Where the bill falls short
Agriculture briefing: an update on the delegated powers in the Land Reform (Scotland) Bill, and on the various guidance notes now in place following agreement between landlord and tenant bodies
Land Reform (Scotland) Bill
The bill is under scrutiny by the Rural Affairs, Climate Change & Environment Committee, which referred it to the Delegated Powers & Law Reform Committee (DPLRC). The DPLRC issued its stage 1 report having reviewed the bill against three principles:
(1) Delegated powers should be framed as narrowly as possible in order to deliver defined policy objectives.
(2) Policies which interact significantly with individuals’ ECHR rights should be developed in full in bills and not deferred to regulations.
(3) Delegated powers should not be taken in bills in the absence of policy in a particular area having been fully developed.
Generally, DPLRC was content with the powers proposed, but in certain cases it found EHCR incompatibility, in particular:
- s 79: conversion of 1991 Act tenancy to modern LDT;
- s 81: sale of holding to tenant following an order from the Land Court because of landlord’s breach of tenancy obligations;
- ss 82 and 83: rent review notices.
Regarding ss 79, 82 and 83, DPLRC considered that significant aspects of underlying policy were still under development or consultation, resulting in insufficient information for it to consider how the powers would be exercised. Powers were being reserved in substitute for the development of policies. It could not confirm whether s 79 would be exercised in an ECHR compatible manner.
DPLRC observed that the consequence of leaving policies to be developed in this manner is that the Parliament does not have the opportunity for amendment which it has for primary legislation. DPLRC recommended amending the bill to enable the Parliament to be consulted over the regulations, with power to take evidence and report on them before approval.
In 2014 NFU Scotland, Scottish Land & Estates and the Scottish Tenant Farmers Association issued guidance (www.gov.scot/Resource/0045/00457974.pdf) on the conduct of rent reviews, designed to deal with uncertainty following the decisions in the Moonzie and Roxburghe Mains cases.
These organisations have liaised with the Scottish Government’s Independent Adviser on Tenant Farming, Andrew Thin, to continue the development and promotion of industry guidance. As part of this initiative, guidelines have been issued on limited partnerships, tenants’ improvements and further on rent reviews.
The guidance applies to limited partnerships which are nearing or have passed their dissolution dates. It recommends a six-step process by which partners are encouraged to enter into dialogue, and includes provision for professional mediation and resolution should that become necessary.
The industry bodies will measure success of the guidance by monitoring the proportion of limited partnerships which, as they approach their end date, are extended or replaced by new, long term management arrangements.
The 2014 guidance was updated as an interim measure pending enactment of the bill, which proposes to change the basis of rent review from the current market formula (ascertained by reference to rents on comparable holdings) to one based on the potential productive capacity of the holding. The guidance is underpinned by three principles:
(1) Rent should be charged only on land and fixed equipment provided by the landlord and should ignore income attributable to tenant’s improvements or fixtures.
(2) Proposals and counterproposals should be presented in a form that is transparent, containing sufficient detail to enable each party to understand and verify the other’s calculations.
(3) Each party should be afforded sufficient time to give consideration to proposals or counterproposals tabled by the other.
These guidelines address concerns about the lack of agreed records of improvements for a significant number of tenanted
farms, which can lead to unpredictability and disagreement in rent reviews, inhibit investment by tenants and discourage tenants’ retirement.
The guidance aims to provide a framework to encourage parties to agree the requirement for recording improvements. Parties are encouraged to take a similar approach to tenants’ fixtures. The three core principles are:
1. Landlords and tenants have a shared responsibility to ensure new improvements are agreed and recorded before implementation.
2. Notwithstanding the proposed retrospective amnesty, tenants should not expect a new improvement to be treated as a tenant’s improvement unless all statutory requirements are met.
3. Landlords should not unreasonably object to an improvement, and in particular, should not object to (a) investment in fixed equipment or land improvement which is desirable on agricultural grounds for efficient management; (b) upgrading of living accommodation to modern standards; or (c) environmental enhancement or business diversification where this is encouraged and financially supported by Government schemes.
The guidance sets out a step by step process, normally initiated by the tenant, including informal preliminary discussions, written proposals and counterproposals, and on-farm discussions. Provision is made for mediation where discussions and written exchanges fail to produce agreement.
The guidance notes have no statutory basis and are built on an assumption that parties will act reasonably. However, once the Tenant Farming Commissioner is officially appointed they may be converted into statutory codes of practice.
Adèle Nicol, partner, Anderson Strathern LLP