Crofting and Scottish Land Court Bill: business and regulatory impact assessment

Section 1: Background, aims and options

Background to policy issue

Crofting

38. In 2021, the Scottish Government published its National Development Plan for Crofting^[1], setting out the importance of crofting across the Highlands and Islands and the need for the development of crofting, its communities, its economic strength and its contribution to the environment. The National Development Plan was accompanied by Scottish Government investment in a renewed development role for the Crofting Commission, and it also set out plans for reforming crofting legislation.

39. The principal legislation for crofting is the Crofters (Scotland) Act 1993 ("the 1993 Act"), as amended. The last time the Scottish Parliament made significant reforms to crofting law was in 2010 through the Crofting Reform (Scotland) Act 2010 ("the 2010 Act"). Virtually all of the crofting provisions in the Bill are to modify the 1993 Act or the 2010 Act, which will remain the two Acts governing crofting and its regulations.

40. In early 2022, the Scottish Government confirmed its intention to take forward crofting law reform and, in May 2022, reinstated the Crofting Bill Group, which comprises a wide range of stakeholders, to consider and refine the necessary proposals. The proposals under consideration came from a number of sources. Chief among these were the proposals previously identified by a Crofting Bill Team and Crofting Bill Group in 2016-19; ideas put forward for consideration by the Crofting Commission; a 2020 paper on Crofting Law Reform from the Law Society of Scotland, and the Scottish Government's own policies.

41. Although crofting reform over the years has led to profound changes and improvements, the sector faces continuing challenges and opportunities. While many crofters are active members of their communities and working their land productively, too many crofts are currently in the hands of those who are not able, or not willing, to use their land. Similarly, although there has been an upturn in the number of active grazings committees, they and the landowners face complex processes if they wish to take forward environmental initiatives.

42. Crofting law is also very complex, and processes are often unnecessarily lengthy for both the crofter and the Commission. Streamlining and simplifying legislation is therefore needed to make crofting less onerous for active crofters and the Commission.

Scottish Land Court

43. The idea of amalgamating the Scottish Land Court and the Lands Tribunal for Scotland is not new. Both bodies have a firm focus on land, and since the late 1970s the Chair of the Land Court has also been appointed as President of the Lands Tribunal; whilst this is not a statutory requirement, by convention the two bodies have shared the same head. They also currently share premises, and both are administered by the Scottish Courts and Tribunals Service, albeit each has its own administrative staff.

44. The primary jurisdiction of the Land Court is to deal with questions between landlords and tenants of agricultural land, including crofts under the Crofters (Scotland) Act 1993, the Crofting Reform etc Act 2007 and the Crofting Reform (Scotland) Act 2010, smallholdings under the Crofters Holdings (Scotland) Acts 1991 and 2003. It also has a number of other jurisdictions. The Land Court is based in Edinburgh but holds hearings throughout Scotland at a venue suitable for the affected party or parties.

45. The Lands Tribunal has an extensive range of jurisdictions, including determination of disputed compensation for the compulsory acquisition or loss in value of land under the Land Compensation (Scotland) Act 1963 and under the Land Compensation (Scotland) Act 1973; references relating to the accuracy of the Land Register under the Land Registration (Scotland) Act 2012; appeals against the valuation of land acquired under parts 2 and 3A of the Land Reform (Scotland) Act 2003 (the Community Right to Buy).

46. The Land Court has a long tradition of serving the crofting and wider agricultural community; the Land Court has a historical role as the protector of tenants' rights going back to the early days of crofting legislation and as such the proposal is to merge the Lands Tribunal into a newly expanded Scottish Land Court, thus retaining the tradition and history of the Land Court.

47. There are areas where the expertise of each body would be valuable to the other, including for example appeals against the valuation of land being acquired under the Community Right to Buy, where that land comprises or includes agricultural land, assessment of the value of agricultural land for compulsory purchase purposes and quantification of farm loss payments under the Land Compensation (Scotland) Act 1973.

48. There are some instances where both the Land Court and the Lands Tribunal have a role in the same procedure, such as the tenant of an agricultural holding's right to buy in Part 2 of the Agricultural Holdings (Scotland) Act 2003. The legislation provides that in the absence of an agreement between the parties a valuer is to be appointed by the Land Court. However, the legislation also provides that appeals against the decisions of a valuer go to the Lands Tribunal. In the course of such an appeal, should a question of law arise which may competently be determined by the Land Court arise, the Lands Tribunal is to refer that question to the Land Court for determination. Having the two bodies amalgamated into a newly expanded Scottish Land Court would simplify matters and provide a measure of structural coherence.

49. The newly expanded Scottish Land Court would allow for the creation of a single team of members combining a wide range of relevant expertise and experience spanning the jurisdictions of both bodies, which has the potential to lead to better decision-making.

