rent.

Costs

5.7 Option 2 could have costs for croft tenants in resorting to the Land Court on rents or where appealing against a decision of the Crofters Commission. In the latter case, landlords also could have costs. Appeal is not mandatory, and the Court does not require legal representation. Were legal representation employed, the costs could be from £1000 to £5000 depending on whether a solicitor or advocate were retained. Crofters would no doubt consider in advance whether exercise of appeal rights was financially worthwhile. Where there is a legal dispute in the courts it is normal for costs to be awarded in favour of the successful litigant. So, in the event of a successful appeal, the appellant's legal costs would most likely fall to be met by the Crofters Commission.

Compliance Issues

5.8 Where there is involvement of the Land Court as final arbiter, both for division and for a fair rent, we see no compliance issues arising.

Consultation

5.9 The question of subdivision and landlord's consent was raised with the Crofting Consultative Panel and in the White Paper. There were few responses, and these were divided as to the merits of the proposal.

Equity and Fairness

5.10 It seems equitable and fair that a crofter should not require the landlord's permission to divide his croft, provided that the landlord's rents post division are fair and worth the collecting.

Small Firms Impact Test

5.11 The interests of crofters and owners of individual crofts are represented by the Scottish Crofters Foundation and the National Farmers Union (Scotland). The interests of landlords are represented by the Scottish Rural Property and Business Association (formerly the Scottish Landowners Federation). All three organisations have been consulted at each stage of the Bill process and have had private meetings with officials on subjects of interest. The proposal would remove constraints on a crofter wishing to divide his croft. The landlord's interests in appropriate levels of rent would be preserved. The Scottish Crofters Foundation was concerned that easier division of crofts could lead to fragmentation of croft land. The Scottish Rural Property and Business Association believed that legislation on division should remain unchanged.

Competition Assessment

5.12 There do not appear any implications for competition among crofters, landlords or between these and their non-crofting counterparts tenanting or owning land.

Enforcement and Sanctions

5.13 Enforcement and sanctions do not appear to be required. A landlord could not prevent division where this was approved by the Crofters Commission or, where the question went to appeal, the Land Court. A crofter refusing to pay rent risks losing his tenancy if the landlord takes that matter to the Land Court under the current legislation. That sanction will continue.

Monitoring and Review

5.14 Monitoring and review of the effect of removal of the landlord's veto on division of crofts will be the responsibility of the Crofters Commission.

Summary and Recommendation

5.15 To leave matters as they are under Option 1 does not provide any improvement to the current situation. To remove the landlord's right of preventing division of crofts under Option 2 removes a barrier to population retention and growth in rural communities.

5.16 Option 2 is recommended

References in the Draft Bill

5.17 Section 14: "Division of croft".

Review

5.18 The impact of these proposed changes would be reviewed by SEERAD within 10 years of their coming into force as legislation. A new Regulatory Impact Assessment would be conducted at that point.

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