Official Report 850KB pdf
Our third item of business is an evidence session on the Land Reform (Scotland) Bill. Today, we are taking evidence from a range of practitioners on part 2 of the bill.
I am pleased to welcome?Hamish Lean, partner and head of rural property, Shepherd and Wedderburn LLP; Martin Hall, senior director, Davidson & Robertson; Tom Oates, director, Oates Rural; and Andrew Wood, partner, residential development, Bidwells. Thank you all for accepting the invitation to speak to us this morning.
I am also pleased to welcome for this item Rhoda Grant MSP, who will have an opportunity to ask a few questions once committee members have asked theirs.
I remind members that I have an interest in a farming partnership in Moray, as set out in my entry in the register of members’ interests. Specifically, I declare an interest as an owner of approximately 500 acres of farmed land, of which about 50 acres is woodland. I also declare that I am a tenant on approximately 500 acres in Moray under a non-agricultural tenancy, and that I have another farming tenancy under the Agricultural Holdings (Scotland) Act 1991. I also declare that I sometimes take on grass lets on a short-term basis.
I should also point out that, in 2005, I worked with Bidwells and I knew Andrew Wood when I was working there.
We will now move straight to questions from committee members. Monica Lennon will ask the first one.
Good morning. I want to begin by asking about the model lease for environmental purposes. Do you think that it serves a practical purpose, and can you foresee any potential issues with the approach that is set out in the bill?
Martin Hall is looking directly at me, so I invite him to respond first.
The model lease has the potential to do a good job for the sector. There are a couple of riders on that, though. First, it is important that it falls outwith the Agricultural Holdings Act 1986, as there is a potential that it might conflict with tenancies under that act. Secondly, it is important to consider just what comprises “environmental purposes” and think about how the provision works practically in that regard—does it mean mainly environmental use, wholly environmental use or something else? However, overall, the provision has some potential, and we welcome an alternative vehicle to use for that purpose.
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I agree with Martin Hall. It is vital to keep the model lease separate from the 1986 act. The difficulty will come in situations in which there is a mixed use. The properties are unlikely just to be environmental—there could be an element of agriculture or other commercial uses in the lease. However, there will need to be clear water between the two bits of legislation for the provision to be effective. Therefore, the drafting will have to ensure that there is the ability to carry out certain agricultural operations—grazing would be the obvious one—in an environmental-type structure. Other than that, I welcome the provision. I do not know how often it will be used, because I suspect that we will see that there are a lot of larger agricultural units that are deemed to be agricultural and are already doing environmental things. People would probably consider splitting a holding and creating a new area using the model, if that were possible.
I have no massive comment on the issue. The only thing that I would say is that, from a practical angle, it is extremely confusing to have another type of lease. There is an attempt to split out agriculture activities from environmental activities, but they are quite combined. If there is a specific environmental thing that is being done, it could be done with a commercial lease, rather than having another type of lease involved. For the practical people on the ground, it is just another level of confusion.
Hamish Lean, do you agree with what has been said, or do you have a different view?
I echo what the previous speakers have said. I do not know whether there will be much in the way of a practical uptake of this sort of lease. The bill contains provisions in relation to compensation for improvements that are tied to sustainable regenerative agriculture, so there is a question about whether the model lease is necessary. I suspect that, in reality, very few landlords and tenants would actively seek out this model.
Does anyone have a view on what is in the bill and what was previously consulted on? There is a different approach now. Do you have any comments on that?
We favoured the former approach, as it gave a great deal more flexibility and scope for the sector to grasp the environment that we are working in now, which is different from the environment that we were working in 30 years ago. The number of uses that land can be put to within a broadly agricultural business is different, and it is important that we have the tools that we need in that regard. We saw the land use tenancy as a good vehicle for that, but that has now been moved towards an environmental use, and that is where I am seeing an issue with the balance between the environmental use and other uses. It is important to understand where the boundaries are.
I have a final question on this part of the bill. As we take evidence, we are looking to make suggested improvements to the bill and identify possible areas for amendment at a later stage. Is there anything that you would like to add on the provision that we are discussing? Should it remain in the bill? Should it be changed in any way?
I would change it back to what was being discussed before the draft came out, in order to ensure that there was greater flexibility.
I would support Martin. I also wonder how often the provision will be used in practice. We are creating quite a large piece of legislation that will probably rarely be used in practice, so the balance needs to be considered.
If you believe that it will not really be used in practice, is it required at all? Is it serving a purpose?
Probably not.
Does anyone disagree with that?
I disagree—I think that it will be used. We need to move forward as a sector, and this is an important flag towards that changing environment.
We have got a range of views. Thank you.
