The long anticipated consultation on the Scottish Government’s proposals to amend the Agricultural Holdings Acts 1991 and 2003 has now been published.
One of the most significant proposals is reducing the term of a limited duration tenancy (LDT) from 15 to 10 years. Another is to allow a short limited duration tenancy (SLDT) at any time during or at the end of the five-year period to convert into an LDT for a total period of 10 years, taking into account the original period of the SLDT.
At present, if a five-year SLDT continues for a sixth year it automatically converts into a 15-year LDT, resulting in a total of a 20 year lease.
These are welcome changes. However, they still don’t allow landlords and tenants to agree to lease land for any period that they wish. Under the current proposals they could not easily enter into, for example, an eight-year lease.
We have an opportunity at this moment to make a fundamental change and abolish the distinction between an SLDT and an LDT and allow more freedom of contract to landlords and tenants. Tinkering around the edges will result in lawyers trying to find ways around the legislation to meet the requirements of the two contracting parties. Why not make the legislation flexible in the first place, to allow it to deal with the realities and requirements of the 21st century?
Changes that are proposed in regards to setting out the nature of the farming enterprise and the fixed equipment to be provided at the start of the lease are a step in the right direction as, at present, there is ambiguity as to what fixed equipment the landlord is to provide.
Another step further would be, for example, a landlord letting bare land does not have to provide any fixed equipment or, if any fixed equipment is provided, then the tenant is able to accept the fixed equipment in its current condition subject to the proviso that, unless they agree to do so, they do not have to maintain or repair it to any better standard than it was at the start of the lease.
Landlords may be concerned about having to spend money improving fixed equipment, such as fences, but a tenant may be quite happy to accept them in a rundown state. There could be scope to include this in the lease. Any perceived barrier or additional cost the landlord may have to incur is a disincentive for them to let land. One of the main purposes of this legislation is to allow more land to be leased.
A slightly technical amendment is being made to the definition of a “two man unit” and replacing that definition by reference to a “viable unit”. The draft legislation refers to full time employment being a necessary precondition of the definition of a viable unit.
Many existing farmers and potential new entrants to the industry may need to derive income from employment outwith the farm, so it doesn’t seem sensible to insist that a farm has to provide the tenant farmer with full time work.
The reality of modern day farming is that it may take many hundreds of acres to provide full employment for one person. Surely, it is up to the tenant to decide whether a unit is viable or not. As long as they can pay the rent and maintain the holding and farm in accordance with the rules of good husbandry that should be sufficient.
This consultation provides an opportunity to have a fundamental and radical rethink of the realities of the farming industry and allow it a much greater degree of flexibility to be given in new leases than the current proposals would seem to allow. It is therefore worthwhile having a careful look at these proposals and make your views known to the Scottish Government by 8 December 2010.Colin Clark is a partner with Pagan Osborne and an accredited specialist in agricultural law