Land reform in a Net Zero nation: consultation analysis

7. Land Use Tenancy

The Scottish Government is proposing a new form of flexible tenancy, called a ‘Land Use Tenancy’, which would help agricultural holdings, small landholding tenants and others to deliver multiple eligible land use activities within one tenancy. These activities could include woodland management, agroforestry, nature maintenance and restoration, peatland restoration, and agriculture. The legal framework of the Land Use Tenancy would set out the terms and conditions of the tenancy for a tenant and their landlord. This framework could include: the key elements that both a tenant and their landlord would agree to at the start of the tenancy; how benefits would be shared; the range of activities that would need to be considered throughout the tenancy; and the process for bringing the tenancy to an end.

It is proposed that tenant farmers and small landholders would be able to convert their tenancy into a Land Use Tenancy. This would allow them to undertake a range of diverse land management activities to deliver national climate and environmental objectives without leaving the landholding.

Question 29 – Do you agree or disagree with our proposal that there should be a Land Use Tenancy to allow people to undertake a range of land management activities?

Responses to Question 29 by respondent type are set out in Table 48 below.

Table 48 Question 29 – Do you agree or disagree with our proposal that there should be a Land Use Tenancy to allow people to undertake a range of land management activities?

	Agree	Disagree	Don’t know	Total
Organisations:
Academic group or think tank	4	0	0	4
Community or local organisations	12	0	3	15
Government and NDPB	6	2	4	12
Landowner	8	2	20	30
Private sector organisations	7	0	4	11
Representative bodies, associations or unions	10	2	7	19
Third sector or campaign group	16	0	2	18
Total organisations	63	6	40	109
% of organisations	58%	6%	37%
Individuals	222	26	45	293
% of individuals	76%	9%	15%
All respondents	285	32	85	402
% of all respondents	71%	8%	21%

Percentages may not sum to 100% due to rounding

A majority of respondents, 71% of those answering the question, agreed that there should be a Land Use Tenancy to allow people to undertake a range of land management activities. Of the remaining respondents, 8% disagreed and 21% did not know, the latter group including the majority of Landowner respondents.

Please give some reasons for your answers.

Around 300 respondents made a comment at Question 29.

Reasons for supporting a Land Use Tenancy

Those supporting the proposed approach frequently pointed to the importance of introducing greater flexibility in the way let land can be used. There was also support for a simpler approach and one which enables greater productive use of land by a greater number of people.

In terms of that productive use of land, enabling tenants and landlords to contribute to, and benefit from, wider public policy goals was seen as important. There was reference to moving away from food production as the primary focus for tenancy contracts, and to supporting a greater focus on activities that contribute towards a just transition to net zero, climate adaptation, biodiversity recovery and nature restoration, community wealth building and population retention and growth in areas within rural Scotland.

It was suggested that a Land Use Tenancy could helpfully address some of the barriers to tenants helping to deliver these objectives and benefiting from some of the associated opportunities, including emerging carbon and natural capital opportunities. Examples of current barriers included that:

• Tenant farmers are currently discouraged from natural capital enhancement projects, both because they are likely to require the landowner’s permission and because the length of tenancy agreements can pose challenges; it was reported that minimum commitment periods make many projects inaccessible to many tenant farmers.
• Although tenants are entitled to compensation for major long- and short-term improvements, improved biodiversity and carbon storage are currently not considered in land value estimates.

It was hoped that enabling mixed activities, and the ability to bring new income streams, would help strengthen business viability, longevity and would help support resilient rural communities. It was also hoped that a new, modern form of tenancy that reflects new rural markets and needs, including by supporting the delivery of multiple land use activities within one tenancy, would support the changes in land use and management required to address the nature and climate emergencies.

However, it was also noted that there are barriers to diversification which go far beyond tenancy type, such as challenges with funding and planning mechanisms. Examples given included planning regulations often preventing the development of small-scale farm shops on farmland and funding packages for woodland creation often not being well designed for smaller-scale farms.

In terms of specific areas of activity that could be enabled under a Land Use Tenancy, suggestions included small-scale renewables, small-scale rural housing and tourism. Opportunities for diversification are covered in greater detail at Question 31. Comments at this question relating to eligible land management activity included that a Land Use Tenancy could cover or enable:

• Agroecology and agroforestry.
• Innovative plant-based land management techniques.
• The repair and restoration of buildings.

More generally, there was support for an approach that equates to a freedom of contract lease similar to that allowed in England; it was suggested that this will allow both parties to negotiate personal terms that meet their specific requirements. An associated concern was that, if freedom of contract is not being proposed, then all the current issues with tenancies and letting land in Scotland will continue.

Although many of the supportive comments were focused on encouraging and supporting diversification, a different perspective was that, while recognising the benefits of some diversification, the main priority for tenancy reform should be an increase in overall tenancy provision; this was linked to ensuring that more land is available to increase the resilience of our food and farming system. There was a call for any new tenancy type be assessed thoroughly in terms of whether the intervention is likely to lead to a net gain in tenancies overall.

Further comments included that a wide range of models such as share farming, small holding agreements, allotments and community farms and gardens, and care farms could all be part of the solution considered under a new tenancy model.

Reservations about a Land Use Tenancy

Respondents who had disagreed with, or were not sure about, developing a Land Use Tenancy most frequently commented that the lack of detail on the proposal makes it difficult to form an opinion on a Land Use Tenancy.

Some of those making this point noted that they supported the concept of flexible arrangements for leasing land to undertake a range of land management activities, but were struggling to see what a Land Use Tenancy would add to what is currently available. Overall, there was a view, including from some landowner respondents, that a confusing number of agricultural leases are already on the statute books and that the consultation paper has not made the case for another. Further, it was noted that the process was recently reformed by the Land Reform (Scotland) Act 2016, and a Representative body respondent suggested that any detailed proposals brought forward should explain in detail why the current diversification provisions do not meet the stated policy aim of allowing a combination of agricultural and non-agricultural activities.

