Land Reform (Scotland) Bill: business and regulatory impact assessment

Other Impact Tests

6.1 Scottish firms impact test

6.1.1 The Scottish Government conducted eight (face to face and online) interviews with landowners in 2023. These landowners and their representatives, represented community landowners, third sector landowners, and private businesses from different regions of mainland Scotland and the islands, and are listed as respondents 1-8 in the coding set out in Annex B. These interviews were in addition to the consultation work outlined above and the questionnaire used is at Annex A.

Part A: Strengthening the Land Rights and Responsibilities Statement (LRRS) through implementing compulsory Land Management Plans

6.1.2 Landowners highlighted the need for certainty over what they were being required to do. Some noted that the principle-based approach of the LRRS to engagement did not provide clear direction about what was expected of landowners, and that there is a need for clear definition of who they are expected to engage with. Some noted this was also important to help with communities’ expectations, and to make it clear what happens if communities do not engage and what constitutes a landowner having fulfilled their duties in that scenario. To provide a clear understanding of what is expected of landowners, the two obligations, to engage with communities and to have a land management plan, were developed. These two obligations support several principles of the LRRS but allow for clear requirements to be set out independently of the LRRS to provide certainty to landowners. Further details of requirements of requirements for community engagement and land management plans, as well as who can report breaches of the obligations will be set out in regulations and supported by guidance.

6.1.3 Engagement with landowners highlighted that many landowners already have forms of land management plans either held privately or publicly available, or identify key objectives and plans for the landholding. For these landowners the impact of the measures is unlikely to be significant as they may already be undertaking much of the work required by the new measures. There will be a greater impact on landowners who are not already identifying or setting out this information, but landowners noted how doing so is beneficial to the management of the landholding and can encourage strategic thinking. Consequently the impact is considered to be proportionate.

6.1.4 Many also noted that they already undertake community engagement activities, and landowners such as third sector organisations identified that they had existing staff provision to support this work. Concerns were raised about costs and time needed for engagement however, and how to make engagement meaningful. Some landowners also noted from experience that engagement over contentious issues or where there was disagreement within a community would typically take longer to conduct. The cost and resource implications were of particular concern to community landowners who often rely on volunteers to carry out engagement, and for smaller landowners with very few staff working on the management of the landholding. Those working with smaller landholdings noted the likely need to employ someone to develop a land management plan, increasing the financial impact on smaller landholdings compared to larger ones that could use in-house staff for the work.

6.1.5 Some respondents representing larger landholdings also raised that they may employ professionals to carry out development work to bring in their expertise. This choice is likely to be of a lesser burden to larger businesses however who may also have staff to support work.

6.1.6 The costs and challenges of mapping landholdings were raised, with specialist expertise being required and the length of time needed for land registrations to process. The measures propose requiring maps of landholdings to be included in land management plans to support transparency, but do not define the format or level of detail of those maps. The comments from landowners including on the costs associated with mapping and the potential pressure on professional services will need to be considered when the requirements for maps in land management plans are set out in regulations and guidance, to ensure the requirements are proportionate.

6.1.7 Some landowners reported that it could be challenging to get communities to take up engagement opportunities, and support communities to understand the process and how to engage meaningfully. There was concern that engagement requirements could result in “tick-box” exercises which would could require resource to be spent on engagement without useful results, and that ongoing engagement can be of greater benefit.

6.1.8 To ensure a proportionate approach, given the resource implications of developing land management plans and engaging with communities, and community capacity to respond to engagement, it was proposed to have a different criteria for landholdings in scope of Part A measures than those in scope of Part B measures. There are fewer landholdings in scope of the Part A measures as a result, but this is considered a proportionate level in terms of the impact of the measures when balanced with the policy aim.

6.1.9 Comments from respondents also informed the proposed frequency for review of land management plans. A number of respondents who had already developed management plans noted that they reviewed their plans on a five yearly basis, though some that covered remoter areas with very little change in the management of land over long periods would review plans less frequently. Consequently, the proposal to require reviews every five years was considered proportionate.

