Scots tenants risk huge repair bills under post-lease clauses

The Scottish Tenant Farmers Association is urging tenants to consider removing post-lease agreements (PLAs) during upcoming rent reviews, warning the arrangements can leave farmers exposed to major renewal costs for fixed equipment.

Under the Agricultural Holdings (Scotland) Act 2003, secure tenants have the right to seek the nullification of a PLA during a rent review process, provided notice is served at least six months before the review date.

For tenants under review at Martinmas on 28 November, the deadline to serve notice is 27 May.

See also: Where now for the tenanted farm sector?

PLAs transfer responsibility for renewing fixed equipment from landlords to tenants.

Without a PLA, tenants are generally liable only for repairs, while landlords must pay for renewal once equipment reaches the end of its tenantable life.

The Scottish Tenant Farmers Association (STFA) said many secure tenants remain tied to agreements that can result in “significant” financial exposure.

In some cases, tenants can face bills worth “several hundreds of thousands of pounds”.

Examples of fixed equipment covered by PLAs include farmhouse roofs, traditional farm buildings, fencing and drainage systems.

Some agreements split replacement costs 50:50 between landlord and tenant, while others place the full renewal burden on the tenant.

STFA managing director Mike Halliday said: “With the majority of secure tenancies now being at least 50 years old, tenants should consider if their fixed equipment is currently in ‘reasonable’ condition or would require minimal spend to achieve this.

“Now might be the time to have your PLA nullified, rather than risk significant cost in renewing roofs and buildings as they come to the end of their working life.”

Removing costs

He added: “Lifting your post-lease agreement has the potential to protect tenants from significant renewal costs and would make a tenancy more attractive to a potential purchaser if the tenancy were to be sold through the relinquishment and assignation provisions.”

The STFA also noted that opportunities to remove a PLA arise only once every three years, because the process is linked to rent reviews.

“Now is the time to start thinking about it, so you are ready to act at your next review,” said Mr Halliday.