Section E: Modernisation of Agricultural Tenancies
Agreement to Diversification
The consultation paper discussed a proposal relating to agreement to diversification, namely that there should be a power for Scottish Ministers to determine what is an acceptable diversification. This will help to enable national biodiversity, climate change mitigation and adaptation needs to be met by tenant farmers.
Agreement to diversification
Tables 48-49 (Appendix 3) provide the frequency tables to questions on agreement to diversification. Below is a summary of results among those who responded to these questions:
- 50% of respondents agreed that Scottish Ministers should have a power to be able to determine what is an acceptable diversification, while 28% disagreed.
- 66% of respondents think that if this power is given to Scottish Ministers that the Tenant Farming Commissioner should have the ability to issue guidance to assist tenant farmers and landlords to understand this, while 15% do not think that this should be the case.
There was some agreement that Scottish Ministers should be able to determine what diversification is to encourage biodiversity and combat climate change.
Conversely, some responses noted that some businesses need to diversify to survive, and that such steps towards resilience should be permissible without a link to biodiversity or climate change:
“Yes, but let's not focus solely on biodiversity or climate change in these changes. It is of equal importance that tenant farming businesses are resilient. They are currently held back by a system that allows landlords to refuse or stall enterprise. This must change. A diversification must not be linked to biodiversity or climate change targets […] For example, the tenanted farm may want to open a farm shop which does not necessarily meet the biodiversity or climate change criteria” – [Individual, Farmer – tenant (including seasonal lets)].
There was some emphasis that local circumstances often require rapid and local solutions, which Ministers may not be able to adequately provide if they are too distant from such issues. Some respondents discussed concerns about the potential politicisation of agriculture, and felt that matters such as diversification should be managed by a committee or similar system.
There was also concern raised with the language in this section in terms of what mechanisms will be used when describing the powers of Scottish Ministers, it was stressed that industry scrutiny would be needed in relation to agricultural holdings to ensure they are fit for the purpose of food production. It was stated that without this detail on the type and scale of diversifications that it wasn’t appropriate to answer further.
Many respondents agreed that The Tenant Farming Commissioner (TTFC) would best placed to advise Ministers and offer guidance to tenant farmers and land owners, with some pointing out that it is often easier to receive unwelcome 'guidance' from an impartial body.
On the other hand, others felt that information around what constitutes an acceptable diversification should be made clear and simple enough that interference by a third party would be unnecessary.
Waygo and Schedule 5 of the Agricultural Holdings (Scotland) Act 1991
The consultation paper discussed several proposals relating to Waygo and Schedule 5 of the Agricultural Holdings (Scotland) Act 1991, including:
- To amend Schedule 5 of the Agricultural Holdings (Scotland) Act 1991 to enable a wider range of activities to be included on Schedule 5 as factors to be taken into consideration in calculating waygo
- To introduce a set timescale to conclude the process of waygo.
Tables 50-52 (Appendix 3) provide the frequency tables to questions on Waygo and Schedule 5 of the Agricultural Holdings (Scotland) Act 1991. Below is a summary of results among those who responded to these questions:
- 53% of respondents agreed that Scottish Ministers should add new activities and items onto Schedule 5 of the Agricultural Holdings (Scotland) Act 1991 to enable tenant farmers to support biodiversity and undertake climate change mitigation and adaptation activity on their tenant farms, while 18% disagreed.
- 47% of respondents agreed that Scottish Ministers should have a power to amend Schedule 5 of the Agricultural Holdings (Scotland) Act 1991 by secondary legislation to enable Schedule 5 to be changed to meet the future challenges, while 24% disagreed.
- 76% of respondents agreed that when an agricultural tenancy comes to an end a tenant farmer should have certainty about the timescale by when they will receive any money due to them, and their landlord should also have a similar certainty. 3% of respondents disagreed, while 21% said they did not know.
The ability of Scottish Ministers to add new activities and items onto Schedule 5 of the Agricultural Holdings (Scotland) Act 1991 was seen as imperative to ensuring fairness, creating financially sustainable tenancies, and encouraging tenants to make improvements to meet modern-day challenges.
Some responses pointed out that some current pressing issues were largely unacknowledged when the Act was drawn up in 1991, and so changes are needed to make it fit for the future. For instance, it was suggested that Schedule 5 be updated to allow tenants to engage in climate change mitigation and biodiversity targets.
In some cases, support for this was dependent on what the activities and items entail. There were calls for more detail around the types of activities and items that could be added, while others noted a need for discussions with tenant stakeholders to find out what they would like to see included.
Many outlined an understanding of the rationale for using secondary, rather than primary, legislation. However, it was felt that Schedule 5 should instead be brought forward in primary legislation so that there is the opportunity for proper industry, public and parliamentary scrutiny. Others also felt the proposals lacked enough thought and required clarification before they could be commented on appropriately.
Some respondents were of the view that Scottish Ministers should not be able to force retrospective legislation changes which will affect the terms of the agreement without the consent of both parties.
In contrast, a vocal minority felt that these issues should not be dealt with by legislation of any kind, but rather be left to landlord and tenant to agree. Through mutual interest, these responses felt that both parties could reach a suitable agreement without government intervention.
