Scots tenancies down as sector adjusts to land reforms

Scottish land reforms are being blamed for a reduction in tenancies being offered in the country.

Last year’s Land Reform Act introduced significant legislative changes such as new tenancies, a pre-emptive right to buy for tenants, and changes to the rent review process.

Strutt & Parker says the reforms have caused temporary uncertainty among landlords, deterring some from entering into agreements.

NFU Scotland agrees the wider land reform agenda has had a detrimental impact but hopes it will be temporary, while the Scottish Tenant Farmers Association (STFA) says forward-thinking landlords are still letting land successfully. 

See also: Ten years on: UK farmland and the credit crunch

Legislation brings uncertainty 

The 2016 Act paved the way for the introduction of two new tenancies; the modern limited-duration tenancy (MLDT) which has a 10-year minimum term, and a 35-year repairing tenancy.

Neither of the new tenancies are currently in place, but the former will be introduced next month.

Those with 1991 Act tenancies were also given a pre-emptive right to buy – should the landlord decide to sell the property – having previously been required to register their interest.

The rent review process has also been tackled and is now more aligned to a holding’s productivity rather than open market rents.

Diane Fleming, farm agent with Strutt & Parker, said: “The net result is that with more legislation comes more uncertainty and therefore the number of agricultural tenancies offered are limited,” she said.

“Landowners fear a perceived loss of control over their land and the future risk of the tenants’ right to buy. Consequently, they are reluctant to enter into new tenancy arrangements.”

Instead, the flexibility of contract farming agreements are proving more popular.

Gemma Cooper, NFU Scotland’s policy manager, said: “There is no denying that changes to secure tenancies coupled with the wider land reform agenda has had a detrimental impact on letting in Scotland.

“Letting is still occurring, but agreements have defaulted to shorter-term arrangements, which are not ideal.

“We are also aware of an increase in contract farming agreements, which are being used as an alternative to tenancies.”

However, Mrs Cooper suggested than it could be a short-term issue.

Given time, she said, confidence could return to the sector and the intended benefits of land reforms in the sector could be realised.

“The new MLDT will be operational from 30 November, and 2018 is likely to see the introduction of the new repairing tenancies,” she said.

“However time will be needed before confidence in the sector improves.”

A promising start 

The development is in contrast to 12 months ago when the STFA said it was encouraged by an improvement in landlord-tenant relationships.

The association’s executive director Angus McCall told Farmers Weekly last October that “behaviour has improved immeasurably” since an independent adviser on tenant farming had been in place. 

Since that point, the new position of Tenant Farming Commissioner has been created, filled by Bob Macintosh. 

But while progress has been made fostering more positive relationships, the numbers of new agreements being signed are, anecdotally at least, down.

STFA chairman Christopher Nicholson said the past three legislative changes relating to the sector – in 2003, 2011 and 2016 – had all made letting land easier for landlords.

He said some landlords have made good use of limited-duration tenancies (LDTs) and continue to do so. 

“LDTs of 35 years or to retirement are not uncommon, and they also provide a vehicle for new entrants to make a start in agriculture,” he said.

“With concern over the possible impact of Brexit on upland and grazing farms we are seeing forward thinking landlords letting land to the next generation and new entrants on LDTs of 20-35 years to ensure their farms are occupied and managed over the next few decades. 

“The MLDTs introduced by the 2016 Act are very similar to existing LDTs but with less obligation on landlords to provide fixed equipment and with an option of a break clause for genuine new entrants.”
He added the letting of land is influenced by other factors included including taxation and support payments.

“Current UK taxation favours in-hand farming over long-term lettings, and the STFA would like to see changes to the fiscal regime that would provide benefits to landlords who let land on long-term leases. 

“Lessons can be learned from Ireland, where tax reliefs for landlords who let land on long leases were introduced in 2015 and the resulting positive benefits to agriculture already evident.”