Small landholdings in Scotland: legislation review

Conversion to Other Types of Tenancies

Issues Raised

130. Some consultees felt that converting small landholdings to another tenancy type would remove the legal uncertainty small landholders have been experiencing; it would introduce a right to buy (if the type of tenancy that the landholding converted to had an associated right to buy) and spread the burden in relation to obligations.

131. Rationalisation of tenancy types may be advantageous in terms of simplifying the agricultural landscape, however, it could possibly result in disproportionate burdens being imposed on the landlord where the rent does not reflect their obligations.

Conversion: Crofting

132. The part of the Highland region that was outwith the crofting counties, Moray, the parishes of Kingarth, North Bute and Rothesay in Argyll and Bute and the islands of Arran, Great Cumbrae, Little Cumbrae in North Ayrshire became designated crofting areas in 2010. ^[104] The Crofters (Scotland) Act 1993 as amended by the Crofting Reform etc Act 2007 and Crofting Reform (Scotland) Act 2010, provides for small landholders to convert their holdings located in these areas to crofting tenure, provided no part of the land is tenanted by other means. ^[105] The landlord need not agree. The process involves providing proof of tenancy type by way of the Scottish Land Court, payment of the agreed compensation to their landlord followed by a request to the Crofting Commission for conversion to a croft. Small Landholders, as new crofters, then have the right to buy their croft. ^[106]

Discussion

133. To date, no small landholder in one of the areas covered by the 2010 Order has gone through the crofting conversion process. During the consultation process, some individuals indicated this was due to the complexity of the legislative process. In addition, this poor uptake is attributed to small landholders not wishing to sign up to the specific terms, rights and duties that apply to crofts; there are regulatory burdens associated with crofting which small landholders consider are excessive. ^[107] Additionally, they may be deterred by a possible decrease in land value as a result of conversion, ^[108] the cost implications in relation to valuations.

134. If the possibility of converting to a croft was extended to all small landholdings, crofting would then apply to the whole of Scotland and geographical jurisdiction of the Crofting Commission would extend to the whole country; historic crofting counties could become obsolete. In addition, extending the crofting regions may result in increased numbers of applicants accessing crofting grants. Such a change would require support from all aspects of the crofting sector and the Scottish public given the cultural significance of crofting.

135. Small landholders on Arran can already convert to crofting, however, they have indicated that the process appears complex.

136. As part of this review, the opinions of small landholders were canvassed on the possibility of converting to crofts. Their responses were mixed. Some suggested that although conversion would mean that small landholders would have the right to buy for the first time, allowing access to funding that has previously been unavailable to them, conversion to crofting would be as a last resort. Some consultees indicated that any further advantages would have to be made very evident to them, especially in relation to their perception of crofting being too bureaucratic with little clarity on rights and conditions.

137. A further barrier to conversion may be the payment of compensation by the small landholder to the landlord. Some small landholders considered that, where small landholdings had automatically converted to crofts under the 1955 Act these individuals were not required to pay compensation. They also felt that the sale value of the land would not be calculated to reflect the their personal long term investment. They also argued that it was potentially possible that compensation in the form of tax breaks or direct payment could have been paid to landlords at the time that certain small landholdings were originally formed.

138. However some small landholders felt that having a governing body such as the Crofting Commission would be advantageous, helping ensure that both small landholders and landlords adhered either to the legislation or to a code of conduct.

139. The Scottish Parliament's Rural Economy and Connectivity ( REC) Committee has considered small landholding conversion to crofting on two occasions recently. Whilst the Crofting Commission appear to be open to the idea of encompassing small landholdings within crofting tenure, it was reported that small landholders were generally against the idea of crofting law applying to them. ^[109]

Conversion: Secure 1991 Act Tenancy

140. Another option would be to allow a small landholding to convert into a secure 1991 Act agricultural tenancy. However, consultation responses indicate that conversion to this type of tenancy would not be an attractive option for small landholders as they felt agricultural holdings legislation was complex.

Legislation

141. No legislation currently exists to allow small landholding to convert into an agricultural holding.

Discussion

142. Conversion to secure 1991 Act agricultural tenancies could help improve clarity of the rules applying to those small landholdings which are converted. However, there would be significant implications for landlords and these would have to be carefully considered. Landlords would no longer be required to apply to Scottish Land Court to serve notice to quit on the small landholder. There may be potential for a higher rental income as a result of a conversion.

143. The small landholder would still benefit from security of tenure and would no longer be responsible for providing or for replacement and renewal of all fixed equipment. In addition, they would be able to benefit from a pre-emptive right to buy the land leased under the converted secure 1991 Act agricultural tenancy and could potentially benefit from the legislative requirements around fixed equipment and improvements at waygo.

144. Such a change would require support from tenant farming and across the Scottish agricultural sector and consideration would also require to be given to the legal impacts upon small landholders and their landlords.

(A table comparing the legal differences between small landholdings, crofting, & secure 1991 Act tenancies can be seen at Annex 4).