There was reference to agricultural tenancies under the Agricultural Holdings (Scotland) Act 1991 and it was also noted that the diversification measures introduced by the Agricultural Holdings (Scotland) Act 2003 (the 2003 Act) already permit tenants to undertake non-agricultural activity on an agricultural holding.

Further comments included that it is also open to the parties to remove part of the land from their agricultural tenancy and enter into a commercial lease in respect of the non-agricultural use. The parties are then free to negotiate a commercial lease for the non-agricultural use outside the remit of agricultural holdings legislation. However, it was noted that this does mean that the parties have two separate lease arrangements in place, and there were reports of situations where the parties have agreed a combined use which cannot be achieved easily within the current mechanisms.

In this context, one perspective was that a flexible arrangement which allowed for a combined use could simplify matters, and there was some support for a Land Use Tenancy that allowed for the hybrid use of land outwith agricultural holdings legislation, such that using some of the land for agriculture does not mean that the parties ability to contract freely is removed. However, a Representative body respondent also reported that, at present, their landowner members are not seeing much demand from agricultural tenants seeking to explore non-agricultural uses; they went on to suggest that the focus could be on raising awareness about the mechanisms for diversification that already exist.

The importance of any new tenancy model complementing rather than undermining existing tenancy arrangements was highlighted, with the risk that retrospective changes eroding the landowner’s rights could undermine confidence in new arrangements also raised. It was suggested that if the current diversification provisions, and especially those introduced by the 2003 Act, are not sufficient, it would be most appropriate to review and revise the existing diversification measures to allow greater flexibility rather than create a new kind of tenancy. In this context, it was reported that croft tenancies allow for a large number of different sorts of activities and environmental schemes to be carried out, including agri-tourism and renewable energy.

It was noted that the proposals appear both within the bounds of the Land Reform and the Agriculture Bills; there was a view it would be better for all agriculture tenure proposals be dealt with in only one of the Bills. There was also a view that the forthcoming Agriculture Bill would be the better choice.

Issues to be considered

Respondents also highlighted a number of issues that would need to be considered if a new Land Use Tenancy is being developed. These included:

• To what extent a Land Use Tenancy would be regulated. It was suggested that, to extend regulation under the 2003 Act to non-agricultural uses is a significant deviation from the position currently applying to commercial leases in Scotland.
• The process or procedures for converting one type of tenancy to another. It was noted that conversion could affect the security of tenure under existing tenancies.
• The minimum term for a Land Use Tenancy.
• How rent would be calculated.
• The taxation implications for both parties if the land is no longer being used for an agricultural purpose.

Suggestions concerning how a Land Use Tenancy and the associated processes should be framed included a number of landowners commenting that any conversion of an existing agricultural tenancy to a Land Use Tenancy must only be permissible by agreement. One of these Landowners went on to note that the use(s) envisaged could represent a permanent change in land use which could result in the landowner losing tax reliefs and being financially penalised.

Other suggestions included that:

• There should be a broad list of permissible activities applicable to Land Use Tenancies in general, with a specific list of permitted activities agreed and specified within the tenancy agreement. Any variation should require the agreement of both parties.
• A threshold level of permitted diversification could be determined on a per area basis, with ‘land sparing’ activities excluded from the calculation.
• Any land use changes requiring planning permission should be considered at the outset with further guidance required. This should include energy efficiency improvements to buildings covered by a Land Use Tenancy.
• For purposes of evaluating rent, a distinction could be made between activities which may be expected to produce a regular cash flow and those that occur as a one-off payoff when the investment is closed – as is the case for investments where land is taken from production and a carbon credit generated.

Question 30 – Are there any land management activities you think should not be included within a Land Use Tenancy?

Around 220 respondents made a comment at Question 30.

The most frequent comment was that no land management activities should be excluded under a Land Use Tenancy. Further comments included that that a non-exhaustive list of positive land management activities may be helpful, with the monitoring body appointed using their discretion to decide what proposed land management activities are acceptable and are in the long-term interest of sustainable development of the land.

Others noted that no activities should be excluded provided that they are legal and agreed with the landowner. Further comments included that this tenancy type suggests freedom of contract, and it would be anticipated that the land use specifications would be outlined in each individual lease. Reflecting comments at Question 29, there was also a view that some activities would be best covered by a lease specific to that use and not included in a mixed use tenancy.

In terms of other general issues to be taken into account, it was suggested that:

• Any approach should be consistent with crofting tenancies.
• Any changes that would become permanent, such as woodland, would need to be agreed before entering into a new lease.
• There may be a need to ensure that certain land management activities do not encroach too far on other rights. A Government and NDPB respondent gave an example of a rewilding project leading to limits being imposed on public access rights.

Focus on net zero and environmental benefit

The other frequently-made comment was that the Scottish Government needs to be clear if the proposed tenancy is targeted only at activities which further net zero, given the emphasis on net zero in the title of the consultation. Some respondents did suggest that only activities that contribute to meeting net zero, and/or that are sustainable and not detrimental to the environment, should be included. Similarly, there was reference to not including activities that are not directly related to nature and biodiversity restoration or that are non-sustainable or environmentally damaging. Specific activities cited included those which tend to degrade soil health, or which create toxic debris or which result in noise, air, water and ground pollution.

However, there was also a view that any environmental activity that could trigger conservation protections in coastal areas that might prevent future economic development should be excluded.

Renewable energy

There were some references to not including activities relating to energy generation, including renewable energy measures and the construction of renewable infrastructure. More specific suggestions included that:

• Renewable energy generation should be limited to that for consumption by the tenant only, with any further activity needing to be in partnership with, or with the consent of, the landowner.
• Installation of solar panels on land that could reasonably be used for agricultural activity should not be included.

Forestry and woodland

There were also a number of references to forestry, including that blanket forestry, commercial forestry, the planting of large tracts of non-native trees, or planting trees on productive agricultural land or peatland sites should not be included. There was also reference to any forestry options which are generally excluded from the standard range of agricultural tenancies in Scotland.