Part B: Adopting a Pre-Notification requirement and Transfer test on transfers of large-scale landholdings

6.1.10 Landowners noted the need for certainty over what is in scope of the measures and who are the relevant communities are for the pre-notification measures. To provide parameters for what is in scope of the measures, the criteria for being in scope is set out in the Bill. Details of requirements to be considered a relevant community body are also set out in the Bill and it is proposed that Scottish Ministers will be responsible for notifying those bodies during the pre-notification process. This approach aims to reduce uncertainty for landowners in who is in scope and who should be notified, and will be further supported by guidance.

6.1.11 Some landowners with experience of buying land as community bodies or selling land to community bodies were concerned that a time period of 70 days (split in the Bill as an initial 30 days to note an intention to register plus an additional 40 if required) would be challenging for community bodies to prepare an application as part of the pre-notification process. It was commented that a workable timeframe was needed but that the timeframe should not have a disproportionate impact on the landowner selling or transferring. As a planned sale must be delayed for the pre-notification requirement, the protected time for community bodies to apply is necessarily limited. A community pro-actively registering an interest prior to a sale though Part 2 community right to buy, community asset transfer, or direct negotiation with the landowner will therefore have more time in which to plan their application. The Bill will include powers to amend timescales for the process.

6.1.12 Some third sector landowners expressed concern about how land that is gifted, particularly through wills, would be impacted by the legislation as they sometime receive legacy gifts of land. This practice will not be impacted by the measures as transfers otherwise than for value are exempted.

6.1.13 Concerns were raised about the impact of Part B measures applying to all transfers of land that formed part of a landholding in scope of the measures. Some landowners discussed their experiences of selling plots of land for individual houses or to allow fields or private gardens to be extended. Placing additional requirements on these transactions could discourage development and was considered disproportionate and not within the policy aim. The transfer test will only apply to transfers of land over 1000 hectares, however pre-notification will apply to when part of a landholding that is over 1000 hectares in total is sold or transferred. In consideration of consultation responses (set out below) that landholdings of this scale are less likely to be accessible to community groups, and given the average sizes of community land purchases, with the vast majority of these landholdings being under 100 hectares, applying these measures to partial sales from a landholding over 1000 hectares is considered as a key element in the effectiveness of the proposal.

6.1.14 A number of potential impacts of lotting land as result of the transfer test were raised, including potential losses in value either as a result of lots not collectively achieving the same price as if the land had been sold as a single holding, or through changes in the market while the sale was delayed leading to a lower sale price being achieved than if the holding had been sold when the landowner planned to do so. The need to consider the use and saleability of areas of land when lotting and other issues such as access to certain sites and the positioning of existing utilities such as water pipes was also noted. It is anticipated that the Land and Communities Commissioner will seek advice from those with appropriate experience of lotting land where appropriate to inform their report to Ministers. Ministers will take into account such considerations as part of their lotting decision. Appropriate review and compensation provisions are provided in the Bill.

6.1.15 It is proposed that Scottish Ministers will make decisions in relation to the Part B measures, and concerns were raised about political influence on decision-making and the impact such perception could have on landholdings as businesses, including on investment in those businesses. The Bill set out test that must be met by Ministers in order for a decision to be made that land should be lotted. The Bill provides appropriate routes for appeal of those decisions to the courts, to mitigate against any concerns regarding decision-making and the impact of that view.

6.2 Competition assessment

Will the measures directly or indirectly limit the number or range of suppliers?

6.2.1 The measures are not expected to significantly limit the number or range of suppliers in relation to the land market or land-based activities. However they could have some impact in these areas.