Many responses also believed that it was fair and important that both tenant farmer and landlord have certainty around when they will receive any money due to them when a tenancy comes to an end. However, some responses were hesitant to see government intervention in this area without a clear understanding of the timeframes proposed, as it may take some time for companies to arrange money at waygo. However, many responses felt that a timeframe of approximately a year would be suitable in most cases.
Amendments to rules of good husbandry and good estate management
The majority (68%) of respondents to this question agree that the Scottish Ministers should be able to amend the rules of good husbandry and good estate management defined in the Agricultural Holdings (Scotland) Act 1948 to enable tenant farmers and their landlords to be able to meet future global challenges, while 11% disagreed.
Many responses were supportive of amendments to the rules of good husbandry and estate management. In general, responses referenced a need to modernise the rules such that they were reflective of current best practice.
‘Good husbandry is no longer only about keeping land to maintain its productive capacity, it is also about the delivery of the wide range of other benefits that good land management delivers. These benefits include protecting water from pollution, protecting and enhancing soil carbon stocks and providing habitat for different plants and animals.’ [Organisation, O ther]
Despite the desire for modernisation to legislation, many responses suggested this issue would be better managed between landlord and tenant, without Scottish Government interference. Additionally, a small minority deemed current rules and regulations sufficiently suitable without changes.
‘Tenants and their landlords should be encourages to discuss such matters and, if they are in agreement, they should be able to amend their tenancy easily and cheaply rather than the bludgeon of legislation’ [Individual, F armer – owner occupied]
Responses also expressed apprehension in relation to how amendments to these rules would function in practice, requesting more details to form an opinion.
The consultation document proposes changing the law to remove rent sections in the Land Reform (Scotland) Act 2016 to make the following 3 things important for each lease:
1. Considering other tenant farmers’ rents if they have secure or fixed time length tenancies;
2. Valuing the possible money to be made farming by that tenant farmer using a farm budget;
3. And thinking about the future economic outlook for the next 3 years.
- 56% of respondents agreed that adaptability and negotiation in rent calculations are required to meet the global challenges of the future, while 5% disagreed and 39% did not know.
- 32% of respondents think there are other relevant considerations that should be included in part of a rent review.
While responses were generally supportive of a rent review, there was little consensus about what best practice would look like in this regard. Some responses discussed following open market value, value based on earning potential, and more.
Responses were also generally positive about adding flexibility to rent reviews. However, two main concerns were raised with the Scottish Government plan:
- Respondents indicated that the 3-year projection was potentially flawed, as demonstrated by the instability in the industry recently and general fluctuations. Many felt this impossible to quantify under current or future conditions.
- Some responses were apprehensive about comparable rents, unsure what would make rents comparable. In particular, these responses emphasised that rents cannot be compared between secure tenancies and LDTs.
When asked if there are any other relevant considerations that should be included in part of a rent review. Included below is a list of the suggestions of factors that should be included in part of a rent review that were made:
- Any averages used for rent calculations should be based on a number of years rather than a single year to allow for fluctuations
- Profitability of the land
- Value of any housing/sheds and steadings on the land
- Calculations should be made on a case-by-case basis
- Tenant characteristics such as age and previous farming experience
- Landownership should be transferred to the community
- Standard of farming
- Rate of inflation
- Time limits for when agreements must be reached
- Soil structure
- Location, topography, weather, accessibility etc...
- Sustainability/Environmental impact of farm
The consultation document puts forward the question of whether or not respondents think that the money to be paid to a tenant farmer by their landlord for a disturbance should be changed. This would involve a change to the valuation of what a tenant farmer is owed from their landlord when the landlord resumes using the land, a process called ‘resumption’.
Around a quarter (26%) of respondents consider that Scottish Ministers should amend the resumption provisions on compensation for disturbance to include a new valuation formula, while 20% do not, and 53% don’t know.
As with the previous question on rent reviews, there are very few ‘themes’ to identify and so instead a list of suggestions are presented below:
Firstly, several respondents viewed this question and part of the consultation paper as unclear. Many remarked that the paper is not clear on whether it is referring to resumption, relinquishment, or notice to quit.
“The commentary in the consultation document is confused. It refers to both notices to quit and resumption as if they were the same process. This is incorrect. It is not at all clear if only resumption is affected and if so whether only whole farm resumption is affected. It is also not clear what leases the proposal is to be applied to.” [Organisation, Other]
Of those respondents who felt they were able to directly answer the question, very few consistent ‘themes’ were obvious. On one hand, several respondents did not want these laws to change.
“There is already provision on resumption for disturbance and discussion and landlords' rights should not be so easily dismissed for political reasons.” [Farmer owner occupied]
A small minority of respondents argued that the Scottish approach is excessively complex and instead Scotland should align with England’s Agricultural Tenancies Act 1995.
In terms of specific changes that could be made to valuation, the following suggestions were tabled regarding how specific needs of tenants/tenant landlord relations should be valued:
- Creation of a landlord-tenant body
- Compensation for costs associated with moving and finding alternative land
- Tenant age
- Value added by the tenant to the land
The following suggestions were made regarding how valuations should specifically be calculated, including:
- Longer valuation periods: to allow for fluctuations that could occur in a single year.
- Independent valuations by experts
- 50% vacant possession premium/vacant possession value
- 50% open market land value
- 25% of increase in value of the vacant possession of the land resumed
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