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Long awaited Housing Bill introduced to Scottish Parliament

The long- awaited Housing (Scotland) Bill was introduced to the Scottish Parliament on 26 March 2024.

Land Reform (Scotland) Bill introduced March 2024

An overview of the content in Part 1 & 2 of the Land Reform (Scotland) Bill introduced to Parliament on 13 March 2024.

Land Reform (Scotland) Bill - Part 2 Leasing Land

We have prepared an overview of the content in Part 2 of the Land Reform (Scotland) Bill introduced to Parliament on 13 March 2024 on Leasing Land.

Part 2 – Leasing Land

Chapter 1

Model Lease for Environmental Purposes

Scottish Ministers are obliged, within 2 years of Royal Assent, to publish a model lease that can be used (wholly or partly) for an environmental purpose.

An environmental purpose is defined as:

  • for sustainable and regenerative agriculture,
  • in a way that contributes towards achieving the net-zero emissions target set by section A1 of the Climate Change (Scotland) Act 2009
  • in a way that contributes towards adaptation to climate change,
  • in a way that contributes towards increasing or sustaining biodiversity.

It is anticipated that the use could be partly environmental and partly agricultural.   It is not clear whether agricultural use could be the predominant use and, if so, whether the lease would sit outside the agricultural holdings legislation.

It is understood that use of the model lease will be optional and it is not intended to replace the existing forms of agricultural lease.

The Policy Memorandum suggests the proposal will be developed further with stakeholders.

Chapter 2

Small Landholdings

Small Landholdings are subject to their own unique statutory protections.   This is extended by the Bill to provide an enhanced framework aligning with parts of the agricultural holdings and crofting legislation.

The main changes are:

  1. Provision is made for the rent to be fixed by the Land Court 7 years after the previous order or following a diversification.
  2. The Bill introduces measures to allow small landholdings (or any part) to be used for purposes other than cultivation.  The process is very similar to that which applies to agricultural holdings.  Notwithstanding the landlord’s right to object to a diversification, the ultimate decision rests with the Land Court.
  3. Assignation and Succession. Small landholders are given similar assignation and succession rights to those which apply to 1991 Act tenants.
  4. The provisions for compensation for improvements are extended to address a decrease or increase in the value of the holding following diversification.  In the case of dispute there is provision for either party to apply the Tenant Farming Commissioner to appoint a valuer to determine the amount of compensation payable with a right of appeal to the Lands Tribunal.
  5. Right to Buy. Similar right to buy provisions to those which apply to 1991 Act tenants are granted to small landholders.
  6. The Tenant Farming Commissioner’s (TFC) functions are extended to small landholders.  The TFC may also publish new codes of practice about creating small landholdings and converting small landholdings to crofts.

Chapter 3

Agricultural Holdings

Tenant’s Right to Buy

The provisions introduced by the Land Reform (Scotland) Act 2016 (2016 Act) which removed the requirement for registration (and have not been implemented) are repealed.

Ministers are empowered, following further consultation, to make regulations providing for a wide range of changes to the right to buy provisions to include the manner in which tenants notify landlords of their interest, the registration procedure, how applications can be challenged, rectification of the Register and inaccuracies and the expiry or cancellation of an entry in the Register.

Resumption

The 1991 Act and the 2003 Act are amended to provide that in addition to the normal compensation claims such as rent reduction and improvements, the tenant is also entitled to receive a payment based on the ‘capital value’ in the lease.

This figure is arrived at by a similar process to the compensation that can be claimed in relation to relinquishment of land by the tenant, as introduced by the 2016 Act. The TFC is to appoint a valuer, whose expenses are payable by the landlord, and the procedure for valuation is set out in the Bill. The capital payment is to be half the difference between vacant possession and with tenant in occupation. There is an appeal mechanism to the Lands Tribunal and a point of law can be referred to the Land Court. The valuation provisions can be changed by regulations.

For a 1991 Act tenancy resumption is still only possible where a landlord has a right to resume (being a matter of contract determined by the lease).  However, additional provisions are introduced to bring the process into line with 2003 Act tenancies namely:

  • the Landlord must give written notice to the tenant of intention to resume not less than one year prior to date of resumption. It must be in a prescribed form, specify the date of resumption and be copied to the TFC.
  • The tenant on receipt of such a notice can terminate the tenancy by giving notice in writing to the landlord.

The Bill also makes a change to the disturbance payment claim (payable on termination by notice to quit or on resumption) giving the tenant the right to claim for costs incurred in connection with the development of the holding e.g. professional fees incurred obtaining planning permission or building warrants. 

Compensation for improvements

The Bill allows for a wider range of improvements to be compensated by substantially removing the fixed lists under Schedule 5 and introducing a new more flexible Schedule 5 comprised of 4 parts which sets out the new improvements for which compensation is payable.

Part 1 (Landlord consent required) – an improvement that makes a change to land or fixed equipment  that (a) means the land or equipment is unlikely to return to its former agricultural use, or (b) otherwise has a long term or significant impact on the management of the holding. A landlord’s refusal to consent can be overridden by the Land Court.  The fixed list is replaced by examples.