Specific suggestions included that the following should not be included:

• Woodland creation in excess of 5 hectares, due to the sterilisation of ground for alternative practices.
• Trees for commercial timber without a bond to cover the removal and disposal of roots on termination.
• Planting Invasive Non-Native Species for any reason.

There were also suggestions that any carbon credit or carbon offsetting activity should not be included and, specifically, activity which takes agricultural land out of production. However, an alternative view was that the Land Use Tenancy offers real opportunity to promote innovation and new approaches in this area. There was reference to ensuring Land Use Tenancies are flexible and able to accommodate new and emerging activities, and it was reported that carbon credits is a relatively recent opportunity that was less apparent a few years ago.

Shooting

There were also a number to references to excluding shooting, including hare shooting, hunting and fishing. There was specific reference to grouse moors and grouse shooting and the release of non-native species, such as pheasants and red-legged partridge.

Other suggestions

Other types of activity that some respondents thought should not be included were:

• Industrial or commercial extraction, including mineral extraction, fossil fuel extraction, mining and quarrying. Also fracking.
• Peat extraction.
• Sale of turf or topsoil.
• Waste disposal.
• Creation of golf courses and any sporting options which are generally excluded from the standard range of agricultural tenancies in Scotland.
• Chicken farms, and dairy or red meat farming, except in the context of an overall regenerative farming approach.
• Tourism activities, including glamping or the letting of farm cottages for holiday accommodation.
• Housing development or development of other buildings that do not have the landlord’s prior consent.

There were also references to not including any activities which are contrary to the interest of local communities, including by disrupting their wellbeing and peace. Noise, air, water and ground pollution were cited.

Finally, the importance of not including activities that would interfere with Scottish Water’s statutory obligations and duties in relation to water, wastewater and achieving their net zero targets were highlighted.

Question 31 – Do you think that wider land use opportunities relating to diversification, such as renewable energy and agri-tourism, should be part of a Land Use Tenancy?

Responses to Question 31 by respondent type are set out in Table 49 below.

Table 49 Question 31 – Do you think that wider land use opportunities relating to diversification, such as renewable energy and agri-tourism, should be part of a Land Use Tenancy?

	Yes	No	Don’t know	Total
Organisations:
Academic group or think tank	3	0	1	4
Community or local organisations	9	1	2	12
Government and NDPB	5	0	5	10
Landowner	16	3	10	29
Private sector organisations	6	2	3	11
Representative bodies, associations or unions	11	1	5	17
Third sector or campaign group	12	0	5	17
Total organisations	62	7	31	100
% of organisations	62%	7%	31%
Individuals	210	27	49	286
% of individuals	73%	9%	17%
All respondents	272	34	80	386
% of all respondents	70%	9%	21%

A majority of respondents, 70% of those answering the question, thought that wider land use opportunities relating to diversification, such as renewable energy and agri-tourism, should be part of a Land Use Tenancy. Of the remaining respondents, 9% did not think so and 21% did not know.

Please give some reasons for your answers.

Around 300 respondents made a comment at Question 31.

General comments in support included that measures to diversify the rural economy are welcome and that diversifying may assist with more efficient land use and supporting stronger communities. It was also suggested that an approach based on agriculture alone is difficult to sustain and that there should be as few barriers as possible for tenant farmers wishing to diversify their land management activities. However, it was also noted that the specific activities identified can already be done by notice under existing structures, so there is no reason not to include them in a Land Use Tenancy. As at earlier questions, there was also a view that such uses should remain the subject of a separate lease.

There was specific reference to supporting tenant farmers to deliver key government policy, but also a query about the intended scope of the activities covered under a Land Use Tenancy; this was connected to a concern that as the policy driver for the Land Use Tenancy is natural capital, it would therefore be limited to land use which fits in with that policy.

In terms of how and if activities should be defined, one suggestion was that it may be useful to have a non-exclusive list of land management activities. The follow up point was that the monitoring body appointed could use their discretion to decide whether any proposed land management activities are sensible and are in the long-term interest of sustainable development of the land.

In terms of the range of land use opportunities that should be included, it was noted that those relating to renewable energy and agri-tourism would be similar to the types of activities included in crofting tenancy arrangements as ‘purposeful use’ of a croft; it was seen as logical to also include such provisions in the proposed land use tenancy. It was also noted that renewable energy and agri-tourism are examples of opportunities that could benefit the wider community.

Respondents also commented on the relationship between opportunities for diversification and farming; there was a view that activities should complement the primary function of agricultural activity and provide the farmer(s) with an opportunity to maintain dignified livelihood and carry out the farming activity in an ecologically sustainable manner that is of benefit to their local community and wider food system.

The importance of ensuring that diversification does not compromise, damage or remove existing assets and does not result in harm to biodiversity was also highlighted. There was also reference to the impact of diversification outwith the tenancy – for example on electrical infrastructure for renewables or conservation sites which will have increased activity through agrotourism. It was noted that there may be costs to others arising from diversification.

Renewable energy

There were a number of issues raised relating to renewable energy, including whether allowing for renewable energy within Land Use Tenancies would have implications for renewables developers and the wider sector. Other points raised included that:

• There would be a risk of dispersed development with minor benefits for economic returns and energy generation, but big impacts on landscapes and environments. Energy generation needs a national strategic approach, within which generation to support local communities could be a priority.
• Planning permission requirements should still apply, thereby ensuring responsible land use.
• There would likely need to be a limit in the scale of any development to avoid conflicts of opportunities or legal and financial complications particularly at waygo^[12].

Finally, it was noted that renewable energy opportunities are likely to require considerable capital and different expertise.

Tourism

The issue of expertise was also raised relation to tourism. In terms of issues that would need to be considered it was suggested that agri-tourism must be highly sensitive to protecting habitats, and the free-living animals which rely upon them. It was also described as a largely green land-use, with some local employment benefits.

Other types of activity

There were also a small number of other suggestions for particular activities that should be permitted or encouraged, these included:

• Woodland expansion. It was suggested that Land Use Tenancies open new ground for woodland expansion and management other than related to agroforestry. There was a call for other types of woodland creation and management to be included.
• The restoration of culturally significant and/or historic buildings, designed landscapes and battlefield sites.