I forgot to say this at the beginning, but it is quite difficult when every committee member asks every single person on the panel the same question. If you want to come in, catch the questioner’s eye, and if you do not want to come in, look away. The problem is that, if you all look away at the same time, somebody will get called in, so it does not always work. Also, if I think that you are going a bit too long on the question, I will give you a sign. It does not mean that you should look away and continue.
Good morning to the panel members. We heard from crofting stakeholders last week. The Scottish Crofting Federation feels that small landholdings should be converted to crofts. What is your opinion of that? Would you like to see an expansion of the crofting counties? Martin Hall caught my eye first.
I feel quite strongly that the bill is heading in the right direction, in that it has moved towards agricultural holdings rather than crofting. I advise some small landholders, and they are generally in the lowlands of Scotland and just would not fit with crofting. There are mixed units; one is in the Lothians, some are in Dumfries and Galloway and some are further west. At the moment, there is a great deal of confusion about how to review rents and do certain things within those holdings, so aligning the legislation with agricultural holdings is a sensible move forward.
You said that you did not think that certain of those landholdings would fit with crofting. Why do you think that that is the case?
They already broadly operate as agricultural holdings rather than crofts. That is really the basis for my answer.
There is already a wide range of size among agricultural holdings, right down to a few acres operating as an agricultural holding. The way in which the bill has been drafted, it would fit well to bring small landholdings into the agricultural holdings legislation, because it would align them with many small farms, some of which are only a few acres. It would bring them together to operate under the same legislative framework.
You have kind of covered this, but the Faculty of Advocates suggested that, from the point of view of legal clarity, it may be more helpful to wholly codify small landholdings legislation without leaving elements of the old legislation in force. Do you agree with the approach that is taken in the bill, or do you feel that another approach might have been preferable? Who wants to have a crack at that?
There are, it is believed, only about 50 to 60 small landholdings in Scotland, and I do not know whether such a wholesale codification could be justified for a relatively small number of holdings. Broadly speaking, I welcome the provisions in the bill, which essentially bring small landholdings legislation up to date and more in line with agricultural holdings legislation, and extend the tenant farming commissioner’s functions to small landholdings. A wholesale codification is probably unnecessary.
So it would be a sledgehammer to crack a nut.
Essentially.
Tom, can you comment, please?
To be honest, having never dealt with small landholdings in 25 years, I am not in a position to comment.
I thought that you waved there because you had something to say.
I was looking away.
I agree with Hamish Lean. There are so few of these things. Indeed, I think that in 36 years I have tripped over just one.
You have tripped over one in 36 years—okay. Thank you very much, convener.
Thanks, Kevin. I am never sure whether we know quite how many there are. I have heard that there are 50, and I have heard that there are 80. I have not heard any advance on that, but it seems to be quite a small number.
The next question is on the registration of tenants’ right to buy. In the first piece of legislation on this matter, which came out in 2003, there was a requirement for registration, but, if I remember correctly, that was removed in 2016. Well, there was the ability to remove it, but nothing was ever done about it. Now this bill is suggesting something else. Is the bill right? Do we need to keep changing this—or keep suggesting that it be changed but not changing it? What is the simple way of doing this?
The simplest way of doing this was provided in the Agricultural Holdings (Scotland) Act 2003, in which a secure agricultural tenant had to actively register a pre-emptive right to buy in the agricultural section of the register of community interests in land. That had the benefit of the agricultural tenant having to think about what they occupied under their secure tenancy, as a plan required to be lodged with the registration application. It also gave the opportunity for the landlord to challenge either the extent of the holding or whether a secure agricultural tenancy existed in the first place. Moreover, it gave quite a lot of confidence to the market in respect of a purchaser buying a farm, given that one of the standard checks as part of the due diligence would be to check the register of community interests to see whether a pre-emptive right to buy had been registered.
That prevented the situation that might otherwise have arisen, in which a purchaser would buy in good faith only to find a tenant appearing out of the woodwork, as it were, to claim a secure tenancy over the ground that had just been purchased. We need to bear in mind that, under the 2003 act, the tenant acquired an absolute right to buy, if they had not been given an opportunity to exercise a pre-emptive right to buy. That was always the problem that would have occurred if the need to pre-register had been removed. I do not know whether that is the reason why that part of the 2016 act was never brought into force, but I welcome the fact that it is not going to happen.
There might well be changes that it would be appropriate to make to the registration process, but first and foremost, I welcome the fact that registration will still be necessary.
Does anyone disagree with Hamish Lean? If not, that is perfect. “Leave well alone and move on” is the message that I think I am getting.
