Residential property
30 Oct 2017 News

The Modern Limited Duration Tenancy

With effect from 30 November 2017 the now familiar Limited Duration Tenancy will no longer be an option for longer term letting of agricultural land. Instead any new leases of more than 5 years duration will be a Modern Limited Duration Tenancy (MLDT), as a result of sections 74 to 78 of the Land Reform (Scotland) Act 2016 coming into force.

Existing Limited Duration Tenancy (LDT) leases will continue unaffected, but a new letting, or where a Short Limited Duration Tenancy (SLDT) continues beyond a 5 year term, will be an MLDT.

Many of the features of the MLDT are familiar, for example the minimum term is 10 years, and where an SLDT continues beyond 5 years it converts to an MLDT which is deemed to have commenced on the original start date of the SLDT. As with an LDT it’s possible to terminate an MLDT early by agreement reached after the lease has commenced. Where differences start to appear between an MLDT and an existing LDT is in relation to extension and termination.

New Entrants

Firstly, where the tenant is a “new entrant” an MLDT can include a break clause, allowing termination after 5 years. The tenant can terminate by serving a notice to that effect at least 1 year and not more than 2 years before the break date. The tenant doesn’t need to give any reason for exercising the break. The landlord can terminate at the break by serving written notice in the same period, but the landlord’s notice must state the landlord’s reasons for terminating the tenancy. In addition, regardless of what the notice says, the landlord can only terminate at the break if the tenant isn’t using the land in accordance with the rules of good husbandry, or is failing to comply with the terms of the lease. 

Regulations have been made which define a “new entrant” for the purposes of including a break clause in an MLDT.  The Government has chosen to define who is not a new entrant, so persons who are already tenants under an LDT, another MLDT, or a 1991 Act tenancy, a crofter or small landholder or has been a tenant for at least 3 years under an SLDT within the last 5 years, or a person who owns more than 3 hectares cannot be new entrants. By definition everyone else is.

Termination

At the expiry of the term of an MLDT the tenant can terminate the tenancy by giving written notice no less than 1 year, and not more than 2 years, before the expiry date. The landlord however must go through a double notice procedure, as presently exists for an LDT. Unlike an LDT however, if the notice isn’t given, the default position under the Act is that an MLDT will continue for a further 7 years, subject to the ability to terminate early by agreement.

Irritancy

The new Act starts off on much the same footing as the 2003 Act - it is for the parties to provide what grounds there are for irritancy, with the same provision that any ground of irritancy based on non-residence is of no effect. If the landlord proposes to irritate an MLDT, he must give a warning notice in writing, specifying the breach that he intends to found on and giving the tenant at least 12 months to remedy the breach. The 12 month period can be extended, either by agreement or by the Land Court on application by the tenant. If the breach is not remedied and the landlord wishes to remove the tenant, a further notice must be given at least 2 months before the date on which the tenant is to be removed.

Fixed Equipment

The usual provisions about the landlord providing the fixed equipment at the commencement of the tenancy will apply to an MLDT, however the schedule detailing it and its condition is to be prepared within 90 days (as opposed to 6 months for an LDT). A major difference is that the Bill includes a provision that the parties can agree in the lease which of them is to effect replacements and renewals during the term of the lease. The default position is as per the current regime, i.e. the landlord is to effect replacements and renewals of fixed equipment, and the tenant is to maintain it, natural decay and fair wear and tear excepted.

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