Question 32 – Do you agree or disagree that a tenant farmer or a small landholder should, with the agreement of their landlord, have the ability to move their agricultural tenancy into a new Land Use Tenancy without having to bring their current lease to an end?

Responses to Question 32 by respondent type are set out in Table 50 below.

Table 50 Question 32 – Do you agree or disagree that a tenant farmer or a small landholder should, with the agreement of their landlord, have the ability to move their agricultural tenancy into a new Land Use Tenancy without having to bring their current lease to an end?

	Agree	Disagree	Don’t know	Total
Organisations:
Academic group or think tank	2	0	2	4
Community or local organisations	6	1	4	11
Government and NDPB	5	1	3	9
Landowner	8	4	15	27
Private sector organisations	5	3	3	11
Representative bodies, associations or unions	7	1	7	15
Third sector or campaign group	11	1	3	15
Total organisations	44	11	37	92
% of organisations	48%	12%	40%
Individuals	190	39	55	284
% of individuals	67%	14%	19%
All respondents	234	50	92	376
% of all respondents	62%	13%	24%

Percentages may not sum to 100% due to rounding

A majority of respondents, 62% of those answering the question, agreed that a tenant farmer or a small landholder should, with the agreement of their landlord, have the ability to move their agricultural tenancy into a new Land Use Tenancy without having to bring their current lease to an end. Of the remaining respondents, 13% disagreed and 24% did not know.

Please give some reasons for your answers.

Around 300 respondents made a comment at Question 32.

General comments in support of the approach included that it is likely to accelerate positive change, and that it will be important for any new opportunities to be available to existing as well as new tenants. However, as at previous questions, a number of respondents also noted that their agreement was predicated on both parties having to consent to the change.

Others, including both those who agreed or disagreed with the proposal, thought that tenants should not require the agreement of their landlord to convert; it was suggested that this should be regarded as an update to tenancy law, such has been carried out by legislation in the past. Specifically, it was suggested that the proposal should be seen as a modernisation of tenancy law, just as Section 42 (tenant’s right to timber) was in the Agricultural Holdings (Scotland) Act 2003.

Respondents also saw it as important to avoid any barriers to take up of a Land Use Tenancy; there was a concern that bringing a current lease to an end seems to offer too many opportunities for slowing or impeding a transition. However, it was also reported that it is common in the sector for landlords and tenants to change tenancy type by agreement and so the proposed approach would continue in the same vein.

There was also a view, as at other questions, that further detail is required. In particular, there was a query about the possible impact of a potential change of use. It was suggested that further clarity is needed on how the approach would work in practice so as to ensure that neither party is negatively impacted by the transition.

In terms of potential problems that need to be considered, issues raised included that:

• A tenant cannot be subject to more than one lease at a time on the same area of land. It was suggested that the existing lease needs to be terminated and a Land Use Tenancy entered into in lieu.
• Simply extending the terms of an existing tenancy to allow the diversified uses would be wholly inappropriate. As an illustration it was noted that the terms of a renewables lease are completely different to those of an agricultural lease, and the terms of an agricultural lease and of the Agricultural Holdings Acts are wholly incompatible with a renewables lease.

With regards to the rights of tenants, concerns included that landlords could reject a request by a tenant or small holder to convert their tenancy to a Land Use Tenancy. Conversely, there was a query as to whether a Land Use Tenancy could be imposed on a tenant by the landlord, for example during a period of tenancy review. There was also a concern that pressure could be applied to some secure tenants to agree to conversion to a Land Use Tenancy, thus losing their security of tenure.

It was also seen as hard to envisage that many, if any, holders of agricultural tenancies will want to transition to a Land Use Tenancy unless their current rights are protected in the new lease. An associated concern was that tenants could be offered a ‘transition’ by their landlord in return, for example, for additional land. There was a view that diminished rights should not be being offered as part of such negotiations.

Question 33 – Do you agree or disagree that when a tenant farmer or small landholders’ tenancy is due to come to an end that the tenant and their landlord should be able to change the tenancy into a Land Use Tenancy without going through the process of waygo, with parties retaining their rights?

Responses to Question 33 by respondent type are set out in Table 51 below.

Table 51 Question 33 – Do you agree or disagree that when a tenant farmer or small landholders’ tenancy is due to come to an end that the tenant and their landlord should be able to change the tenancy into a Land Use Tenancy without going through the process of waygo, with parties retaining their rights?

	Agree	Disagree	Don’t know	Total
Organisations:
Academic group or think tank	0	0	4	4
Community or local organisations	5	0	7	12
Government and NDPB	1	0	5	6
Landowner	7	3	17	27
Private sector organisations	5	1	5	11
Representative bodies, associations or unions	5	0	9	14
Third sector or campaign group	9	0	5	14
Total organisations	32	4	52	88
% of organisations	36%	5%	59%
Individuals	143	34	107	284
% of individuals	50%	12%	38%
All respondents	175	38	159	372
% of all respondents	47%	10%	43%

The largest proportion of respondents, 47% of those answering the question, agreed that when a tenant farmer or small landholders’ tenancy is due to come to an end that the tenant and their landlord should be able to change the tenancy into a Land Use Tenancy without going through the process of waygo, with parties retaining their rights. Of the remaining respondents, 10% disagreed and 43% did not know.

Please give some reasons for your answers.

Around 295 respondents made a comment at Question 33.

Comments tended to be brief, with reasons for agreeing including that it should make things easier, reduce the amount of red tape, and be a time saving measure. As at other questions, some noted that both parties must agree, and it was also suggested that rights must be retained, with an agreed record of conditions in place.

Also as at other questions, a number of those who did not feel able to take a view at this time were looking for further information or detail relating to what is proposed. In terms of issues to be taken into account, it was reported that, in the past, many tenants have lost their right to compensation for their improvements when their existing tenancy was converted into a new tenancy without going through the waygo process, and their improvements were not carried forward into the new lease; there was a concern that the same could happen here.

