Small landholdings in Scotland: legislation review

Background

What is a small landholding?

9. Small landholdings are those holdings, subject to the Small Landholders (Scotland) Acts 1886 to 1931 ^[6] which are present in all parts of Scotland, except the crofting counties ^[7] . Crofts in the crofting counties, which used to be subject to the Acts 1886 to 1931, were removed from the small landholdings regime by the Crofters (Scotland) Act 1955, and are now primarily governed by the Crofters (Scotland) Act 1993.

10. The small landholding regime was introduced into the crofting counties, following the Napier Commission Report, ^[8] by the Crofters Holdings (Scotland) Act 1886 which introduced three key rights for crofters: security of tenure; ^[9] fair rent; ^[10] and payment of compensation for improvements at the end of a tenancy. ^[11] A crofter was defined as tenant of a holding from year to year where the annual rent did not exceed £30, situated within a crofting parish. ^[12] The 1886 Act makes specific provision excepting certain categories of persons from the definition of crofter.

11. The Small Landholders (Scotland) Act 1911 remodelled the small landholding landscape, extending the 1886 Act to the whole of Scotland. The 1911 Act contained some freestanding provisions but also amended and modified the application of the 1886 Act, and the other Crofters Acts ^[13] . This means that the 1886 Act was not replaced and remains relevant as regards small landholdings. The 1911 Act provided that where the Crofters Acts said "crofter" this should be substituted to read as "landholder".

12. The 1911 Act came into force on 1 April 1912. On that date, existing holdings were reclassified depending on the characteristics of the holding. The classification of the holding determined the set of rules applying to that holding. The term "small landholders" is normally used as the generic term to include those individuals who are technically a "landholder" and those who are technically a "statutory small tenant". The law applying to each of these is not the same and the following paragraphs set out some of the differences.

Landholders

13. The 1911 Act provided that a variety of different types of persons became landholders under that Act. ^[14] The provisions of the 1911 Act, and of the Crofters Acts, which apply to landholders applied to these holdings. These persons were:

14. Existing crofters - On 1 April 1912 every holding which was held by a crofter to whom the 1886 Act applied became a landholding for the purposes of the new small landholdings regime. These were referred to as existing crofters.

15. Existing Yearly Tenants - On 1 April 1912 certain tenants who held a holding from year to year became landholders for the purposes of the new small landholdings regime, provided certain criteria were satisfied. The tenant had to reside on or within two miles of the holding, ^[15] and had to cultivate the holding by themselves or with their family (with or without hired labour). The rent of the holding on 1 April 1912 had to be less than £50 if the holding exceeded 50 acres ^[16] (however the rent could exceed £50 if the holding was less than 50 acres). ^[17] The tenant, or their predecessors in the same family, had to have provided or paid for the greater part of the buildings or other permanent improvements on the holding. The final criteria was that none of the disqualifications under section 26 of the 1911 Act applied.

16. Qualified Leaseholders - Certain tenants held their holdings under a lease for a term of more than year. If they satisfied the same criteria as existing yearly tenants, then those tenants became landholders from the termination of the lease. This meant that they did not gain landholder status when the 1911 Act came into force on 1 April 1912 but later, when the lease terminated. Such persons were termed "qualified leaseholders".

17. New Holders - The 1911 Act put in place a process for creating new holdings, which were registered by the Scottish Land Court under the Act. The tenants of newly registered holdings had landholder status for the purpose of the new small landholdings regime and were known as "new holders".

18. Importantly, the status of existing holdings was fixed at 1 April 1912. Existing crofters and tenants became landholders in accordance with the above processes, provided they met the criteria. They acquired landholder status either as an existing crofter; existing yearly tenant; or qualified leaseholder. New holdings could only be constituted in the meaning of the Acts if they were specifically created as such in terms of the legislation. The 1911 Act established a process in which a landowner and any other person could apply to the Scottish Land Court for that person to be registered as a new landholder under the Act. ^[18]

19. Provision was made to allow new holders to obtain loans or grants for certain purposes with a view to preparing the land to be suitable for cultivation. Following World War I, the Land Settlement (Scotland) Act 1919 amended the process for the creation of new small landholdings, which were offered to war veterans as a means of support and were often created by breaking up larger farms. Existing landlords or tenants could apply for compensation for any loss to the rental value or depreciation in the value of the estate that they sustained. This was settled by the Scottish Land Court unless the landlord required arbitration.

20. It should also be noted that a person who inherited a small landholding also became a landholder. ^[19]

Statutory Small Tenants

21. As mentioned above, the 1911 Act established alternate regimes for landholders and for statutory small tenants. Statutory small tenants were those tenants who would otherwise have been an existing yearly tenant or a qualified leaseholder ( i.e. landholders) but for the fact that the landlord provided the whole or greater part of the buildings or other permanent improvements on the holding i.e. where the landlord provided most of the fixed equipment. ^[20] Statutory small tenants also had to satisfy the relevant criteria in section 26 of the 1911 Act.

22. The distinction between small landholders and statutory small tenants is important because a statutory small tenant is subject only to certain of the provisions of the 1911 Act. ^[21] The 1911 Act provided that, except as expressly provided by the 1911 Act, the legislation shall not apply to statutory small tenants. ^[22] Further provision is made as regards statutory small tenants by the Small Landholders and Agricultural Holdings (Scotland) Act 1931. This means statutory small tenants had different rights than landholders and that any continuing statutory small tenants do not have the same rights as landholders under the Small Landholders Act 1886 to 1931.

