Identifying The Solutions

• There was wide support amongst landowners and agents for greater freedom of contract in tenancy agreements, like the Agricultural Tenancies Act 1995 in England & Wales, as a means of encouraging more letting of farm land; but tenants were not keen, some seeking more security, not less; some respondents from both sides felt the existing system works fine and cautioned against change; many pointed out that the degree of security provided by the Agricultural Holdings (Scotland) Act 1991 is not the only, and possibly not the main, impediment for new entrants, and that the real problem is financial;
• The idea of giving farm tenants the right to buy was a key feature of many individual responses; but landowners, agents and the industry representative bodies suggested that this would completely halt further letting of land; others suggested the less radical right of pre-emption when the estate is being sold;
• The existing arrangements for dispute arbitration were widely criticised as unnecessarily complex, prolonged and expensive; though there was a general acceptance that simplifying the procedures to save time and cost might be at the expense of transparent fairness in some cases;
• Tenants demanded more opportunities for diversification, including the ability to combine part-time farming with other businesses, and many expressed frustration at present difficulties; but landowners tended to assume that tenants should do only the farming, with other activities done by or on behalf of the estate; tenants also lamented resumption of land for non-agricultural activities, and advocated changes in the holdings legislation, or in the rules of grant schemes, to prevent this;
• On forestry, many landowners seemed willing in principle to agree to tenants’ proposals, but subject to rent adjustment; concern was expressed by landowners and agents about the long term nature of forestry, the effect on land values, and demands for compensation to outgoing tenants for future timber value;
• On conservation, most agreed that conservation work would benefit the interests of the whole estate, and the need for co-operation was stressed; many felt farmers should be doing it anyway and that problems were isolated and exaggerated;
• On sporting interests, landowners argued that these normally need to be exercised over an area larger than a single farm and are unlikely to be technically or economically viable at a small scale; that sporting activities currently make a small but useful contribution to the rural economy which could be threatened if they become fragmented; and that sporting (and mineral) rights ‘naturally’ belong to landowners who would expect compensation if they were transferred to tenants;
• There was wide concern about the possible environmental effects of encouraging small-scale mineral developments, hence the important role of planning authorities;
• number of individuals and organisations raised the specific case of the Carbeth hutters as a land reform issue.

• more scope for diversity of agricultural tenancy arrangements;
• simpler and cheaper arrangements for resolution of disputes between agricultural tenants and their landlords;
• wider opportunities for tenant farmers to diversify;
• greater protection for those who own property built on leased land.

Vision for the future

Possible legislation and other action to achieve this

LT2 Abolish the Agricultural Holdings (Scotland) Act 1991 for new tenancies.

LT3 Amend the 1991 Act to provide for limited duration tenancies, to include specific provisions to control the use of limited partnerships, and to reduce the restrictions on using short-term lets.

LT4 Introduce a right for secure tenants to buy their farms, including a provision to enable smallholders or tenants to acquire ownership of their farm buildings, and a right of pre-emptive purchase by the tenant when sale by the landowner is in prospect.

LT6 Extend the role of the Scottish Land Court (SLC) to cover appointment of arbiters, providing for all stated cases to go to the SLC, and introduce stricter time limits. Vision for the future

LT8 Amend the existing provisions for resumption and efficient farming to permit operation on a part-time basis.

LT9 Provide greater protection for tenants against resumption by landlords for non-agricultural land uses by restricting the operation of notices to quit and amending the rules of relevant public assistance schemes.

LT10 Introduce rights for tenants/crofters to plant trees, to cut and sell timber, and to derive income from farm woodlands, and provide a clear and fair framework for payment of compensation at waygo.

LT11 Amend the statutory rules of good husbandry to encourage management for nature conservation.

LT12 Introduce a pre-emption right for agricultural tenants to acquire vacant sporting leases.

LT13 Strengthen farm tenants’ rights to compensation for game damage and in respect of mineral developments.

LT14 Introduce provision for landlords and tenants to share the royalties in respect of mineral developments.

More scope for diversity of agricultural tenancy arrangements.

