Scottish Agricultural Tenure Evidence Review

2 Background

2.1 Agricultural tenancy is an emotive subject due to the interests of two distinct groups in Scotland, namely landlords and tenants, with a group in-between who both own and lease land. Since the enactment of the Agricultural Holdings (Scotland) Act 1948, later consolidated in the Agricultural Holdings (Scotland) Act 1991, agricultural tenants have enjoyed security of tenure under statute in Scotland. There was a poor uptake of 1991 Act leases and Limited Partnership arrangements became more popular throughout the 1980's and 1990's as landowners preferred to let out land under these arrangements in order to avoid security of tenure and fixed equipment provisions. As a consequence land was often let out to existing tenants to help them expand and it became very difficult for new entrants to the industry to find land to rent in from landlords.

2.2 The Agricultural Holdings (Scotland) Act 2003 was the culmination of many years of discussion, debate and deliberation throughout Scotland on the issue of land tenure. The 2003 Act was initially seen as far-reaching and new forms of tenancy were introduced, namely the Limited Duration Tenancy (LDT) and Short Limited Duration Tenancy (SLDT). These tenancy reforms aimed to provide a degree of security for tenants, introduce fair maintenance obligations for landlords, provide tenants an opportunity to diversify and plant trees and introduce procedures to reduce the costs of dispute resolution. Part two of the 2003 Act also introduced the "tenant farmers right to buy" which enabled tenants to register their interest in their holding meaning that they have a pre-emptive right to buy should the landlord choose to sell the holding.

2.3 To date there has been very limited uptake of these new forms of tenure and the tenancy sector continues to contract in Scotland.

Purpose and Objectives

2.4 The main purpose of this report is to provide an evidence review on agricultural tenure in Scotland to inform the Agricultural Holdings Legislation Review Group and support policy development. This includes an examination of Scottish Government datasets pertaining to agricultural tenancies to identify trends in different forms of leasing agricultural land in Scotland, including any regional dimension or differences between farm types. In addition the report examines causal factors that have led to these changes. The report also includes a number of case studies from Europe and beyond, to ascertain, for example: extent and commonality of rented land; how their tenure systems operate; patterns and intensity of landownership; fiscal measures; regulation of land markets, etc.

2.5 The specific objectives for the study were to:

• Quantify the current level (frequency and area) and type of agricultural land tenure arrangements in Scotland
• Quantify the level of change in owner occupied agricultural land, agricultural land let out under tenancy and grass lets between 2000 and 2012
• Account for, and where possible quantify, the underlying reasons for change in tenure arrangements between 1991 and 2012, identifying as necessary any geographical differences.
• Explore the reasons for any differing change in ownership and tenure dependent on type of farming and location.
• Undertake case study reviews of land tenure arrangements in 8 countries. The case study reviews were to consider the nature and length of tenancies, whether countries are doing anything to promote new entrants, how rents are set and the impact of those rents on that land tenure, how succession and assignation is handled, any absolute right to buy/pre-emptive right to buy provisions, information on the types of companies and individuals owning land and if those companies are owned by a small range of individuals and the nature of any key tax legislation which significantly benefits either tenant or landowners.

2.6 Given the specific legislative framework for crofting, the focus of this study was restricted to non-crofting tenure.