Small landholdings modernisation: consultation

Proposals

We propose a package of legislative reform measures relating to the following parts of small landholdings legislation:

1. Right to buy;

2. Diversification;

3. Assignation and succession; and

4. Access to an umbrella body.

These proposals seek to explore how best to modernise and update small landholdings legislation to give small landholders equality of opportunity compared to tenant farmers and crofters.

Responses to this consultation will help to: allow small landholders to take the right business decisions for them; help them to play their part in urgently tackling the climate and biodiversity crises; and help Scotland to reach Net Zero by 2045. These proposals aim to enable small landholdings to play a socio-economic role in supporting local rural communities to remain vibrant by encouraging population retention and enabling the next generation of small landholders to remain within their community.

1. Right to Buy

In response to the 2016 consultation, some small landholders felt it was unfair that they did not have an absolute or pre-emptive right to buy their holding in the same way that crofters and tenant farmers did.

Small landholders wanted to either have the right to buy their small landholding or the right to buy the land under their home, which they or their ancestors had built. They felt that introducing an absolute right to buy the land under their homes would reduce their fears of their risk of becoming homeless due to the lack of local permanent residential housing provision, particularly for areas with high levels of tourism. Population decline is a real threat to the sustainability of many of Scotland's rural communities.

They also felt it was unfair that their tenanted land could change ownership without them being offered the opportunity to buy their small landholding. Some suggested this was potentially a contributory factor to challenging relationships between small landholders and their landlords.

How this compares to other forms of land tenure

Tenant farming: The Agricultural Holdings (Scotland) Act 2003 (‘the 2003 Act’) gives tenant farmers with a secure 1991 Act agriculture tenancies the opportunity to buy the agricultural land if the landlord offers the land for sale (subject to the tenancy arrangement). This is known as a pre-emptive right to buy.

To exercise the pre-emptive right to buy, tenant farmers must register their interest in the Register of Community Interests in Land maintained by Registers of Scotland.

On receipt of the application, Registers of Scotland notify the landlord who has an opportunity to comment on the application. Provided the details of the tenant and the holding are accurate and reflect the contractual agreement between the landlord and tenant, the Registers of Scotland will add the tenant’s interest to the Register of Community Rights in Land.

The Land Reform (Scotland) Act 2016 will remove the requirement for a tenant farmer to register their pre-emptive right to buy interest and ends the Register of Tenants’ Interests. After this happens, the land owner will then need to give the tenant written notice of any proposed sale in advance.

Crofting: A crofter has an absolute right – a right which can be enforced against an unwilling landlord – to purchase their croft house and garden ground. Crofters are also entitled to make a request to purchase their croft land though the landlord is not obliged to agree to this. If a landlord is unwilling to negotiate the terms of the sale for the land, a crofter can apply to the Scottish Land Court for an order authorising the purchase. The Scottish Land Court may make an order authorising for the crofter to acquire the croft land or it can refuse the application. The Scottish Land Court cannot make an order authorising the conveyance of land to the crofter where it is satisfied that the sale would cause the landlord a substantial degree of hardship and/or be detrimental to the interests of sound management of the landlord’s estate. The purchase price is fifteen times the annual rent currently paid by the crofter (unless a crofter makes an application for the fixing of a fair rent). We do not consider that this calculation is appropriate for small landholdings given that rents for smallholdings vary enormously and this could lead to wide disparities in valuation.

Relevant recommendations

The Scottish Government appointed land reform groups in 2014 and 2015 to look at the question of a right to buy for small landholders. The Agricultural Holding Review Group’s Review of Agricultural Holdings Legislation Final Report 2015 recommended that further consideration should be given to providing small landholders with a pre-emptive right to buy their holdings, should they come up for sale. The Land of Scotland and the Common Good: Report 2014 recommended that small landholders should, like crofters, be given a statutory right to buy their small landholdings, at fifteen times its annual rent.

The Scottish Government propose:

In keeping with the Scottish Government’s Ambitious proposals for land reform 2022, we propose to introduce into legislation an absolute right to buy the land under the small landholder’s house and garden along with a pre-emptive right to buy the remainder of the small landholding. This proposal will aim to provide small landholdings with a right to buy comparable to other forms of land tenure.

This would give small landholders security in their ownership over the house they live in and their home and garden. We consider the most appropriate and fair method for both small landholders and landholdings is that this valuation should be based on the valuation given by a valuer who is appointed having been agreed by both the small landholder and their landlord. Where the small landholder and landlord fail to agree the appointment we propose that the umbrella body (see proposal 4) should independently appointment of valuer.

We also propose that small landholders should have the right to buy the remainder of their small landholding tenancy if the landowner of their land gives notice and takes action (with the view of selling the land or a part of the land) to transfer the land containing their small landholding. As is the case with secure 1991 Act tenancies we consider that this offer should be at a price agreed between the small landholder and their landlord.

This proposal could provide wider benefits such as supporting domestic population retention in rural areas particularly in areas where there is a lack of housing and pressure from tourism such as on Arran, support community cohesion and encourage economic growth of small landholdings.