Introduce farm business tenancies as in the Agricultural Tenancies Act 1995 in England and Wales, providing more flexibility to diversify, greater freedom for the parties to agree the terms of leases, simplified arrangements for setting of rents and payment of compensation at the end of a tenancy, and resolution of disputes under general arbitration legislation.

New, controversial and relatively complex primary legislation required: the Agricultural Tenancies Act 1995 runs to 41 Sections and a Schedule containing 37 paragraphs of Consequential Amendments. The 1991 Act would need to remain in place for existing secure tenants.

Would reduce and eventually relieve AEFD of responsibility for appointment of agricultural arbiters, but likely to increase referral of disputes to the courts.

Information possibly available from MAFF compliance cost assessment for 1995 Act.

• Would introduce simpler and more flexible statutory arrangements for new tenancies.
• Likely to produce more land for rent.
• Would eventually reduce the Department’s role in appointment of arbiters.

• Would move the balance of rights away from tenants towards landlords.
• Unlikely to benefit new entrants.
• Reduced security of tenure might damage structure of rural communities.
• Short tenancies might discourage adoption of more sustainable farming practices.
• Could not repeal 1991 Act for many years.
• Would simply add to existing already complex body of agricultural holdings legislation.

Probably not: the solution adopted in England would not necessarily suit the characteristics of the industry and landlord/tenant relations in Scotland.

More scope for diversity of agricultural tenancy arrangements.

Abolish the Agricultural Holdings (Scotland) Act 1991 for new tenancies, permitting complete freedom of contract and placing farm tenancies on the same basis, and subject to the same restrictions, as other types of commercial leases. In practice, new lettings would be likely, as now, to occur principally through the mechanism of limited partnerships under the Limited Partnerships Act 1907, with the relationship between landowner and farmer governed by the terms of the partnership agreement. The parties would still be free to negotiate inclusion in the agreement of features of the existing arrangements for agricultural tenancies if they so desired.

Simple but highly controversial primary legislation required to repeal the 1991 Act and to make a large number of consequential amendments to other legislation.

Would reduce and eventually relieve AEFD of responsibility for appointment of agricultural arbiters, but likely to increase referral of disputes to the courts.

Minor for implementation, but likely increased costs for parties in court actions.

• Would permit complete flexibility of agreement.
• Would encourage landowners to make more land available for farming by others.
• Would eventually reduce the Department’s role in appointment of arbiters.
• Logical way of rationalising the current position on use of limited partnerships as a means of circumventing the holdings legislation.

• Would completely remove the existing statutory protections for future farm tenancies.
• Might be perceived as giving landowners total control over ‘tenants’ and therefore conflicting with other land reform objectives/aspirations.
• Would be highly controversial, and likely to be strongly opposed by tenants’ interests.
• Unlikely to benefit new entrants.
• Reduced security of tenure might damage structure of rural communities.
• Short tenancies might discourage adoption of more sustainable farming practices.

Probably not: there would be immense presentational difficulties and it is unlikely such a measure would have a quick or easy passage through Parliament.

More scope for diversity of agricultural tenancy arrangements.

Amend the Agricultural Holdings (Scotland) Act 1991 to provide for limited duration tenancies for a fixed term to be agreed between the parties, thus permitting secure leases for periods of eg 10 or 20 years, or until the farmer reaches age 65, or for his/her life. In other respects, the tenant would enjoy the same rights and responsibilities accorded to existing secure tenants until the end of the agreed period, similar to short assured housing tenancies. Other changes might include specific provisions to control the use of limited partnerships, to remove any remaining uncertainty and help to avoid further legal challenge; and, to reduce the restrictions on using short-term lets for less than one year, by abolishing the requirement to seek the Secretary of State’s approval each year, replacing this with a requirement that, after eg 5 successive short term lets involving some or all of the same land to the same farmer, the parties must agree a limited duration lease subject to consent of the Scottish Land Court (SLC).

Primary legislation required, to make fairly complex and probably controversial additions to Part I of the 1991 Act, and amendments to Sections 2 and 3, and possibly also Section 11 and Part III, of the Act.