I want to look at the issue of resumption, which, according to my notes, is one of the bill’s more contested aspects. We will find out in this morning’s evidence taking.
Mr Hall, I think that I saw that you were the national president of the Central Association of Agricultural Valuers, which thought that it was about time that compensation rights under resumption were reviewed. Perhaps, Mr Hall, you could say a little more about whether it is right in principle to review some of that.
I am happy to do so.
I think that it is right in principle to review the process, but there are two parts to my answer. First, in connection with 1991 act tenancies, the mechanism has gone out of kilter with relinquishment and assignation. That is why I think that it is right to review the process. The bill takes steps in that direction, but it needs tidying up, as it looks clunky and cumbersome in that respect.
The second element is to do with 2003 act tenancies. I know that there has been discussion within the sector through groups such as the tenant farming advisory forum—TFAF—suggesting that the 2003 provisions should not be changed, and I broadly agree with that. In short: yes to 1991 act tenancies; no to 2003 act tenancies.
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You have almost pre-empted my second question. We will come back to that point so that you can put it more clearly on the record.
Hamish, I think that you had some concerns about some of this stuff. Do you want to say a little bit more about that?
Yes—and I will do so in two parts. First, on the proposed changes in relation to secure agricultural tenancies, it is my experience that, in practice, resumption in relation to a secure agricultural tenancy is possible only where there is a written lease containing an express provision that allows resumption to take place. There are a surprising number of secure tenancies that exist by virtue of operation of law, so there is nothing in writing. Therefore, there is no contractual right on the part of a landlord to resume land out of the tenancy. In those circumstances, the tenant is in a very strong position to negotiate commercial terms in relation to agreeing the resumption or not.
Even where a lease contains a resumption clause, there is a settled body of case law to the effect that, if the resumption will be materially prejudicial to the viability of the remainder of the farm, the Scottish Land Court will not permit the resumption to take place. The resumption of a small, relatively unimportant part of the farm is reasonably straightforward, and the tenant is entitled to compensation by way of a reduction in rent or disturbance and reorganisation compensation—which is normally five times the rent reduction compensation—for any improvements.
The greater the scope of the proposed resumption, the easier it is for the tenant to challenge it. For example, for a tenant on the edge of a town where half the farm is suitable for commercial or residential development, the resumption clause in the lease will not allow the resumption to take place, because the tenant can oppose it given the materially prejudicial effect on the remainder of the farm. If the resumption happens at all, it is only on the basis that the tenant will be able to negotiate favourable terms. The question that I have over the resumption provisions relating to 1991 act tenancies is whether they are necessary at all.
Secondly, in relation to fixed-duration tenancies under the 2003 act, I would observe that there is a powerful incentive for landlords not to let out land if it is reasonably foreseeable that there is some development potential. If the landlord obtains planning permission, section 17 of the 2003 act allows them to serve a resumption notice, on a 12-month notice period, to take back whatever part of the land—or indeed the whole of the holding—is subject to planning permission. A landlord who has land that they might otherwise have been prepared to let out—although they might be developing part or all of it in the reasonably foreseeable future—will not let that land out if the consequence is that they will have to pay the tenant a substantial amount of compensation for doing so, so they will just avoid letting out land.
It might have been helpful to let you speak for longer, but this is really important, and I want to keep the questioning moving.
I want to ensure that I do not misrepresent you, Hamish. I think that you are suggesting that reviewing and changing the compensation for tenants on resumption could theoretically weaken the position of some tenants, which would be an unintended consequence in the legislation. I am not trying to summarise that as your entire position, but is that one of the aspects that you are perhaps hinting at in what you were saying?
Certainly in relation to the availability of short limited-duration tenancies and modern limited-duration tenancies going forward.
That is helpful.
I will bring in the other witnesses shortly but, given that you have a different view, Martin Hall, and that you spoke relatively briefly in relation to reviewing some of the arrangements in principle, how would you respond to some of the concerns that Hamish has put on the record this morning?
Broadly, we are saying the same thing about the different types of tenancy being treated differently. We are aligned on that front. Another point, which I did not bring out earlier, is that the bill misses the incontestable notice to quit for the whole, which, I believe, was the original intention for the review. It seems to have been missed altogether, in that we are dealing only with resumption, not with a whole-farm situation. That would fall outwith the provision in the bill at the moment.
Should the bill deal with that?
Yes.
Not everyone will understand, so I would like clarity on the incontestable notice to quit. Could you give the grounds on which such a notice could be served, just so that we can understand that?
Absolutely. If, for example, a landowner obtains planning permission for a whole farm for residential development, say, he could serve what is called an incontestable notice to quit, because of the alternative use for that farm. There are very few grounds for objecting to or fighting that, and very limited compensation is payable.
What you are saying is that that should be attended to; in other words, it should not be allowed to happen without more significant compensation for the tenant.
Yes.
All witnesses are nodding their heads, I think. Mr Wood, are you nodding your head?
I will have my say in a minute.
At this point, let us move on. I think that Hamish Lean, Martin Hall and Tom Oates were nodding their heads on that point.
I will bring in Andrew Wood first. I think that we have moved on to whether notice-to-quit arrangements should be included in the bill. So far, the witnesses have said that the bill should not include notice-to-quit arrangements. That brings us to where we are in the line of questioning, Mr Wood. What comments would you like to make?
I will cover off the 2003 act. It is hard enough to persuade a landlord to let any land at all at the moment, because of the frameworks that they would have to operate under. Further meddling with the 2003 act will completely undermine confidence in using that legislation, so I urge you not to change that. We use it all the time as a method of letting land that could potentially come forward for development, and there is flexibility in the legislation to build in clauses that will allow for land to be released. Everybody who goes into that knows the situation at the start of the agreement. If you effectively and retrospectively change the 2003 act by introducing such a provision, that will significantly undermine confidence in the use of that legislation.
The 1991 act resumption provisions need to be updated. In some situations, the compensation is not appropriate. Generally, people’s costs have moved forward with inflation and change. I am not saying that a huge amount of change is needed for the taking back of a small corner of a field for a road improvement, or the selling of a bit of land to the village hall, for example, but people’s base costs have changed and the situation can be out of kilter. There needs to be a review of that process.
From a development point of view, the issue is much trickier. I get involved in a lot of rural development. Often, the landlord is on a 20 or 30-year journey of investment to bring forward land for development. The tenant is not involved in the risk or the funding of that. For example, the building of 10 affordable houses on the edge of a village could be completely blocked if we are not careful about how we treat the revisions to the resumption legislation. It needs further looking at.
Before I bring in Mr Oates, I should say that your answers have helpfully overlapped with all the other questions that I want to ask on this issue.
You said that the issue needs to be reviewed, but I think that your point was that the time is right to look not at fixed-term tenancies but at compensation for resumption in general, because things have moved on. I will not just regurgitate the model that I have in my briefing notes, as it gets quite complex, but you have said that there should be a review. Are you willing to put on record how you think that things should change?
I will write to the committee with some proposals.
That would genuinely be helpful.
Mr Oates, you have been very patient. Do you have any comments or reflections on all of the above?
Just to clarify, I wholly agree with leaving the 2003 act tenancies as they are, as going back there will be just revisiting a mess.
As for compensation for 1991 act tenancies, I am wholly with Martin Hall on that point. The agricultural tenant, from a practical point of view, loses his agricultural interest—that is, his relinquishment value—so that is where compensation should move to. It is about moving forward with the base costs, in line with what Mr Wood was saying, and increasing the compensation payable there. I strongly believe that tenants should be compensated only for ag value.
On resumption, it has been suggested that the tenant farming commissioner be involved in the process, but I think that that is a complete red herring. There is no need to involve the TFC. A lot of these negotiations happen over the kitchen table, and the ability to have that negotiation will be removed if the immediate default is for the TFC to appoint an independent valuer. Actually, it is a bit of an insult to the industry to remove valuers and negotiators from that position.
I think that Mr Wood was nodding his head at that, which should be captured on the record.
I am nearly finished with this section, but I just want to mop up the witnesses’ different views. I think that we have to reflect very carefully on what is quite a complex area in the legislation. Mr Oates said that agricultural value only should be compensated for in relation to resumption rights. I think that Mr Wood was nodding his head at that—[Interruption.] Oh, right, he was not. In that case, I will bring in Mr Wood, and if there are any other views, it would be helpful to hear them
I would not go as far as to say that you have to buy the land back from the tenant.
No—I was talking about ag value in relation to the relinquishment and assignation value.
Well, I do not agree with that, actually. I think that there is a middle way that recognises small-scale resumptions.
And you are going to write to the committee with your thoughts on that.
Yes.
I am going to let everyone have one more cut at this, if that is okay, convener, because this is quite an important part of the legislation.
Mr Lean, you talked about unintended consequences in relation to some of this stuff and how they might disincentivise landowners from leasing. Do you have any further comments on that, after what we have heard? I want to capture the views of all the witnesses on this particular section, because the committee then has to reflect on them.