6.2.2 The pre-notification process and transfer test will potentially delay transactions and increase transaction costs in the Scottish land market for large-scale landholdings. The additional costs and risk of government intervention in a proposed sale (through lotting requirements) may discourage some private sector buyers from entering the market. This could in turn have a negative impact on land prices that could otherwise be achieved. There is provision in the Bill however for landowners to claim compensation in relation to additional costs incurred as a result of the pre-notification process and the transfer test, where these costs are not covered by any additional sale value achieved. The compensation provisions mitigate the risks in relation to increased transaction costs, and so while the measures may discourage some private sector buyers they are not expected to significantly limit the number or range of buyers. In cases where land is lotted, this is anticipated to widen the potential range of buyers past those with the capacity to purchase an entire large-scale landholding.

6.2.3 There is also potential that land management plans, through increasing transparency of land ownership data and providing information about plans for land use change might act a catalyst for investment by private sector into areas of land that are earmarked for development or for natural capital investments. This would not limit the number or range of suppliers though, and may encourage greater investment in rural areas.

Will the measures limit the ability of suppliers to compete?

6.2.4 The measures are not expected to significantly limit the ability of suppliers to compete in the market.

6.2.5 There may be a small competitive advantage for landholdings out of scope of the measures due to their size over those in scope, as they would not be subject to a pre-notification process or transfer test. The landholdings out of scope would not be subject to measures which could impact how they can be transferred, which could make them more attractive to buyers. Any competitive advantage though that this gives landholdings out of scope of the measures is likely to be minimal. While there is overlap in the uses of smaller landholdings out of scope of the measures and larger landholdings that are in scope, buyers seeking to take ownership of large landholdings are unlikely to be seek smaller landholdings out of scope of the measures as a result of these proposals. Their reasons for taking ownership of a larger landholding are unlikely to be satisfied by taking ownership of a smaller landholding. Consequently any competitive advantage is only likely to be for landholdings just out of scope over those just in scope, rather than all landholdings in scope.

Will the measure limit suppliers’ incentives to compete vigorously?

6.2.6 No, the measures will not limit suppliers' incentives to compete vigorously.

Will the measure limit the choices and information available to consumers?

6.2.7 No, the measures will not limit the choices and information available to consumers. The measures will increase transparency of land ownership and use through land management plans and community engagement requirements, and provide additional opportunities for communities to take ownership of land. As a result more information will be available for consumers and all individuals, including prospective buyers of land (whether that is private businesses or community groups).

6.3 Consumer assessment

Does the policy affect the quality, availability or price of any goods or services in a market?

6.3.1 The policies may have some impact on the availability or price of goods or services in relation to land and the land market.

6.3.2 The measures will not increase the net availability of land. However they could lead to an increase in the availability of land to certain groups or individuals in the local area, either by encouraging landowners to offer land for sale to communities or to offer to sell or transfer land in lots rather than as a single entity, or by requiring land to be sold in lots as an outcome of the transfer test.

6.3.3 The increase in supply of land in different sizes in the market could impact on land prices but is not likely to do so significantly as there are other drivers of land prices, such as investment potential. The additional requirements and steps impacting the transfer of land however could discourage some buyers which could lead to a reduction in prices being achieved. Any impacts on prices though as a result of these measures are expected to be minimal as they will not affect other factors impacting land’s investment potential.

6.3.4 While the requirements for land management plans and engagement with communities are not expected to require specialist professionals to be engaged by landowners to carry out required actions, a number of landowners have expressed that they would employ their services to do so. This could put pressure on the availability of these services, but could also create new job and training opportunities if the market evolves in that direction.

Does the policy affect the essential services market, such as energy or water?

6.3.5 No, the measures do not effect the essential services market. The supply of land can impact this market, for example the availability of land for food production, renewable energy production, and housing, but the measures do not direct land use.

Does the policy involve storage or increased use of consumer data?

6.3.6 The measures require Scottish Ministers to keep a list of the contact details of persons who wish to be notified about any possible transfer of land to which the pre-notification provisions apply. How that data is collected and stored will be considered and addressed during the development of regulations in secondary legislation, and the impacts considered as that stage.