Queries raised included that it is not clear what is being asked since, if the tenancy is converted, it is not coming to an end and therefore waygo compensation is irrelevant. Associated comments included that it may be better to bring the tenancy to an end and deal with all waygo and landlord dilapidations. Were this to be the case, it was suggested that, if the landlord has to pay compensation to an agricultural tenant based on value to the incoming tenant, then the landlord should retain that asset.

There were also queries around:

• What would happen if there were no incoming tenant to an agricultural tenancy, including whether the waygo would roll into the new tenancy and whether the value would be to an incoming Land Use Tenancy tenant.
• The value to an incoming tenant of an agricultural improvement where the incomer is a Land Use Tenancy tenant with no need for the improvement.

Suggestions as to how changes of tenancy might best be taken forward included that it might be simplest for the basic legal framework of a Land Use Tenancy to include a provision akin to that of s.34(5) of the Agricultural Holdings (Scotland) Act 1991 so that such rights (but also to dilapidations) remained over successive tenancies, under whatever code of law. However, a practical problem relating to evidence was also highlighted, and it was suggested that the new tenancy agreement should record all such points.

Other suggestions included that provision should be made for the Land Use Tenancy to apply to part of a holding only with the remainder remaining under an agricultural lease.

Finally, a small number of comments were made by those disagreeing with the proposal. Their concerns included that the future use may be so different to the original agreement that the proposed approach seems imprudent. Reflecting some of the points and queries raised above, there was also a view that these are two separate forms of tenure; the associated suggestion was that the parties should treat the end of tenancy matters under the respective tenures and statutes.

Question 34 – How do you think the rent for a Land Use Tenancy should be calculated?

Around 305 respondents made a comment at Question 34.

The most frequently made point was that the rent should be by agreement between parties. Landowner and Representative body respondents were particularly likely to take this view, which was often connected to a market rent approach being fair, transparent and providing certainty to both parties.

Some of the comments addressed possible challenges associated with calculating the rent for a Land Use Tenancy, albeit it was also noted that it is difficult to comment in detail without further detail on the structure, purpose and manageability of a Land Use Tenancy. In terms of particular points that could impact on the rental calculation, there was reference to whether:

• It is a rental for the duration of the different uses on a parcel land?
• Payments are tethered to any formal planning or land use rights? mechanism that could also attract additional costs, such as VAT and Rates?

There were concerns that it will be hard to find a fair, standardised mechanism to cover different rental situations, including because of different lease types and levels of investment. There was also a concern that tenant farmers might be exploited for introducing more productive uses of land and charged extortionate rent in return for such efforts.

In terms of issues to be taken into account, or not, as part of rent calculations, comments included that:

• A mechanism needs to be in place to ensure one party’s cost liability is not then a transferable cost onto another party. Thought is needed on how these costs might be passed onto land users through methods such as increased market rental value for the land (reflecting its use), or additional rental / upfront one off ‘consideration’ payments.
• Comparison is needed of other land costs such as ‘community benefit’ payments to the council / community as part of planning conditions. Duplication of intent, benefit and right of use needs to be avoided.
• The rent should be for the whole holding, including any dwelling that might be in the tenancy.
• Consideration should be given to whether certain forms of investment would be better suited to being separately contracted as a joint venture.
• There should be regulations to ensure that tenants get a fair deal for their improvements. Serious consideration should be given to the potential value of future land uses in the context of historical land improvements. This should also be considered in the context of public land value capture.

In terms of existing models that could be looked at, it was noted that croft tenancies have a statutory mechanism for determining rent.

As noted above, the most frequently made point was that the rent should be by agreement between parties. Associated points included that a specific formula would be too complex and lead to further issues, and that it would be counterproductive to be too prescriptive with rent provisions if the rest of the tenancy is based on the ability of parties to agree based on circumstances and activities. Very much reflecting the focus on agreement between parties, respondents were most likely to suggest that any approach should be market led. It was suggested that this would make sure that the approach is fair, transparent and provides certainty to both parties.

Further comments included that the market rate would lead to negotiation between the parties and could take diversification and use into account. There was also reference to an open market rental value, as defined by RICS.

Further comments or suggestions relating to a market led approach included that:

• It should disregard a tenant’s improvements and fixtures, save where they are an obligation of the tenancy agreement and to the extent that the landlord has funded or given benefit for them.
• It should disregard the fact of the tenant being in occupation and any extent to which the tenant has fallen short of the tenant’s obligations, allowing the holding to deteriorate.
• Arrangements for regular reviews will be critical to support both tenants and landlords in agreeing to enter into a new lease arrangement. Specific suggestions included carrying forward a default, three-year minimum period for a review, although allowing the parties to agree otherwise.

In addition to general comments about the approach being market led, there were also a number of suggestions relating to the basis on which the rent could be agreed or set. It was noted that, in common with commercial leases, rent may be fixed or relate to turnover. There was reference to: percentage of income generated; percentage of profits; and discounted cash flow. Respondents also noted that rent levels would vary according to use, for example that they could be based on reasonable cost per acre for labour-based use, or a value of turnover for non-labour-based use, such as forestry or renewables.

Other suggestions included that rent could:

• Be an annual percentage of the capital value of the land, taking account of the initial agricultural value and also the commercial value according to the purpose to which the land is put.
• Reflect the quality of the land.
• Take non-profit-making activities and community development work into account.
• Reflect organic farm transition times, taking into account the extra demands of transition towards net zero-compatible techniques.
• Be means tested or capped. There was a view that, with Scotland’s land ownership characterised by concentration and land monopolies, there should be some form of statutory rent protection for the tenant to avoid inflated ‘open market’ rents.
• Take account of the capital impact or restoration position if the land management activity involves a permanent land use change.

The potential to make a distinction between activities which may be expected to produce a regular cash flow and those that occur as a one-off payoff when the investment is closed, as is the case for investments where land is taken from production and a carbon credit generated, was highlighted. However, it was also noted that such an approach could be challenging and that an alternative model may be for the landlord and tenant to enter into a joint venture, with the landlord forgoing rent for that activity and instead agreeing that each will receive a proportion of the proceeds where the investment is finally closed.