To ensure fairness for the landlord we propose to introduce an appropriate clawback provision. This would mean that once the small landholder purchases the land under their home and garden or their small landholding, if they then decide to sell on either of these within a certain timescale, they would have to pay their landlord a specific amount. This approach would support population retention and reduce onward sales for holiday homes.

Questions

A. Do you agree that providing small landholders with the right to buy the land under their homes and their gardens could give small landholders greater security and allow them to invest into their small landholding and business with confidence?

• Strongly agree
• Agree
• Neither
• Disagree
• Strongly disagree

Please give reasons for your answer:

B. Do you agree that giving small landholders the right to buy the land under their homes and garden could be beneficial in reducing rural depopulation for the communities with small landholdings in them?

• Strongly agree
• Agree
• Neither
• Disagree
• Strongly disagree

Please give reasons for your answer:

C. Do you agree that small landholders should have the opportunity to purchase their small landholding if their landlord gives notice or takes action to transfer the land containing the small landholding for sale or transfer to another company or trust?

• Strongly agree
• Agree
• Neither
• Disagree
• Strongly disagree

Please give reasons for your answer:

D. Do you agree that a clawback provision should be introduced to ensure fairness for the landlord if a small landholder who previously purchased the land under their home and garden or their small landholding and subsequently sells either of these within a specific timeframe?

• Strongly agree
• Agree
• Neither
• Disagree
• Strongly disagree
• E. How do you think this clawback should be calculated and what length of time should the clawback apply to?

Please give reasons for your answer:

F. Do you agree that the most appropriate and fair valuation for the right to buy the land under the home and garden should be decided by a valuer appointed in agreement by both the small landholder and their landlord, or failing both of them agreeing a valuer, one would be independently appointed? The small landholder will be legally required to meet the cost of the valuation.

• Strongly agree
• Agree
• Neither
• Disagree
• Strongly disagree

Please give reasons for your answer:

G. How should the valuation of the right to buy the land under the home and the garden site be calculated to provide fairness for both the small landholder and their landlord?

Please give reasons for your answer:

2. Diversification

Small landholdings can be utilised for other occupations that the Scottish Land Court find reasonable so long as the occupation is not inconsistent with the landholding’s cultivation.

Responses to the 2016 consultation found there was confusion amongst small landholders and landlords about whether diversification is possible. Some small landholders who responded to the 2016 consultation said they had found it difficult to develop viable small landholding businesses and all small landholders called for greater opportunity to diversify. It was also suggested by some small landholders that landlords could be resistant to diversification.

How this compares to other forms of land tenure

Tenant farming: Agricultural leases are subject to statutory terms, but a tenant farmer and their landlord can, in some circumstances, reach private contractual agreements as well. Tenant farmers with a secure 1991 Act agricultural tenancy are required to seek their landlords permission in advance before diversifying into non-agricultural activity which is not set out in the terms of their lease. If landlord objections to the diversification and the tenant does not does agree to the objection, the landlord has to go to the Land Court. The agriculture bill consultation contains proposals to further modernise tenant farming, with the introduction of a power for Scottish Ministers to determine what is an acceptable diversification – which will also help to enable national biodiversity, climate change mitigation and adaptation needs to be met by tenant farmers.

Crofting: Tenant crofters are able to diversify with their landlord’s permission, or if this cannot be obtained, they can submit an application to the Crofting Commission. Diversification beyond cultivation has to be for ‘purposeful use’, which is described as ‘any planned or managed use of croft land, which does not adversely affect the croft, the public interest, the interests of the landlord or owner, or the use of adjacent land’.

The Scottish Government propose:

To introduce legislation to enable small landholders to diversify their current activities, and to modernise and adapt their business enterprise, in line with the options available to other tenants of agricultural land. This aims to allow small landholders to play their part in tackling the urgent climate and biodiversity crises. This could be delivered by implementing a similar approach as has been used in the crofting legislation.

This could help enable small landholdings to develop their business, and contribute more to their local community.

Questions

H. Do you agree that small landholders should be able to diversify their activities on their landholdings?

• Strongly agree
• Agree
• Neither
• Disagree
• Strongly disagree

Please give reasons for your answer:

I. Should small landholders require their landlord’s permission in advance of diversifying their activities?

• Yes
• No
• Don’t know

If yes, should that permission have a set timescale that a landlord is required to meet?

Please give reasons for your answer:

J. Do you agree that if the landlord does not consent to the small landholder’s diversification the small landholder should have to go to the land court?

• Strongly agree
• Agree
• Neither
• Disagree
• Strongly disagree

If you disagree what alternative do you propose?

Please give reasons for your answer:

3. Assignation and succession

The legislation about small landholdings succession and assignation rights is old and in the case of testate succession (where there is a will or other testimony writing) the legislation is from 1886. In response to the 2016 consultation, some small landholders felt the categories of eligible assignees and successors should be widened. Other respondents believed that the provisions on succession were unclear.

How this compares to other forms of land tenure

Tenant farming: Tenant farming legislation has been updated significantly to enable more people to be assigned or succeed a secure 1991 Act agricultural tenancy, taking account of the wide range of modern family arrangements and the practical nature of farming.