50. At present, the Chairman of the Scottish Land Court, judges of the Court of Session and sheriffs are eligible to act as judicial members of the Upper Tribunal. Members of the Lands Tribunal and other members of the Land Court are not eligible to act as judicial members by virtue of membership of either of those bodies.

51. The Tribunals (Scotland) Act 2014 (the 2014 Act) created a new, simplified statutory framework for tribunals in Scotland, bringing existing tribunal jurisdictions together and providing a structure for new jurisdictions. The 2014 Act created two tribunals, the First-tier Tribunal for Scotland and the Upper Tribunal for Scotland (Upper Tribunal), known collectively as the Scottish Tribunals. The First-tier Tribunal is organised into a series of chambers which deal with different subject matter. Cases in the Upper Tribunal are heard by judicial members (Court of Session judges, sheriffs) and other members who have certain specialisms (for example, legal or surveyor experienced members) and are known as legal or ordinary members of the Upper Tribunal. The merger of the Lands Tribunal and Land Court provides an opportunity for suitably qualified members of the Scottish Land Court to be eligible to act in the Upper Tribunal if required.

Purpose/ aim of action and desired effect

Crofting

52. The Scottish Government recognises the vital contribution that crofting makes to the population, economy and culture of Scotland. Crofting is at the heart of communities across many parts of the Highlands and Islands, in Argyll, the Hebrides, the Highlands and the Northern Isles. Crofters across these areas are cultivating land, tending livestock, diversifying into alternative land-based businesses, protecting the environment and biodiversity, playing a full part in their local communities, and maintaining the areas' heritage and culture. But the system needs to adapt to changing circumstances, to allow crofting to continue to thrive.

53. Virtually all of the crofting provisions in the current Bill are to modify the 1993 Act or the 2010 Act, which will remain the two key Acts governing crofting and its regulation. The Bill aims to strengthen crofting in seven key respects:

• Crofting communities
• Enforcement of crofters' duties
• Crofting Commission powers
• Common grazings
• The Crofting Register
• Electronic communications
• Simplifying and clarifying aspects of crofting law.

54. Crofting Communities: Crofting has an important community dimension, and the legislation reflects this by balancing the rights of individual crofters with the rights of the communities of which they are part. Section 19 clarifies the definition of a crofting community as the crofters holding crofts and/or grazings rights in a particular township, with the townships being those recorded in the Register of Crofts. The Bill (Schedule 2) will also require the Crofting Commission to consider a wider area - the parish - when they are weighing up pressures on the sustainability of crofting. Section 3 will give subtenants and landlords, along with the crofters themselves, the right to report suspected breaches of duty to the Commission, while removing the grazings committee's duty to do this wholesale.

55. Enforcement of crofters' duties: All crofters^[2] have a legal duty to reside within 32km of their croft and to ensure their croft land is cultivated or put to another purposeful use. Crofters' adherence to these duties are vital for the strength of crofting communities, and for population retention and land use in remote areas. The legislation gives the Crofting Commission powers to enforce adherence to the duties, and the Bill aims to streamline and improve this legislation to give the Commission more power to act. The Commission will be entitled to require that questions about crofters' adherence to their duties can be resolved before their other applications are considered. In addition, under section 10, the Bill will prohibit future transfers of owner-occupied crofts to legal persons such as a limited company or incorporated charity. This will help ensure over time that every owner-occupier crofter is, like a tenant crofter, a natural person (human being) directly responsible for complying with the crofting duties.

56. The Crofting Commission powers: The Commission is the key public body charged with promoting the interests of crofting. The Bill will make changes to give it stronger autonomy, in particular relating to decisions on applications to decroft land. The Bill will give the Commission additional powers with which to resolve issues for individual crofters or crofting communities, in particular the power to award owner-occupier status when it is merited, and to adjust the boundaries of crofts with consent from all interested parties. The Bill will also introduce a streamlined and simplified assignation process (transfer of croft tenancy) for within-family assignations, removing the requirement (and associated cost) to advertise the proposed assignation, whilst retaining the landlord's right to object. However, a proposed family assignation application will be subject to certain conditions. This proposal will help facilitate entry to crofting, by simplifying and accelerating the process.

57. Common Grazings: Two thirds of all crofting land is on common grazings, the upland areas shared by most members of the local township(s) and by other shareholders. In common with upland areas not in crofting tenure, common grazing land is increasingly recognised as having great potential for peatland restoration, forestry, habitat restoration and renewable energy schemes, as well as traditional grazing of livestock. The Bill aims to bolster and strengthen the role of Grazing Committees, giving them and individual shareholders more options for proposing environmental initiatives on common grazings. It also aims to protect the connection between inbye croft and grazings shares, by preventing the unintended separations of grazings rights, which have happened many times when crofts have been purchased, and by providing new flexibility for owners of common grazings, and the Crofting Commission, to reallocate vacant shares.