Does the policy increase opportunities for unscrupulous suppliers to target consumers?

6.3.7 No, it is not likely to increase opportunities for unscrupulous suppliers to target consumers. The measures are likely to increase the demand for services of specialist professionals such as land managers or consultants, and lawyers, but these services would be engaged by one professional business to another, and this activity does not present an increased risk to consumers.

Does the policy impact the information available to consumers on either goods or services, or their rights in relation to these?

6.3.8 The measures increase the information available to the public about the land management of landholdings in scope, and so will have a positive impact although not directly on goods or services. This increased transparency will support community engagement with landowners however, which could support community bodies in considering the purchase or lease of land and discussions on this with landowners.

Does the policy affect routes for consumers to seek advice or raise complaints on consumer issues?

6.3.9 The measures are not related to consumer issues.

6.4 Test-run of business forms

6.4.1 The measures may ultimately lead to the creation of new forms or guidance to support the processes for pre-notification and the transfer test, and requirements for land management plans and community engagement. A Business and Regulatory Impact Assessment will also be undertaken for secondary legislation.

6.5 Digital impact test

6.5.1 The provisions in the Bill are not prescriptive as to how the measures interact with digital processes, and so will be able to adapt to future advances in technology without changes to legislation. The measures cannot be circumvented by digital or online transactions.

6.5.2 Requirements that may interact with digital environments will be set out in regulations in secondary legislation and so the impacts will be considered at that stage following further development and consultation.

6.6 Legal Aid impact test

6.6.1 The Bill seeks to introduce some new appeals to the Lands Tribunal and Court of Session. Civil legal aid is available for Lands Tribunal procedures. There were a very small number of applications to the Scottish Legal Aid Fund relating to the Lands Tribunal over the previous year, and so the changes are unlikely to have an impact on the Fund. Information was shared with the Scottish Legal Aid Board in relation to Court of Session measures and no significant impacts on the legal aid fund were identified.

6.7 Enforcement, sanctions and monitoring

6.7.1 Enforcement and monitoring of the measures will be divided between the Scottish Land Commission and the Scottish Government.

6.7.2 To support the enforcement of the community engagement and land management plan obligations, the Bill includes provisions to enable alleged breaches to be reported to a new Land and Communities Land Commissioner, who will be a member of the Scottish Land Commission. The Commissioner may investigate an alleged breach of an obligation, and for that purpose require information to be provided and impose a fine of up to £1000 for a failure to do so. The Commissioner may, having determined that an obligations has been breached, impose a fine on the person who committed the breach of up to £5000. A person on whom a fine is imposed may appeal against the fine to the Lands Tribunal for Scotland.

6.7.3 Enforcement of compliance relies on breaches of the obligations being reported to the Land and Communities Commissioner rather than the Commissioner monitoring all landholdings in scope for compliance. Monitoring of the number of land management plans produced and breach investigations will be carried out by the Land and Communities Commissioner to support understanding of compliance with the obligations.

6.7.4 While the pre-notification and transfer test processes are ongoing, restrictions will be in place in respect of the landholding which prevent transferring the land or part of it, or taking action with a view to transferring that land, except in accordance with exemptions set out in the Bill. Monitoring of the pre-notification process, transfer test investigations, decisions and lotting will be carried out by the Scottish Government to assess the effectiveness of the policy in meeting the original policy aims. .

6.8 Implementation and delivery plan

6.8.1 A detailed implementation plan will be developed to so that the timing of the measures coming into force and recruitment of the new Land and Communities Commissioner ensures that the measures can function effectively. The dates for the measures to come into force (subject to Parliamentary process and timing) will be appointed by the Scottish Ministers in regulations.

6.9 Post-implementation Review

6.9.1 The Scottish Government, with the support of the Scottish Land Commission, will monitor whether the measures, once implemented through regulations, are having the intended effect and whether they are implementing policy objectives efficiently. Plans for monitoring and review will be developed as regulations and guidance are developed.