Additional duties for SLC if consent provision implemented. Also additional scope for disputes, resolvable by arbitration/reference to the SLC. Reduced administration for AEFD Area Offices in handling applications for consent to short-term lets.

Some modest additional costs for SLC and possibly initially for the parties in negotiating agreements. However, there may eventually be savings from a reduction in disputes, especially regarding notices to quit.

• Would permit greater freedom for parties to agree length of leases, whilst retaining a reasonable balance in protection of landowners’ and tenants’ interests.
• Would avoid conferring indefinite tenancy rights on the farmer or his family thus enabling the landowner to regain vacant possession at the end of the specified period.
• Would encourage landowners to let vacant farms rather than taking in hand or amalgamating.
• Would avoid additional separate legislation (as in England and Wales) to achieve these objectives.
• Would remove need for annual approval of short-term lets.

• Complex and controversial.
• Might encourage more usage of limited partnerships by landowners seeking to avoid granting security of tenure in circumstances where tenancy might be more appropriate.
• Might still be situations where parties want a series of short lets to continue for longer.

Probably yes: although complex, these changes would directly address many key issues.

More scope for diversity of tenancy arrangements.

Introduce a right for secure tenants to buy their farms in particular circumstances and on specified terms. This could include a provision to enable smallholders or tenants to acquire ownership of their farm buildings together with any ‘private’ garden ground associated with farmhouses and access roads/tracks. Another possibility would be to introduce a right of pre-emptive purchase by the tenant on specified terms when sale by the landowner is in prospect. Provision could also be made to prevent sporting, fishing, foreshore and mineral rights being sold separately from land.

New primary legislation required, or substantial insertions into existing agricultural holdings and small landholders legislation; complex and extremely controversial. Potential for ECHR difficulties (unless suitably compensated for).

Probably require some form of registration and consent system to ensure conditions and restrictions were being complied with, for payment of compensation and to monitor implementation and uptake. Could be quite elaborate, with implications probably for AEFD and Scottish Land Court.

Could be enormous costs (up to £100 million a year) if compensation payable to landowners.

Operation of registration, consent and compensation payment system (up to £1 million a year).

• Would provide opportunities to overcome continuing difficulties for tenants on estates which have changed hands frequently.
• Would provide tenants who purchase their farms with unfettered rights to diversify.
• Would give farmers more control over management of land.
• Would enable tenants to obtain loans/mortgages for developing their enterprises.
• Would facilitate retiring farmers remaining in community or transfer to active ones.
• Would diversify ownership.

• Would cause landowners to entirely cease letting more land.
• Might make it harder for new entrants, conflicting with other land reform objectives.
• More small landowners would not necessarily be better for land or local community.
• Might reduce land values, with possible need to pay compensation.
• Could lead to fragmentation and damage to well run traditional estates.
• Might risk encouraging sale of houses as holiday homes or second homes.
• Might accelerate amalgamation of small farms into larger land units with reduced agricultural employment.

Maybe: although the right to buy looks to be a non-starter, pre-emptive purchase might be worth further investigation.

Simpler and cheaper arrangements for resolution of disputes between agricultural tenants and their landlords.

Simplify the arbitration procedures by providing for use of simpler methods, including mediation, to resolve disputes; reducing the volume of detailed evidence needed in the award; permitting hearings to be dispensed with; limiting the way in which the parties may be represented; and restricting the scope for appeal. In addition, introduce stricter controls over the cost of arbitrations and the fair allocation of costs between the parties; update and simplify other existing statutory provisions, including valuation of bound sheep stocks, and responsibility for fixed equipment; appoint a smaller, more experienced arbiters’ panel, with greater flexibility over the timing of appointment of an arbiter, more training for arbiters and more general guidance on leases and disputes.

Primary legislation needed to amend Sections 13 and 61, and Schedule 7 of the Agricultural Holdings (Scotland) Act 1991, also relevant secondary legislation; other changes might involve Sections 5, 68-72, and Schedules 9 and 10 to the 1991 Act.