58. The Crofting Register: The Crofting Register, held and managed by Registers of Scotland (RoS), was introduced by the 2010 Act. The Crofting Register complements the information held by the Crofting Commission in their Register of Crofts, in particular by including in the Crofting Register a map of each registered croft. A number of provisions in the Bill refine the processes for registration of crofts in the Crofting Register, including the interaction between the Commission and RoS in handling first registrations, and more flexibility for both RoS and the Commission to correct errors in the Crofting Register.

59. Electronic communications: The Bill includes provisions to modernise and broaden the methods available to crofters and the Crofting Commission for serving notices, giving public notifications, and holding meetings.

60. Simplifications and clarifications: The Bill makes a range of simplifications and improvements to the way crofting is administered, including more flexibility for the Scottish Ministers in the appointment of Crofting Commissioners; and makes corrections and clarifications to the legislation as recommended at various times by the Scottish Land Court, or suggested by the Crofting Law Group.

Scottish Land Court

61. The purpose of the provisions in the Bill is to amalgamate the Land Court and the Lands Tribunal into one cohesive body, the Scottish Land Court. The newly merged and expanded body will offer structural coherence, efficiency, and a better service to litigants in meeting the challenges of future developments. The amalgamation will allow the personnel, skills and expertise which each of the bodies possesses to be available across the entire spectrum of their jurisdictions, and will put an end to current statutory anomalies whereby certain questions can get referred from one body to the other. In respect of the Upper Tribunal provisions, the aim is to improve the resilience of the Upper Tribunal, allow it to have access to a broader range of expertise and knowledge, and manage any fluctuations in case volumes in the Upper Tribunal.

62. Whilst the amalgamation is primarily administrative in nature, the Scottish Government recognises the historical importance of the Land Court to the agricultural and crofting communities and the opportunity has therefore been taken to largely reproduce the provisions of the Scottish Land Court Act 1993 with some changes to ensure parity for judicial office holders of the new body.

63. In addition to the merger, the Bill provides for the Scottish Land Court to have jurisdiction over any matters arising under the March Dykes Acts 1661 and 1669, the Runrig Lands Act 1695, and the Division of Commonties Act 1695. Whilst these Acts are very rarely used, for the purposes of structural cohesion they will be brought within the jurisdiction of the Scottish Land Court.

64. At present, "right to roam" cases under section 28 of the Land Reform (Scotland) Act 2003 are heard in the appropriate Sheriff Court. Individual sheriffs are unlikely to gain extensive expertise in the determination of such cases and as a consequence there is a risk of a lack of consistency of approach. The Bill therefore transfers jurisdiction to the Scottish Land Court which will be responsible for determining these cases.

65. The provisions in the Bill are intended to improve the administration of justice for affected parties with an expanded Scottish Land Court covering a wider jurisdiction, and to facilitate better decision-making with the availability of members with a broader range of expertise.

Options

Crofting

66. In 2022, a decision was made to take forward a dedicated Crofting Bill in this parliamentary term. Other options were available at that time, such as using the Agriculture Bill or Land Reform Bill to deliver crofting reform. However, it was felt that it would be unlikely that we could build a consensus on those issues needing to be addressed within the timeframes of the other Bills, and that it warranted a separate Bill.

67. Proposals for a Crofting Bill had been under consideration since 2017. A 2017 Consultation on the Future of Crofting Law had identified strong support for improvements to the legislation, albeit split between those who wanted modifications to the existing legislation and those who believed crofting law needed to be substantially rewritten, in one way or another. In 2018, the Government announced its intention to bring forward a Phase 1 Bill to correct known anomalies in crofting legislation, followed by a conversation to consider more fundamental changes. However, work on the Phase 1 Bill was unavoidably suspended in October 2019, because of Brexit preparations.

68. The work resumed in the spring of 2022, as Scotland was emerging from the covid 19 pandemic, and this Bill is the product of that continued and expanded work.

69. The proposals have been developed through extensive engagement and close cooperation with key stakeholders, and this is reflected in the responses to the 2024 consultation. All of the proposals included in the consultation, which are being taken forward in the Bill, received majority support from respondents, with many being supported by the vast majority.

70. In addition to the proposals covered in the previous section, there were a number of proposals that were consulted on but have since been discounted. Most significantly, consultation responses were mixed on both the proposals in the consultation chapter on "entry to crofting", to allow two people to take on a dual croft tenancy, and to allow secured borrowing against the market value of a tenanted or owner-occupied croft. A majority supported both proposals and accepted that they could make a first croft more affordable for some. However, others, including the two main membership organisations, pointed to the increased complexity that both proposals could bring to crofting law, some potential downsides, and that relatively few, of the many who find it difficult to afford their first croft, would be helped. The Scottish Government has therefore concluded that these measures should be considered more carefully in the context of a debate about more fundamental crofting law reform in the future.

