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A security loophole

10 December 12

An update on land and agricultural law reviews currently underway, and a case that appears to have found a way round farming security of tenure

by Alasdair Fox

The last quarter has witnessed a good deal of activity on the rural front.

The Land Reform Review Group, set up in July 2012 with a general remit to review and “deliver radical change for both rural and urban areas, developing new ideas which will improve current legislation as well as generating even more innovative proposals”, has issued a call for evidence by 11 January 2013. A number of areas for potential reform have already been identified, including the expansion of community ownership, community participation in the planning of land use and management, diversification of land ownership and, most importantly, agricultural tenants’ right to buy, a land value tax and changes to the law of succession as it affects land ownership. Other ideas are invited.

The Tenant Farming Forum has been asked by the Cabinet Secretary to consider, within a short timescale, whether changes are required to the Agricultural Holdings (Scotland) Acts in relation to fixed equipment, repair and renewal, diversification, investment in holdings, tenants’ improvements, waygoing compensation, dispute resolution, assignation and succession – what else is there!?

TFF has established the Rent Review Working Group to consider whether changes are required to the rent review provisions (s 13 of the 1991 Act as amended); it was due to issue its report at the end of November. The group has the unenviable task of squaring a circle in which the two main interest groups hold diametrically opposed positions.

A second, longer term TFF working group has been set up to consider how accurate data can be collected, to better inform the debate round agricultural holdings.

The First Division issued an interesting opinion, as a special case, in Trustees of the Late Sir Dennis Mountain [2012] CSIH 73 (28 September 2012). This concerned whether a draft lease purporting to implement a condition of a bequest would constitute a 1991 Act tenancy, a short limited duration tenancy (SLDT), or a limited duration tenancy (LDT).

The landlord (the trustees) proposed to let to the tenant (the deceased’s elder son), or any general partnership in which he was a bona fide general partner, land which had been bequeathed to a younger brother, “for the lifetime of the tenant only or for such lesser period as the tenant shall farm as an individual or as a general partner in a bona fide partnership”. The “liferent lease” was to be subject to a number of conditions, including that it was to subsist until the earlier of the death of the tenant, or his ceasing for his own part or as a general partner in a bona fide partnership to farm the farm, when it was to terminate ipso facto without notice.

In the Lord President’s opinion the draft lease would create neither a 1991 Act tenancy nor a SLDT or LDT. It could not be a 1991 Act lease for the simple reason that it contained no provision, such as is required by s 1 of the 2003 Act, that the Act was to apply to it. Although the point was, for that reason, academic, Lord Gill opined that a liferent lease did not fall within the definition of a lease contained in s 85 of the 1991 Act, which included a lease for “lives”, but not one for “a life” – the plural could not, in this case, be presumed to include the singular as the definition in terms of years included the singular “year to year”.

Nor, in the court’s opinion, could it be a SLDT or an LDT, because it was not for one of the fixed durations specified for such leases in the 2003 Act (as amended).

It would, nevertheless, be a valid lease of agricultural land outwith the scope of the Acts, conferring on the tenant only the rights available to him ex contractu. In reaching that conclusion, Lord Gill noted that it was to be granted for an unambiguous contractual duration (the lifetime of the tenant), the provision relating to his ceasing to farm the land being a resolutive condition specifying an event the occurrence of which would bring the lease to an end earlier, which would not invalidate the lease as such.

The court’s opinion raises the obvious question of whether a way has been found to let agricultural land unfettered by the statutory restrictions of the Acts, by providing for termination on an event which is bound to occur, but of which the date is unknown when the lease is granted. On the face of it, that appears to be the case, so clearly stated is the Lord President’s opinion. That said, I cannot imagine that it would be long before the Scottish Parliament closed the loophole.

Interesting times.

Alasdair Fox, consultant, Anderson Strathern LLP

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