Rent, rent and rent again
The Rent Review Working Group's report, and the Land Court's guidance note in response
It is no surprise that rent review continues to dominate debate around the potential reform of the Agricultural Holdings (Scotland) Acts, following the opposing decisions of the Land Court and the Court of Session in the Moonzie case.
Since my December briefing, two things have happened:
Rent Review Working Group
As I indicated was then imminent, the Rent Review Working Group (RRWG) issued its report to the Tenant Farming Forum and the Scottish Government on 28 November 2012. It made the following recommendations:
- First and foremost, no amendment was required to the statutory review framework contained in s 13 of the 1991 Act (as amended), which is a tried and tested formula, also bearing in mind that the vast majority of rent reviews are settled by negotiation. In reaching this conclusion it found that: (a) rents of LDT and SLDT can be adjusted to make a fair comparison with the subject holding, just as it is possible to do so with 1991 Act comparables; and (b) the productive and earning capacities of the holding (the STFA’s preferred method) were not factors which should be taken into account.
- To improve understanding of s 13, there should be developed (i) a practitioners’ guide on procedure and methodology for reviews; (ii) an explanatory note for issue with rent review notices; and (iii) a lay person’s guide to current legislation.
- Access to information on comparable rents should be improved by the establishment and maintenance by an impartial entity of a voluntary rent register.
- The review process should be accelerated, and costs reduced, by: (a) engaging with the Land Court to develop a simplified case management procedure, including the issue, prior to the review date, by the party seeking the review to the Land Court of a notice of his intention to do so instead of an application as such, pre-application discussion, an agreed schedule of relevant information, abbreviated pleadings, a preliminary hearing, and empowerment of a specialist court; (b) encouraging ADR, including arbitration, reference to an expert (with suggestions as to procedure etc), mediation, and “early neutral evaluation”.
The Land Court
The Land Court’s response to the RRWG’s report has been to issue a guidance note on rent review, containing the following main elements:
Negotiation: The court strongly encourages negotiation by the parties at all stages and will, if necessary, sist an application to facilitate discussion so that as many factual and other matters as possible can be agreed before the hearing, which can then be restricted to the central issues.
Onus on parties: Both parties will be required to co-operate with the court at all times, to disclose their cases fully with relevant issues spelled out, and to lead such evidence as will enable the court to make its decision. A particular responsibility is placed on applicants to set out their contentions in detail, so that answers can be focused and adjustments minimised.
Evidence: The court leaves it to the parties to decide what evidence to present but, as a general guide, it will expect them to provide, not only for the holding itself but also for comparables:
- A description of the land, including areas and categories, together with comments on stocking and cropping capacities. Use of plans (including IACS plans) and photographs is encouraged.
- Aspects of the lease, including details of any post-lease agreements and other conditions, which are relevant to the rent.
- Details of landlord’s fixed equipment and tenant’s improvements.
- Details of any particular advantages or disadvantages which the various farms concerned have and how these might bear on the rent.
Practitioners should now be in no doubt as to the basis for rent review and what is expected of them by the Land Court. It is also clear, however, that we are not at the end of this debate, there having been a very mixed reaction from landlords’ and tenants’ interest groups to the RRWG report.
Alasdair G Fox, consultant, Anderson Strathern LLP