Few, but further research and consultation needed; likely reduction in court cases; might reduce number of applications for appointment of an arbiter; would involve significant changes for AEFD to the manner in which the arbiters’ panel is constituted and to the process of selecting members, possibly involving agreement with the interested industry bodies over the training and qualifications to be required of panel members; extensive work in preparing drafts of guidance documents or new forms, obtaining agreement/support of interested bodies, conducting consultations, publication and dissemination etc, but could be contracted out, or undertaken by the industry itself.

Savings in costs of court time and in legal representation for the parties; some additional short term costs in setting up and providing training for new type of panel and in preparation of published guidance (up to £200,000); possible longer term savings in operation of the system; should reduce costs for the parties in many cases if arbiters able to conduct cases without legal advice.

• Would save time and costs for the parties.
• Would result in more authoritative and reliable dispute resolution.
• Would be fairer for party least able to afford cost of appeal or prolonged dispute.

• Would reduce transparency of decisions.
• Would make it more difficult to correct an apparently unjust outcome.
• Might be difficult to gain consensus on the detailed changes to be made.

Probably yes: the changes would directly address a key area of concern.

Simpler and cheaper arrangements for resolution of disputes between agricultural tenants and their landlords.

Extend the role of the Scottish Land Court (SLC) to cover appointment of arbiters, allowing applications to be made by one party only, giving the SLC an investigative role, and providing for all stated cases to go to the SLC; introduce stricter time limits for issue of arbiters’ findings, providing for ending or transfer to the SLC if unduly prolonged; and introduce provision for the SLC to order immediate removal of the tenant in extreme cases of bad husbandry.

Would require primary legislation to amend Sections 22, 23, 26, 60, 63, 64, 69 and Schedule 7 of the Agricultural Holdings (Scotland) Act 1991; also, possibly some amendment needed to Section 83 of the 1991 Act and/or to provisions of the Small Landholders (Scotland) Acts 1886 to 1931 relating to the Land Court.

Expanded role likely to have administrative implications for the SLC; would remove from AEFD the role of establishing and maintaining the Secretary of State’s panel, carrying out 5 yearly reviews, and making arbiters’ appointments; would increase the references to the SLC, but reduce the number of cases going before the Sheriff Court or Court of Session.

Small saving in running costs to AEFD; increased cost to taxpayer of more SLC cases, but reduced costs to the parties.

• Would permit abolition of the Secretary of State’s arbiters’ panel, further distancing Ministers from landlord/tenant disputes.
• Would simplify the procedures, reducing the incidence of excessively prolonged cases.
• Would provide an opportunity for intervention in cases where an arbitration has gone awry, without involvement in the substance of the case.
• Easier handling by SLC with specific expertise in this area and fairer for both parties.
• Would be able to find court time more quickly for each case.
• Might reduce tendency of parties to appoint excessively high level legal representation.
• Quicker resolution of disputes would help to protect farmland from serious damage.

• Extending the role of the SLC might be viewed by some as failing to tackle the legalistic approach for which the arbitration system has been criticised.
• Arbiters or SLC members less likely to have farming background and the system might therefore be more susceptible to criticism of bias in favour of landowning interests.
• Some parties able to afford high level action may feel they are being unfairly prevented from escalating the dispute.

Probably yes: these changes would represent a useful rationalisation of the disputes procedures, especially in combination with other possible changes to the legislation.

Wider opportunities for tenant farmers to diversify.

Introduce a statutory provision into new leases to permit wider diversification with provisions for resolving disputed cases. Such a provision might be restricted to secure tenancies, and exclude short-term lets. Other refinements might include limits on the extent of diversification permitted (eg up to a specified percentage of tenant’s income from the farm), and a right for tenants to seek arbitration or to appeal to the Scottish Land Court if the landlord refuses consent for diversified activities. Provision might also be made to require landlord’s consent if the effects of the diversification would outlast the lease, like new improvements in Schedule 5, Part II, of the 1991 Act. In addition, it may be possible to provide model forms of agreement for tenants to obtain landowners’ consent for diversified uses of land on the farm.