Scottish Land Court

Option 1 - amalgamate the Scottish Land Court and the Lands Tribunal for Scotland (the proposed option)

71. The idea of amalgamating the Land Court and the Lands Tribunal was raised in the 1970s, given that both bodies have a firm focus on land. Since that time the Chair of the Land Court has by convention also been appointed as President of the Lands Tribunal, and in addition to sharing a head the two bodies share premises and are both administered by the Scottish Courts and Tribunals Service. A public consultation on a proposed merger was launched in July 2020. Respondents were evenly split on the question of whether the two bodies should be amalgamated. The then Chair of the Land Court/President of the Lands Tribunal was fully supportive of amalgamating the two bodies, as is his successor.

72. Another key issue in the consultation was whether a merged body should be a court or a tribunal. Respondents were overwhelmingly in favour of the merged body being a court, as it is perceived as being more authoritative and having greater status. Further, the Land Court has a long tradition of serving the crofting and wider agricultural community, and has a historical role as the protector of tenants' rights going back to the early days of crofting legislation. Merging the Lands Tribunal into a newly expanded Scottish Land Court will retain the tradition and history of the Land Court. The merger also provides an opportunity to widen the judicial membership of the Upper Tribunal.

Option 2 - do nothing

73. One option would have been to retain the status quo and not take forward the merger of the Land Court and the Lands Tribunal. However not doing anything would mean that litigants would not benefit from the structural coherence, efficiency and better service that the newly merged Scottish Land Court can provide.

Sectors/ Groups affected

Crofting

74. The key businesses whose interests are potentially affected by the measures in the Bill are active crofters (croft businesses), landowners, land consultants and solicitors. These sectoral groups have all been represented in the membership of the Crofting Bill Group through representative organisations for crofters and landowners including the Scottish Crofting Federation, National Farmers Union of Scotland and Scottish Land & Estates, together with Highlands & Islands Enterprise, the Law Society of Scotland and leading crofting solicitors. The Crofting Commission, whose general functions are to regulate, reorganise, and promote the interests of crofting, as well as keeping under review matters relating to crofting, were also a key member of the Group.

75. The majority of crofters operate their crofts as small businesses, representing the most numerous type of business, which will be affected by the measures in the Bill. However, it should be noted that the majority of crofters have other sources of income, which in many cases will be from full or part-time employment. In addition, many crofters will only have infrequent interactions with the Crofting Commission and the regulations it oversees, which are the main focus of the measures in the Bill. Overall, the measures in the Bill are not expected to have any significant impact on the economic underpinnings of crofting. Any impact they do have should be positive, by simplifying regulatory processes and, in the case of the measures to make it easier for crofters and landowners to form joint ventures for undertaking environmental initiatives on common grazings, opening up opportunities for new income streams.

76. The other main types of business affected include landowners, whether they be individuals, trusts or other corporate entities, as well as land agents and solicitors specialising in crofting transactions.

77. Another type of businesses which the Bill will have some impact upon are local newspapers. There are provisions which will remove the requirement for crofters and the Crofting Commission to advertise various types of applications and notifications in traditional print media, allowing them instead to use digital platforms including, potentially, the Commission's own website. These measures will generate savings for crofters and the Commission, but will result in a relatively small reduction in advertising revenue for local print media outlets.

78. Crofting exists only within the Highlands and Islands, and the jurisdiction of crofting legislation only applies to these areas. The duty to be resident within 32km of their croft means that crofters should not be based outwith this area, other than in exceptional circumstances. Landowners, whether individuals or corporate entities, may be based elsewhere including in some cases overseas. Similarly, solicitors and land agents may be based outwith the Highlands and Islands, though many of those with a focus on crofting are likely to be located in these areas.

79. In addition to the business types and sectors detailed above, one proposal that was included in the public consultation, but is not being taken forward in the Bill, namely the proposal to allow for standard securities to be issued against croft tenancies, would have affected banks and mortgage lenders. Although not represented on the Crofting Bill Group, engagement was undertaken by officials with the Committee of Scottish Bankers before the decision was made not to proceed with this proposal.

Scottish Land Court

80. The amalgamation of the Land Court and Lands Tribunal is primarily administrative in nature. As such, while it has the potential to affect anyone who may have standing to raise (or cause to defend) proceedings in the Land Court, it is anticipated that any such impact will be minor; cases which would previously have been raised in the Lands Tribunal will be raised in the Land Court but no changes are to be made to the underlying substantive legislation. Cases which were previously heard in the Land Court will remain within the jurisdiction of the Land Court. The provisions widen judicial membership of the Upper Tribunal and will not affect the appeal rights of any individuals or businesses who wish to pursue an appeal to the Upper Tribunal.