Question 35 – Would you use a Land Use Tenancy if you had access to a similar range of future Scottish Government payments which other kinds of land managers may receive?

Responses to Question 35 by respondent type are set out in Table 52 below.

Table 52 Question 35 – Would you use a Land Use Tenancy if you had access to a similar range of future Scottish Government payments which other kinds of land managers may receive?

	Yes	No	Don’t know	Total
Organisations:
Academic group or think tank	2	0	1	3
Community or local organisations	3	0	5	8
Government and NDPB	1	1	4	6
Landowner	2	2	22	26
Private sector organisations	4	1	5	10
Representative bodies, associations or unions	0	1	13	14
Third sector or campaign group	3	0	6	9
Total organisations	15	5	56	76
% of organisations	20%	7%	74%
Individuals	81	33	151	265
% of individuals	31%	12%	57%
All respondents	96	38	207	341
% of all respondents	28%	11%	61%

Percentages may not sum to 100% due to rounding

A majority of respondents, 61% did not know if they would you use a Land Use Tenancy if they had access to a similar range of future Scottish Government payments which other kinds of land managers may receive. Of the remaining respondents, 28% said they would and 11% that they would not.

Please give some reasons for your answers.

Around 120 respondents made a comment at Question 35.

The most frequent observation was that there is not enough detail, including to allow for informed comment. There was a particular query about the consultation paper’s reference to tenants ending tenancies early because they are prevented from delivering range of environmental benefits; the Scottish Government was asked to share the evidence of this happening so that discussions on the Land Use tenancies can go forward on a more informed basis. It was also suggested that, in the interest of fairness, the Scottish Government should also be asking landlords whether they would grant a Land Use Tenancy.

There was also a suggestion that Question 35 is a leading question because it suggests that tenants of agricultural holdings might be excluded from future payments. Associated comments included that tenants not on a Land Use Tenancy should not be disadvantaged and that fairness and equity is important. Equally, it was noted that anyone on a Land Use Tenancy should have access to any relevant payments.

In direct answer to the question, a small number of (primarily Individual) respondents commented that they would potentially be interested in having a Land Use Tenancy, albeit they sometimes noted this would be dependent on the ‘small print’, and factors such as the commercial viability of any opportunities and the length of the tenancy on offer.

Others noted that they might have been interested in a Land Use Tenancy but that it is not relevant to their current circumstances, for example because they already own land or are retired. There were also a small number of references to crofting, including that a Land Use Tenancy would not be relevant to crofts or that the respondent might prefer to stick with crofting.

A small number of Landowners or Private sector organisation respondents also commented on whether they would be interested in using Land Use Tenancies. One said they would not be interested because they are considering entering Environmental or Land Use Partnerships with agricultural tenants to do the same thing. Others had reservations, including because they were likely to prefer the flexibility of a commercial lease.

However, some said they would be interested, especially if a Land Use Tenancy allowed enforceability of conservation management clauses, or if it was otherwise the most appropriate tenancy type.

As at other questions, respondents also highlighted a number of issues that could have an impact on take-up. In particular, it was suggested that take-up would be greater if more tenancies are made available and that a Land Use Tenancy which replaces currently existing tenancies without increasing the overall availability of tenancies may be of limited benefit. The importance of both parties in the contractual agreement being in favour was noted again, as was the importance of simplicity and making the Land Use Tenancy an attractive option where it is appropriate.

Question 36 – Do you think that there should be guidance to help a tenant and their landlord to agree and manage a Land Use Tenancy?

Responses to Question 36 by respondent type are set out in Table 53 below.

Table 53 Question 36 – Do you think that there should be guidance to help a tenant and their landlord to agree and manage a Land Use Tenancy?

	Yes	No	Don’t know	Total
Organisations:
Academic group or think tank	4	0	0	4
Community or local organisations	14	0	0	14
Government and NDPB	8	0	2	10
Landowner	24	0	5	29
Private sector organisations	9	2	0	11
Representative bodies, associations or unions	12	1	3	16
Third sector or campaign group	11	0	3	14
Total organisations	82	3	13	98
% of organisations	84%	3%	13%
Individuals	232	15	30	277
% of individuals	84%	5%	11%
All respondents	314	18	43	375
% of all respondents	84%	5%	11%

A large majority of respondents, 84% of those answering the question, thought that there should be guidance to help a tenant and their landlord to agree and manage a Land Use Tenancy. Of the remaining respondents, 5% disagreed and 11% did not know.

Please give some reasons for your answers and outline who you think should be responsible for writing and managing the guidance.

Around 300 respondents made a comment at Question 36.

It was suggested that lack of awareness or misinterpretation of legislation has been at the root of many of the disputes relating to existing forms of tenancy. In terms of the Land Use Tenancy itself, points raised included that there may be an be complex issues with unexpected consequences, including because the conversion of an agricultural tenancy to a Land Use Tenancy has implications for both landlords and tenants. It was also noted that the approach would be consistent with those taken in relation to other aspects of land reform policy and practice, including the LRRS.

It was hoped that clear guidance would help standardise the process and that it would or should offer reassurance to the tenant that their aspirations for the land are supported for the long term; it was suggested that this should help encourage positive investment in, for example, improving the land to tackle climate change, reversing biodiversity loss and providing benefit to local communities.

Some respondents referenced existing approaches or specific pieces of guidance which they found helpful, including the TFC’s Guide to General Statutory Compliance on Agricultural Holdings. However, some also suggested there remains room for improvement.

In terms of who should be responsible for writing and managing any guidance for Land Use Tenancies, respondents were most likely to suggest the SLC and/or the TFC, including because of their experience of doing so in other contexts. Other organisations referenced included the Tenant Farming Advisory Forum and the Scottish Agricultural University. There was also reference to the Social Farms and Gardens’ Community Land Advisory Service, which provides one-to-one support for community organisations and landowners in all sectors.

Other suggestions or comments included that a mix of stakeholders – tenants, landowners and policy experts – should write the guidance. It was suggested that the best guidance has been co-produced by stakeholders but that this would require facilitation by an independent organisation with knowledge in the field of tenancy and community land use.