Part 2 (Tenant requires to give notice) – an improvement of a kind that makes a change to the land or fixed equipment but which does not have a long term or significant impact on the management of the holding as a whole. The fixed list is, again, replaced by examples.

Part 3 (No requirement for consent or notice) – a fixed list of minor improvements.

Part 4 (Covers both Landlord consent and Tenant notice cases) – this refers to some of the improvements referred to in parts 1 and 2 which are presumed to facilitate or enhance sustainable and regenerative agriculture unless the contrary is shown. It appears the purpose of this part is to inform the Land Court which must consider if a proposed improvement satisfies this requirement in circumstances where the landlord refuses to consent or has objected to an improvement and the decision sits with the Land Court.

Diversification

The Bill introduces changes to both 1991 Act and 2003 Act tenancies requiring a tenant to specify any environmental benefit arising from the proposed diversification and in the case of an objecting landlord, to show that the diversification would substantially prejudice the use of the whole of the tenant farmer’s holding (rather than the part directly affected) for the purpose of sustainable and regenerative agriculture in the future.

Landords will also need to explain why their grounds for objection or imposition of conditions to a diversification proposal are reasonable.

In determining whether a landlord’s objection or imposed conditions are reasonable the Land Court must consider whether the proposed diversification has perceived environmental benefits.

As part of the process a tenant will also be able to serve an “extension notice” which would pause the approval process for thirty days.  This is intended to make it easier for the parties to reach agreement where possible.

In circumstances where the tenant’s diversification has enhanced the value of the holding, the tenant will be entitled to claim compensation from the landlord at the end of the tenancy based on its value to a hypothetical incoming tenant provided the diversification has not substantially prejudiced the use of the whole holding for sustainable and regenerative agriculture.

The list of topics which the TFC is to consider including in his codes of practice providing practical guidance is extended to include “the use of the land for non-agricultural purposes”.

Compensation for damage by game

The 1991 Act is amended to enable tenants to claim compensation for a wider range of losses caused by game (deer, pheasants, partridges and grouse) and also, importantly, game management.

Game management is defined as the killing and taking of game and any steps taken or not taken by a person in connection with the exercise of a right to kill and take game.

A tenant is entitled to be compensated for damage to:

  • crops grown or seeds sown for agricultural or permitted non- agricultural purposes
  • trees grown for agricultural or permitted non-agricultural purposes
  • fixed equipment
  • livestock
  • habitats

The landlord needs to be given reasonable opportunity to inspect the damage before harvesting or other steps are taken which limit the ability to see and understand the damage.

The provisions only apply if the tenant does not have the right to shoot game, which includes deer.  Under the Deer Acts a farmer has a right to shoot deer to prevent damage to crops, pasture, enclosed woodland etc. It is not stated how the Bill interacts with this.

Standard Claim Procedure – Waygo

Ministers may by regulations apply a new “Standard Claim Procedure” (SCP) to any compensation to which a party to a 1991 Act or 2003 Act tenancy is entitled.  There is also provision for interest to be paid at 1.5% above the Bank of England base rate on late payment of any compensation due as set out in the SCP.

The SCP requires that claims must be notified more than 9 months before the relevant date and paid within 2 months of that date.

The notice must provide details of the claim and nominate a valuer.  If the respondent objects to the valuer and agreement cannot be reached, then the TFC will appoint an independent valuer with suitable knowledge and experience.  Either party can appeal against the TFC appointed valuer on grounds of non-independence or lack of knowledge and experience in which case the Land Court will determine the matter (which may involve appointing another valuer).

The SCP also sets out the basis on which the valuer is to go about assessing the value of the claim including receiving representations from the parties and giving power to the valuer to apply to the Land Court for an order to require compliance by the parties with the process.  A time frame is set out for the process to follow.  There is scope for appeal to the Lands Tribunal.

Rent Review

The Bill introduces modifications to the (not yet implemented) rent review processes introduced by the 2016 Act.

The provisions will affect: 1991 Act tenancies, Limited Duration Tenancies, Modern Limited Duration Tenancies and Repairing Tenancies.

The statutory procedure now requires the Land Court, in determining a fair rent for the holding, to have regard to:

  • (a) the productive capacity of the holding,
  • (b) the open market rent of any fixed equipment provided by the landlord for a non agricultural purpose,
  • (c) the open market rent of any land used for a non agricultural purpose
  • (d) the rent payable on similar holdings; and
  • (e) the prevailing economic conditions in the applicable sectors of agriculture.

Ministers may by regulations make further provision in relation to (a) to (e) above.  They must consult in advance and any regulations would be subject to the affirmative procedure (requiring a vote in the Scottish Parliament).

Rules of good husbandry and estate management

The Bill reforms the current rules of good estate management and good husbandry in the Agriculture (Scotland) Act 1948.

Greater emphasis is placed on sustainable and regenerative farming and in the case of good husbandry on the health and welfare of livestock.

View detailed summary of Part 1 – Large Landholdings

View Land Reform (Scotland) Bill Overview

If you have any questions or would like to discuss the Land Reform (Scotland) Bill further, please get in touch with a member of our Land & Rural Business team.

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