Insert additional provisions in Part II and Schedule 1 of the Agricultural Holdings (Scotland) Act 1991. This could be along the lines of Paragraph 3 of Schedule 2 to the Crofters (Scotland) Act 1993.

Might be increased number of arbitrations/court cases on the terms of leases. For AEFD, in preparing draft agreements, conducting consultations and obtaining agreement from both sides of the industry (as model form now in use for crofter forestry), and in publishing and distributing copies to interested parties.

Minor for implementation. Initial preparation of model forms etc (up to £100,000); minor ongoing administrative costs. Landowners might seek large rent increases.

• Would give tenants greater freedom to diversify, encouraging the setting up of additional/alternative rural enterprises.
• Would be beneficial for rural development and the structure of rural communities.
• Model forms would provide clear guidance on Government expectations regarding the nature of such agreements, ensuring consistency and avoiding loopholes.

• Might make it harder for well run traditional estates to control unsuitable or anti-social land uses by tenants.
• Might lead to more uncertainty and conflict with landowners and neighbours over standard of land management by tenant.
• Model forms would not oblige parties to agree on this basis; landlords could still simply refuse to sign.

Probably yes: this would help to remove one of the main barriers to diversification of rural enterprises.

Wider opportunities for tenant farmers to diversify.

Amend the existing provisions for resumption in the interests of good husbandry and sound management of the estate, to ensure that it is acceptable to operate the farm on a part-time basis.

Primary legislation required, to amend Sections 24(1), 25(3) and (4), and Schedule 2 to the Agricultural Holdings (Scotland) Act 1991.

Minimal. Possible implications for the Scottish Land Court procedures for granting consent for resumptions.

Minimal.

• Would allow tenants not to be earning all or most of their income from farming.
• Would encourage retention of small units, providing more opportunities for entrants.
• Would permit small farms to be run on a basis likely to be viable when combined with other businesses or part-time employment.
• Would encourage tenants to consider converting part of land to other uses.
• Would promote diversification of rural land use enterprises.

• Might encourage fragmentation of otherwise viable farming units.
• Might lead to adoption of inefficient farming practices.

Probably yes: it would remove the possible danger of resumption where a small farm unit might otherwise be deemed unviable for farming on a full-time basis.

• Might be perceived as unfair to estates with substantial agricultural holdings.
• Could reduce land values and subsequent removal of trees could cause legal and practical difficulties.

Probably yes: this could be an important factor in encouraging tenants to participate in the continued expansion of woodlands in a farming context.

Wider opportunities for tenant farmers to diversify.

Amend the statutory rules of good husbandry to encourage management practices beneficial for nature conservation. Also could restrict the scope of certificates of ‘bad husbandry’ to disregard conservation practices, perhaps defined by reference to a list of specified or permitted activities, such as those covered by Environmentally Sensitive Areas (ESA) or the Countryside Premium Scheme (CPS).

Primary legislation required, to amend Schedule 6 of the Agriculture (Scotland) Act 1948. Also amendments to Sections 22(2)(c) and 26(1) of the Agricultural Holdings (Scotland) Act 1991, and possibly an additional schedule or secondary legislation. Might be quite complicated, with much room for debate over meanings of ‘good or bad husbandry’ and ‘conservation activities’.

Probable need for published guidance. Possible implications for the Scottish Land Court in considering applications from landowners for certificates of bad husbandry.

Minor.

• Would clarify the status of conservation work carried out by tenants.
• Would encourage tenants to undertake conservation activities.
• Would enable tenants to benefit from ESA/CPS.

• Might risk encouraging abandonment or deterioration of agricultural land.
• Could be possible loss of value of farms.

Probably yes: this would represent a useful rationalisation, helping to remove doubt.

Wider opportunities for tenant farmers to diversify.

Introduce a pre-emption right for agricultural tenants to acquire vacant sporting leases.