Suggestions relating to how the guidance should be developed included that:

• There should be legal input from a party representing the climate emergency.
• It should be subject to consultation with bodies with relevant expertise.
• It should be agreed between RICS, the Scottish Agricultural Arbiters’ and Valuers’ Association (SAAVA), the Scottish Tenant Farmers Association and the National Farmers Union of Scotland.

It was also noted that a number of organisations, including the Central Association of Agricultural Valuers and SAAVA, are likely to produce guidance and commentary to assist parties and their advisers.

There were also suggestions relating to the content of the guidance, including that the format of the TFC guidance (referenced above) could be expanded to encapsulate guidance to assist Land Use Tenancies. Suggestions around particular issues or topics to be covered in the guidance included:

• How the legal requirements and rights of all parties would be affected.
• Rental structures, calculations, and percentage of benefit. Specifically, a clear formula for rent charges.
• Ways of working together in partnership, including outlining how to establish shared goals and work towards these collaboratively.

In relation to what would not be required, there was reference to specific Codes of Practice; it was noted that Codes of Practice are intended to regulate processes and behaviours and it was thought that existing Codes which apply to specific aspects of agricultural tenancies would apply to Land Use Tenancies. It was also argued that any guidance that is produced should be non-binding and for information only. These issues were also raised by those who did not think that guidance should be produced or who had not answered the closed question. Other comments from those who had not thought guidance is required included that parties should be able to seek professional advice and agree their own personalised tenancy terms and conditions and that this is likely to negate the need for any guidance.

Finally, there were offers to support the dissemination of any guidance and to organise joint training for the sector. There was also reference to the need for a support line and legal advice for tenants.

Question 37 – Do you think there should be a process to manage disputes between a tenant of a Land Use Tenancy and their landlord?

Responses to Question 37 by respondent type are set out in Table 54 below.

Table 54 Question 37 – Do you think there should be a process to manage disputes between a tenant of a Land Use Tenancy and their landlord?

	Yes	No	Don’t know	Total
Organisations:
Academic group or think tank	4	0	0	4
Community or local organisations	13	0	1	14
Government and NDPB	6	0	2	8
Landowner	24	1	4	29
Private sector organisations	8	3	0	11
Representative bodies, associations or unions	12	2	3	17
Third sector or campaign group	13	0	3	16
Total organisations	80	6	13	99
% of organisations	81%	6%	13%
Individuals	243	10	28	281
% of individuals	86%	4%	10%
All respondents	323	16	41	380
% of all respondents	85%	4%	11%

A large majority of respondents, 85% of those answering the question, thought there should be a process to manage disputes between a tenant of a Land Use Tenancy and their landlord. Of the remaining respondents, 4% did not think so and 11% did not know.

Please give some reasons for your answers and outline how this process could be managed.

Around 300 respondents made a comment at Question 37.

In addition to general statements of support, comments included that disputes are inevitable and that, without a dispute management process, issues will need to be resolved by agreement between the parties or, failing that, through the courts.

It was noted that the process would be consistent with that proposed in relation to the LRRS, and also that most commercial contractual agreements include dispute resolution measures. There was also a view that the Land Use Tenancies process should be broadly as is used to manage disputes under existing agricultural tenancies.

Other respondents noted that a freely negotiated lease would include appropriate dispute resolution arrangements, but thought that there is no reason why a particular dispute resolution process should be imposed on parties entering into a freely negotiated letting arrangement. It was argued that, to ensure freedom of contract, it will be important that Land Use Tenancies are not overburdened by prescriptive dispute resolution procedures.

In terms of how any future approach should be framed, there was reference to the current TFC dispute management process, with its appeal rights. It was suggested that the aim should be early, timely, cost-effective and impartial provision of answers that allow the parties to move on.

One perspective was that, if possible, mediation should be made a mandatory part of the resolution process, with the Civil Court only involved if this fails. A different perspective was that alternative dispute resolution should be an option for parties, rather than a mandatory process, as evidence suggests that outcomes are better for the former than the latter. It was also noted that some disputes involve complex issues of law, which are better resolved by a court determination, or would have a binary outcome (either a right or responsibility exists or not), for which alternative dispute resolution may not be the most appropriate approach.

Other suggestions about the best approach going forward included that:

• Each party should be able to refer a dispute to arbitration, with the framework for that provided by existing law and practice, ideally with the extension of the Arbitration (Scotland) Act 2010.
• The process should be affordable and accessible to different land users; it should be through appropriate professional bodies and should avoid becoming a costly and intensive legal process. There was also a suggestion that mediation should be government funded.

Respondents also referred to the importance of the process being managed by an impartial body, or that any approach should be led by a fully independent body which should develop new processes. However, and reflecting comments at the previous question, there was also reference to the outputs from the TFC having proved useful. The appropriate organisation to lead on dispute management is the focus of the next question.

Question 38 – Do you agree or disagree that tenants of a Land Use Tenancy and their landlords should be able to resolve their legal disputes in relation to the tenancy through the Scottish Land Court?

Responses to Question 38 by respondent type are set out in Table 55 below.

Table 55 Question 38 – Do you agree or disagree that tenants of a Land Use Tenancy and their landlords should be able to resolve their legal disputes in relation to the tenancy through the Scottish Land Court?

	Agree	Disagree	Don’t know	Total
Organisations:
Academic group or think tank	3	0	1	4
Community or local organisations	4	1	7	12
Government and NDPB	3	0	5	8
Landowner	8	12	8	28
Private sector organisations	6	2	3	11
Representative bodies, associations or unions	7	2	8	17
Third sector or campaign group	8	0	7	15
Total organisations	39	17	39	95
% of organisations	41%	18%	41%
Individuals	193	30	56	279
% of individuals	69%	11%	20%
All respondents	232	47	95	374
% of all respondents	62%	13%	25%

A majority of respondents, 62% of those answering the question, agreed that tenants of a Land Use Tenancy and their landlords should be able to resolve their legal disputes in relation to the tenancy through the Scottish Land Court. Of the remaining respondents, 13% disagreed and 25% did not know.