A landlord can object to either the assignation or succession if the person who the tenant farmer wants to assign their tenancy to:

• is not of good character;
• does not have sufficient resources to enable them to farm the holding with reasonable efficiency; or
• the person has neither sufficient training in agriculture or sufficient experience in the farming of land to enable them to farm the holding with reasonable efficiency.

Crofting: In terms of succession, a croft tenancy can be transferred to a person through succession. Crofts can be assigned by the crofter to any natural person (i.e. not a company). The assignation does not need to be to a family member – crofts can be exchanged on the open market. All transfers of a croft require the consent of the Crofting Commission.

The Scottish Government propose:

To amend the legislation for small landholdings and update the assignation and succession provisions, so a small landholder can assign to the same classes of people as tenant farmers with secure 1991 Act agricultural tenancies in the Land Reform (Scotland) Act 2016.

This proposal aims to reflect modern family arrangements and brings small landholding legislation in line with the legislation for secure 1991 Act agricultural tenancies. This will make it easier for small landholders to retire and the small landholding to continue by it being assigned to a family member or for the small landholding to be retained by an suitable person within the wider family or the next generation, encouraging population retention and small scale economic activity within the local community.

Given that small landholdings are smaller than the average tenant farm, we consider that the landlord should be able to object to the person identified to be assigned or succeed the small landholding for the following reasons:

• if the person is not of good character;
• does not have sufficient resources to enable them to farm the small landholding with reasonable efficiency; or
• the person has insufficient training in agriculture or insufficient experience, unless the person is undertaking a suitable training course.

Questions

K. Do you agree that the legislation setting out who can be assigned or succeed a small landholding should be updated to have similar succession and assignation rights as tenant farmers with secure 1991 Act tenancies?

• Strongly agree
• Agree
• Neither
• Disagree
• Strongly disagree

Please give reasons for your answer:

L. Do you agree that a landlord should be able to object to the person the small landholder wishes to be assigned the small landholding or to succeed it? If so what should those objection grounds be?

• Strongly agree
• Agree
• Neither
• Disagree
• Strongly disagree

Please give reasons for your answer:

4. Access to an umbrella body

During the 2016 consultation, some small landholders felt that they could benefit from having an organisation with over-arching responsibility for small landholders and their small landholdings. They felt that this approach would ensure that the current small landholding legislation is properly followed by both small landholders and their landlords. Some also felt that they might benefit from the establishment of a single organisation with responsibility for regulation of small landholders and their small landholdings.

Many small landholders felt that they did not understand the current legislation, given how old it was (last amended in 1931) and were unclear on where they could go to get advice on the interpretation of the current legislation. Although we are already proposing to update the legislation; an umbrella body will be able to help increase understanding of the legislation.

Both landlords and small landholders also expressed concerns about the Scottish Land Court and felt that reaching resolution could be extremely stressful, costly, complex, and onerous for all those involved. They felt these concerns could be mitigated by an umbrella body, which could provide small landholders and their landlords with an independent source of information. It could also provide a means to encourage good relations between small landholders and their landlords, although a body should not replace the Scottish Land Court.

Other forms of land tenure

Tenant farming: The Scottish Land Commission includes a Tenant Farming Commissioner (TFC). The TFC has a legal duty to promote and encourage good relations between landlords and tenants and has the ability to publish certain codes of practice. The TFC also has the power to investigate alleged breaches of the codes.

Crofting: The Crofting Commission has a wide range of functions to regulate and reorganise crofting, including investigating breaches of duty and taking enforcement action. In addition, crofters are required to apply for Commission approval in a number of situations such as when seeking to be absent from their croft for a period of time. All new crofting tenants require to be approved by the Commission including for assignation and succession. The Commission also promote the interests of crofting.

The Scottish Government propose:

As there are only a small number of small landholdings it would not be justifiable to create a new body solely for small landholders and their landlords. It would be better value for money and more appropriate, for small landholdings to fall under the remit of an existing public body (such as the Scottish Land Commission). This would require the Scottish Government to amend their remit but would allow small landholders and their landlords access to support, and encourage good relationships.

As part of this, the organisation would promote and encourage good relations between small landlords and their landlords, publishing guidance and codes of practice. The organisation could also be given the power to investigate alleged breaches of codes of practice. This proposal would help to reduce confusion and tension while making small landholdings legislation more accessible.

Questions

M. Do you agree that small landholders and their landlords should have access to a public body (in a similar way that tenant farmers and their landlords have for agricultural tenancies)?

• Strongly agree
• Agree
• Neither
• Disagree
• Strongly disagree

Please give reasons for your answer:

N. If a small landholder and their landlord have a disagreement should the body be able to mediate?

• Strongly agree
• Agree
• Neither
• Disagree
• Strongly disagree

Please give reasons for your answer:

5. Additional considerations

This section of the consultation enables you to give us your views on anything else you think needs to be changed in the small landholding legislation to support small landholders and their landlords.

O. Is there anything else you think should be changed in the current small landholding legislation to modernise small landholdings, so they can play their part helping to tackle the climate and biodiversity crises and for Scotland to reach Net Zero by 2045?

If yes, please use this text box to provide reasoning for your answer: