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Landowners highlight tenant farming risks and opportunities to MSPs

Scottish Land & Estates has presented evidence to the Scottish Parliament’s Rural Affairs and Climate Change and Environment Committee on the final report of the Agricultural Holdings Review Group.

In its evidence to the committee, Scottish Land & Estates states:-

  • Landowners want to see churn in the sector, allowing new and younger farmers to gain access to land.
  • Landowners support the establishment of a Tenant Farming Commissioner.
  • A government retirement fund should be set up for tenants aiming to retire.
  • Current proposals on succession rights and conversion of secure tenancies breach property rights and risk contravention of ECHR legislation.
  • Research shows compensation payable to landowners could cost Scottish Government in excess of £600 million.
  • Analysis suggests tenants converting secure tenancies will attract little, if any, additional value to the outgoing tenant beyond a 20 year term.
  • Successors to a secure tenancy should have a working connection to the farm.
  • It does not object to productive capacity being used to calculate rent reviews.
  • The Review Group’s report should form the basis of a separate Agricultural Holdings Bill, ideally delivered in the current parliamentary term.

Stuart Young, chief executive of Dunecht Estates and chairman of the organisation’s Agricultural Holdings Strategy Group, gave evidence to the committee alongside representatives from NFUS, RICS and the Scottish Tenant Farmers’ Association (STFA).

He said: “There is an opportunity following the publication of this report for the Scottish Government and the Scottish Parliament to develop these recommendations into a balanced set of policies which will take account of landlord and tenant interests and deliver success for Scottish agriculture.

“There are recommendations in the report which Scottish Land & Estates supports and is committed to developing with other industry organisations. In particular, we support the establishment of a Tenant Farming Commissioner and actively promoted the idea of an amnesty on tenant improvements.

“However, we cannot escape the fact there are recommendations which – if progressed in their current form – would not be to the benefit of the tenant farming sector.  These can be worked on in a constructive and collaborative manner to ensure that a package is delivered that benefits the sector as a whole.”

Scottish Land & Estates produced evidence on proposals to convert 1991 Act ‘secure tenancies’ to a minimum of 35-year LDTs and on the widening of succession rights.

Prior to publication of the Review Group’s final report, land agents Smiths Gore undertook research to calculate the loss of value to landlords on the basis of conversion to a 25-year LDT. They estimated the losses would be £297 million. Their research (attached) also looked at the extension of succession rights and estimated losses would be £285 million on the basis of an extension more conservative than what is being proposed now by the Review Group.

Andersons Farm Business Consultants produced modelling to show the values of tenancies being converted.

Scottish Land & Estates has taken legal advice on the proposed measures which identifies that they would detrimentally affect property rights and risk contravening ECHR legislation.

In its evidence Scottish Land & Estates said that there are alternative ways to achieve the same policy of encouraging tenants to retire without prejudicing the property rights of landlords.

The value to the public purse of paying compensation to landlords for the resulting loss in their land value, rather than, for example, funding a retirement scheme is highly questionable.

The Andersons’  analysis identified that the value of the tenancy (i.e. the amount a farmer would pay to have the opportunity to earn an income from the use of the asset) does not increase further once the assignation period reaches 20 years.

This means an assignee should pay no more for a 20 year LDT compared with a 25 or even 35 year LDT. If the policy objective is to facilitate the retirement of existing secure tenants and provide opportunity for new entrants or existing tenants growing their business, the valuation evidence shows this could be achieved with a term which is significantly shorter than 35 years.

On succession, the Review Group recognised the ECHR consequences of widening succession.

Scottish Land & Estates said in its evidence: “We fully support developing a targeted solution to address individual hardship cases, but can it be proportionate to change the succession law for all 1991 Act tenancies resulting in a potential compensation claim of hundreds of millions of pounds for a handful of situations?  

“We remain of that view that any widening of succession, as suggested, must at the very least be balanced by an eligibility test requiring the successor to have been earning a percentage of his or her income from the farming business in question for a period of time before the tenant’s death.

Following today’s hearing, Stuart Young said: “It is important that such a raft of recommendations are given close consideration. We were encouraged by the committee’s scrutiny of the issues today and look forward hearing its views on how the Scottish Government should take the Review recommendations forward.”

 

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