23. Persons who inherit SSTs are themselves statutory small tenants in the meaning of the legislation. ^[23]

24. The legislation permits for statutory small tenants to gain the status of landholder in certain circumstances. Where a landlord failed in any duty to provide or maintain buildings and equipment required for the cultivation of the land by the tenant, the tenant was eligible to apply to the Scottish Land Court, which could declare that the statutory small tenant was a landholder. ^[24] This would bring the holding under the small landholding regime as opposed to the SST regime.

25. Additionally, the Small Landholders and Agricultural Holdings (Scotland) Act 1931, established a process where by a statutory small tenant could serve notice on their landlord that they wish to become a landholder. If that was agreed the holding would then be registered as a small landholding and the tenant would obtain the status of a landholder.

(see also Annex 5 for comparisons between statutory small tenancies and landholders)

Extent of Small Landholdings

26. During the 1880's there were more than 50,000 smallholdings or small farms ^[25] covering 14.6% of all agricultural land. ^[26] Today, the number of small farms in Scotland is 20,000. The number of statutory smallholdings (comprising both statutory small landholdings and statutory small tenancies) is approximately 74. One per cent of holdings with tenanted land are small landholdings. Land allotted to small landholdings covers 2,889 hectares or 0.2% of tenanted land, or about 0.05% of agricultural land. This compares to 5.58 million hectares for all agricultural holdings. ^[27]

27. In the early 20 ^th century the practice of creating new small landholdings was abandoned and few were established after 1931. ^[28] In some cases, the small landholder purchased the land from their landlord, ending the status as a landholding under the Acts. ^[29] Between 1959 and 2008 successive governments actively pursued a policy of removing state owned small landholding tenancies from land tenure and/or converting them to secure 1991 Act agricultural tenancies ^[30] or selling them back to the landlord for a fair consideration. Dwindling numbers are compounded by challenges in identifying this tenancy type. ^[31]

28. The reduction in the number of small landholdings can also be attributed to tenancy conversion. Following the Crofters (Scotland) Act 1955 small landholdings located within the crofting counties were automatically converted to crofts. ^[32] Today, all small landholdings lie outwith crofting counties. Some lie in the designated crofting areas; Arran, Bute, Great and Little Cumbrae, Moray and parts of the Highlands, ^[33] with the largest number, between 15-18 on Arran. Concentrations of small landholdings remain in Ayrshire, Aberdeenshire, Moray, Dumfriesshire, the Scottish Borders and east central Scotland.

(The distribution of small landholdings in Scotland can be found on the map in Annex 3)

Key issues small landholders face

29. Some of the issues small landholders face stem from a lack of understanding of how the legislation works in this area. Small landholders do have rights of security of tenure, but, they do not share the same benefits or legal rights as crofters or tenant farmers with secure 1991 Act agricultural tenancies:

• The legislation governing small landholdings was last updated in 1931. The legislation can appear inaccessible either because small landholders and landlords do not know where to access it, do not understand it or find it unwieldy and can be uncertain where they can go to get expert advice.
• Small landholders have to provide and maintain the entire infrastructure of their farms: housing, drainage, fencing and buildings ( i.e. fixed equipment). The burden of maintenance falls entirely to them. This position stems from small landholders originally providing the fixed equipment and buildings on the holding; often with a government grant. This is the same regime as applies to crofters under the Crofters (Scotland) Act 1993, who also have to provide and maintain their own fixed equipment. Under the Agricultural Holdings (Scotland) Acts 1991 & 2003, obligations are subject to a more equitable split between landlord and tenant farmer.
• In certain circumstances buildings, housing and land can fall into disrepair if the small landholder is unable to manage the land. This can raise concerns about eviction on the part of those individuals if they fear they are not meeting the statutory standards for maintaining the land.
• Some small landholders are uncertain of their rights and how small landholding legislation works in relation to succession or assignation. This has led to fears of homelessness upon retirement, as they do not own the house that they or their predecessor may have built and/or invested in.
• Legal provisions for compensation on improvements are similar to those applied to crofts, although some small landholders consider they are not fairly compensated for investments at resumption or waygo ^[34] e.g. as a crofter can assign a croft for value they can realise the value of their investment.
• There is no right to buy for small landholders. Crofters have a statutory right to buy their croft (introduced by the Crofting Reform (Scotland) Act 1976) and tenant farmers with secure 1991 Act agricultural tenancies have a pre-emptive right to buy (introduced through the Agricultural Holdings (Scotland) Act 2003).
• There is significant uncertainty as to tenancy type: some small landholders are unsure whether they have a small landholding tenancy; in addition the Scottish Government no longer links tenancies to the old development loans and no formal register is kept.

Current contribution to a vibrant tenanted sector

30. Smallholdings can provide both an important point of access into agriculture for new entrants and are essential for the sustainability of the industry and for those farming part-time or on a smaller scale. Small landholdings are in a different position and this review is the first step towards trying to understand how small landholdings can improve, how they contribute to land tenure and the tenanted sector and to our vibrant rural economy.