New primary legislation required to insert provisions possibly into Part II of the Agricultural Holdings (Scotland) Act 1991. Complex and potentially controversial, but not as much as simply transferring sporting rights to agricultural tenants, and less vulnerable to legal challenge.

Could be some in procedure for payment of compensation to landlords for loss of rights and for the possible adverse effect on land values, also perhaps a system for registration/consent/monitoring.

Future compensation claims from landowners as tenants exercise this right (up to £1 million a year) and ongoing administration etc (up to £10,000 a year).

• Would provide opportunities to overcome continuing difficulties for tenants on sporting estates which have changed hands frequently.
• Would provide at least some prospect for tenants eventually to be able to acquire sporting rights and diversify into this.
• Would avoid potential problems that would be created for well run traditional estates if sporting rights were simply transferred to agricultural tenants.

• Progressive fragmentation of sporting rights might make it harder to manage land for environmental and economic benefits.
• Sporting rights might be of limited economic value at the scale of an individual farm.
• Might increase landowners’ reluctance to let land, thus reducing opportunities for new entrants to rent farms and conflicting with other land reform objectives.

Maybe: some of the issues here are similar to those raised by possible pre-emption rights for tenants to purchase farms when sale by the landowner is in prospect, and could usefully be considered in more detail at the same time.

Wider opportunities for tenant farmers to diversify.

Strengthen farm tenants’ rights to compensation for game damage and in respect of mineral developments.

Primary legislation required, to amend Sections 29, 30, 43 and 52 of the Agricultural Holdings (Scotland) Act 1991. Section 14A of the Opencast Coal Act 1958 may also be affected.

Few, but possibly more arbitrations or court cases.

Minor for implementation, but landowners likely to seek rent increases.

• Would help to avoid tenanted farmland being damaged or fragmented.
• Would provide greater protection for tenants’ farm business.

Probably yes: would help to remedy a weakness in the protections currently available for tenants’ interests.

Wider opportunities for tenant farmers to diversify.

Introduce provision for landlords and tenants to share the royalties in respect of mineral developments undertaken within the leased area of the farm.

Possible primary legislation to insert new provision into Part II and Schedule 1 of the Agricultural Holdings (Scotland) Act 1991.

Possibly cover in draft clauses and published guidance notes or codes of practice relating to agricultural leases, instead of or in addition to legislation. Problematic in drafting and consultations. If legislation, possible need for procedure to pay compensation to landlords for loss of value of mineral rights.

Preparation of draft clauses and guidance etc (up to £100,000). Possible compensation payments (up to £1 million a year), and administration costs (up to £10,000 a year). Landlords likely to seek large rent increases.

• Would permit farm tenants to benefit from mineral developments as part of their diversified rural businesses.
• Would encourage partnership between landowner and tenant over difficult land use decisions.
• Would be less controversial than transferring mineral rights to tenants.

• There might be wider concern about encouragement of small scale mineral developments, and the possible environmental effects.
• Small scale mineral developments unlikely to be economically viable.
• Might be concern at possibility of poor quality restoration.

Maybe: could be worth considering as another possible facet of diversified rural businesses, especially through co-operation between landowners and tenants.

Greater protection for those who occupy housing built on leased land.

Introduce legislation to provide security of tenure and rights of access plus mechanism for setting rents and for settling other disputes.

This might be effected either by extending the Rent Act 1984 or, alternatively, specific new primary legislation could be introduced. However, it would be difficult to legislate retrospectively; legislation aimed at specific areas would probably mean a hybrid Bill; and, unless appropriate compensation was made, there might be ECHR difficulties.

There might be some extra work for the Rent Registration Service as a result.

Minor extra costs of administration, plus potentially substantial costs of compensation to affected landowners.

• Would remedy current difficulties (such as those experienced by the Carbeth hutters, for example) which present legislation cannot tackle.

• Might prove difficult to draft legislation which is tightly enough focused.
• Might mean a hybrid Bill, which always increases complexity.
• Large potential cost of compensation to affected landowners.

Maybe: but the relatively small numbers of those affected, the legislative difficulties and the potentially high resultant costs suggest there might be limited overall benefits.