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Enter yet another tenancy

11 December 17

Agriculture briefing: an outline of the new modern limited duration tenancy, now in force – with late regulations to ensure all the relevant provisions have been applied

by Adèle Nicol

From 30 November 2017 the modern limited duration tenancy (MLDT) replaces the limited duration tenancy (LDT) as the vehicle for new lettings of agricultural land for 10 or more years. 

The MLDT was created by s 85 of the Land Reform (Scotland) Act 2016, inserting s 5A into the Agricultural Holdings (Scotland) Act 2003. The differences from the LDT are not great, although the MLDT will allow greater flexibility for negotiation over fixed equipment and the purposes of the lease.

Key features

Any new tenancy for 10 years or more (unless a 1991 Act tenancy) entered on or after 30 November will be a MLDT, as will one purporting to be for more than five but less than 10 years. It may contain a break after five years for a new entrant to farming, defined in the Agricultural Holdings (Modern Limited Duration Tenancies and Consequential etc Provisions) (Scotland) Regulations 2017 (SSI 2017/300). A tenant is not a “new entrant” if at any point within the five years prior to the MLDT being entered into they:

  • are a tenant under a LDT, or another MLDT, or a secure 1991 Act tenancy; or
  • are a small landholder; or
  • are a crofter; or
  • have been a tenant under a short limited duration tenancy (SLDT) for three years or more within the preceding five years; or
  • own more than three hectares of land in aggregate.

The 2016 Act imposes default statutory terms in relation to the landlord’s obligations for the renewal of fixed equipment. These may be contractually varied within the MLDT.

Termination and continuation

The MLDT retains the two-stage notice procedure, and may be terminated by the landlord serving notice of intention to quit at least two years and no more than three years before the expiry, followed by a second notice to quit served at least one year and no more than two years before the expiry. 

If the landlord fails to serve the dual notices there are no short or long continuations, as currently apply to LDTs: a MLDT will continue automatically for seven years if not properly terminated. A MLDT may be extended by agreement.

In addition, in the case of a lease to a “new entrant” the landlord can exercise a break after five years (subject to having given notice) if the tenant is not using the land in accordance with the rules of good husbandry or is breaching a term of the lease. A new entrant tenant may exercise the break option without giving a reason.

Subletting will be permitted if the lease specifically allows it. It will be terminable by agreement after the tenancy has started.

A MLDT may contain an irritancy clause as agreed by the parties, though non-residence will not be a ground for irritancy nor will the tenant be in breach of the rules of good husbandry in respect of conservation activities. The landlord must give the tenant at least a year’s notice to remedy the breach on which he intends to irritate the lease, plus a further two months’ notice following expiry of the initial notice if the tenant has failed to remedy the breach. This applies to all breaches, including non-payment of rent. 

Existing LDTs will remain in place, although there is scope for voluntary conversion of both secure 1991 Act tenancies and LDTs to MLDTs if parties agree.

Properly in force?

At the time of writing, there seems to be an omission in the implementation of the relevant sections amending the 2003 Act. Section 102(2) of the 2016 Act brings MLDT and repairing tenancies into the framework of the existing s 9 (rent review provisions) in the 2003 Act, but has yet to have a commencement date appointed. Without s 102(2)(b) there is no statutory mechanism for reviewing a MLDT. 

Sections 9A, 9B and 9C of the 2003 Act, when implemented, bring in new regimes for rent reviews for all types of tenancy (1991 Act, SLDT, MLDT and repairing tenancy). The commencement date for these sections is still to be appointed. Thus until such time as s 9 is amended to include reference to MLDT, there is no default statutory provision for rent review for MLDT. It would be advisable therefore for any MLDT entered into on or after 30 November to contain specific rent review provision, even if that is simply to state that the mechanism will be the formula set out in s 9 of the 2003 Act. [Late news: SSI 2017/416, made on 22 November 2017 and in force 30 November 2017, is intended to cure this omission.]

New codes of practice

The new Tenant Farming Commissioner, Bob Macintosh, has issued three further codes of practice. The first deals with the amnesty for tenants' improvements; the second with planning the future of limited partnerships; and the third the management of the relationship between agricultural tenants and the holder of sporting rights. All are available on the Scottish Land Commission's website (landcommission.gov.scot/tenant-farming/).

Also on the website, the commissioner has issued an invitation for landlords and tenants to take part in a survey of views on agents’ conduct, with a view to the commissioner completing a review and making recommendations to ministers by March 2018.

Adèle Nicol, partner, Anderson Strathern LLP

 

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