Please give some reasons for your answers and outline additional ways in which disputes could be resolved.

Around 140 respondents made a comment at Question 38.

The importance of both parties having access to an appropriate judicial forum in which to resolve disputes was highlighted. General reasons for supporting the Scottish Land Court option included that it would be appropriate or reasonable, and that the Court has a wealth of experience.

While supporting the judicial route being available, some respondents argued that this should act operate as a backstop and not a first port of call. It was suggested alternative dispute resolution (ADR) can offer quicker and more cost-effective outcomes than court resolution, with a higher degree of satisfaction in the process and higher likelihood of successful enforcement of any outcome reached. There were differing views as to whether some form of ADR should be a required step. While some respondents thought options such as expert determination, mediation or arbitration should be tried before going to the Scottish Land Court, others thought that ADR should be optional, since the evidence suggests that outcomes are better for an optional process rather than a mandatory one.

An alternative view was that ADR and other courts would be the better approach; it was suggested that the Scottish Land Court would not be the most appropriate body to deal with a dispute relating to commercial matters. Another suggestion was that parties should be free to specify the legal resort in the case of a dispute, and could be free to nominate the Scottish Land Court. However, it was noted that this could raise issues for the Court in terms of legal expertise.

Other suggestions included the use of local sheriff courts or of an Environmental Court, or for the SLC to have a role based on the approach adopted by the TFC.

Other issues raised about how any approach should work included that:

• Parties should be free to agree the dispute resolution approach which best suits their circumstances.
• Any approach should look to minimise legal costs to help ensure equality of access across all sectors.
• In terms of both ADR and recourse to the Scottish Land Court, expert advice regarding novel aspects of land use may be required.

Question 39 – Do you have any other comments on our proposal for a Land Use Tenancy?

Around 110 respondents made a comment at Question 39.

Comments sometimes reiterated that more information or detail is required, or that the Land Use Tenancy would be better suited to being considered alongside the proposed changes to agricultural tenancies rather than in Land Reform legislation. One suggestion was that it should be dealt with under a single Bill – either the Land Reform Bill or the Agriculture Bill, but not both. There was also reference to the provisions proposed in each Bill being compatible and complementary.

Other general comments or suggestions included that the Scottish Government needs to consider what other models are already working and whether the Land Use Tenancy model offers more. If the proposals are to be taken forward, there was a call for any new tenancy, and the associated processes, to be kept simple and designed to offer a commercial option for willing parties.

Reflecting this issue of willing parties, some respondents queried the extent to which the legal framework will regulate what terms the parties can agree, and it was suggested that it would be helpful to set out what types of activities can be undertaken and the process for termination. In particular, it was noted that most agricultural leases do not include sporting rights, minerals, and rights outwith the farm, and this would need to be factored into a Land Use Tenancy that permitted the tenant to interfere with or have any right to interact with these normally reserved rights.

However, it was also suggested that the commercial arrangements on some alternative land uses might struggle to be encompassed within a single legal format, for example the future liability for reinstatement/fulfilment in relation to carbon credits or the impact of permanent land use change. There was also a query about how the long-term nature of activities such as forestry will affect rent.

Other issues highlighted included that some of the rights under the Agricultural Holdings Acts (such as succession and assignation rights, security of tenure and the test for a ‘capable tenant’) would not be appropriate in a mixed use or entirely commercial tenancy. It was suggested that it would be inappropriate for a Land Use Tenancy to be an agricultural lease, or otherwise subject to the Agricultural Holdings Legislation, and that a freely negotiated lease of land permitting a mixture of agricultural and non-agricultural uses would be most beneficial for all parties. However, there was an associated concern that the Agriculture Bill consultation includes a proposal to change the compensation payable on resumption, and that proposals do not give confidence that a freely negotiated lease would remain as negotiated.

Suggestions for other issues to be considered included:

• The impact of any new type of tenancy with the general law of leases.
• What would happen if land under the proposed tenancy type is permanently improved by the agreed activity, or conversely, is impacted detrimentally.
• Any possible impact if the proposed tenancies would bring new tenants within the definition of ‘associate’ in terms of the Register of Persons Holding a Controlled Interest in Land Regulations.
• To what extent any new tenancy would be regulated.

In relation to the latter point regarding regulation, it was reported that this area of law is already heavily regulated and that many landlords and tenants see this as a significant burden. It was also suggested that the extent of regulation has resulted in a reduction in the amount of land available to let in the sector, and that a further tenancy type with complex provisions and regulation risks even further reduction.

There were also concerns about the likely outcomes from introduction of a Land Use Tenancy, including that it could lead to agricultural land being taken out of food production. It was suggested that this would be in contradiction with many of the Scottish Government’s other policies, such as the Local Food Strategy and the Good Food Nation Act. An associated suggestion was that large-scale landholdings should have a duty to offer tenancies for small-scale food production and mixed land use.

There was also reference to forest land and woodland, and woodlot licences, and to issues with tenant crofters and carbon income, as warranting further exploration and discussion with relevant stakeholders. More generally, there was a call for extensive stakeholder outreach to gauge landlord appetite to enter into Land Use Tenancies.

There was a concern that, given the volume and complexity of issues relating to Land Reform and Agriculture, legislating for a new type of tenancy may distract resources from other more important matters. The example given was the outstanding actions required for tenants and their families arising from Agricultural Holdings (Scotland) Act 2003 Remedial Order 2014 in light of the Salvesen Riddell judgement.

Although many of the comments raised concerns, the potential benefits of a Land Use Tenancy were also noted by some. For example, a Third sector respondent that owns land noted that they do not use current forms of agricultural tenancies because such arrangements permit and oblige the tenant to carry out agricultural practices, but conservation management is not covered; they would welcome being able to enter into longer term conservation management and land restoration tenancies with partners. They asked for consideration to be given to how Land Use Tenancies could be made to work as ‘conservation tenancies’ to help deliver conservation outcomes.