The thrust of the resumption proposals in the bill do not impact at all on the landlord’s underlying ability to resume or otherwise. It is all about compensation, as far as the 1991 act tenancies are concerned. The greater the scope of the resumption in a 1991 act tenancy, the greater the ability of the tenant to resist and negotiate commercial terms. There is nothing in the bill to suggest that that will change in any way. I would be concerned if there were any changes that would impact on the tenant's ability to contest the resumption, but there is nothing there at the moment.
That clarity was helpful.
I want to pick up on something that Tom Oates said. The process outlined in the bill looks cumbersome, particularly for small resumptions, and there absolutely needs to be a backstop position. However, for the majority of cases, there should be a negotiated position to start with and if all else failed, you would revert to the process in the bill.
I think that that is all that I have to say.
Does that need to be clear on the face of the bill?
As the bill is drafted at the moment, the automatic first position is to refer the matter to the tenant farming commissioner, but the costs and the process involved in that are significant. Someone mentioned the examples of means of access, garden extensions or village halls, but for resumptions of what are small areas, the costs and process would be prohibitive.
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Your view would be that if both parties could enter into a negotiation in good faith without having to have recourse to the tenant farming commissioner, that would be perfectly acceptable, but that it is a fall-back position.
Yes.
The bill does not suggest that.
No, it does not.
I will hear Mr Wood and finally Mr Oates.
I support what Martin Hall has said. The majority of resumptions and surrenders are dealt with through negotiation perfectly amicably, and a commercial position is agreed. Having to go to the commissioner as the first point in any of those situations would be complete overkill, with regard to what happens day to day. However, we need the ability to refer on if things do not work, so the bill needs to be amended to say that, in the event that agreement between the parties cannot be reached, the case can be referred to the commissioner.
That is helpful.
I agree with that. Martin Hall and Andrew Wood have said that, first and foremost, it is a negotiation, but a backstop would be extremely helpful.
I thank all four witnesses for helping me to get my head around that complex area in the bill. I have no further questions at this time.
Out of interest, if things do not work out and you are going to refer the case to the tenant farming commissioner, what do you think would be a reasonable timescale? Sometimes, negotiations can become so protracted that there is never a solution. Would it be fair to say that you would refer the case if negotiations had not been, or could not be, resolved in—I am just thinking of a timescale to help people—three months? Does anyone have a view on that? You are all looking away. [Laughter.]
It would not be helpful to have a delay built in. It should be open for either party to be able to go to the tenant farming commissioner immediately if, in fact, that procedure is to be introduced.
If either party is unhappy, they could therefore go to the tenant farming commissioner at any stage. Is that not rather like saying, “Don’t go to negotiation”?
If you are not minded to negotiate at all, you do not engage for the three-month waiting period before the other side can go to the tenant farming commissioner anyway. I am not sure that a built-in period to allow negotiation would work. The procedure should be notice driven, in my view.
It looks like no one has a contrary view to that. Okay. The next questions come from Mark Ruskell.
Do the witnesses back the provisions on compensation for improvements and the shift from fixed lists to illustrative lists? I understand that the illustrative lists now include improvements that
“are presumed to facilitate or enhance sustainable and regenerative agricultural production.”
Are the illustrative lists clear enough? Would they be workable? Tom Oates is nodding.
I will jump in first. The updated lists are required—they are more encompassing. I do not feel that there is necessarily a need for the new proposed part 4 in the schedule. A lot of these are practical, on-the-ground items, but some of them will probably not be of value to the incoming tenant. It could be confusing to include some of the things that are identified in part 4.
Do you have an example of that?
The bill aims to include items such as
“the laying down of ... pastures”
or “making water-meadows”—they are very much new areas. It is guesswork, so it is somewhat confusing as to what they may be.
Are there any other views?
I broadly agree with what Tom Oates said. The overall principle—of moving towards a general list rather than a prescriptive list—is the right direction of travel. However, with regard to part 4, there is definitely scope for confusion. Part 4 is to do with
“Improvements ... to facilitate or enhance sustainable or regenerative agricultural production”.
It looks as though it has just been bolted on to the back of the bill. Within the list, there are elements that will require notice and elements that require consent, but it does not say which are which. For instance, the laying down of pasture might require notice, and the making of water meadows might require consent, because that changes the nature of the land altogether. Planting with trees might also require consent. Within that list, there are different impacts on the land, but it is not clear how they are to be dealt with. If that is not clarified, there will be room for disagreement and dispute.
Therefore, more clarity would be useful.
There is no reason why part 4 needs to be there. Its provisions could be within the other three parts of the legislation.
I will come back briefly to Tom Oates.
Sustainable and regenerative farming is a bit of a buzzword, but are there clear definitions of what it is? A lot of sustainable and regenerative practices are now common practice in productive farming. It is a way of utilising the soil and the natural goods to be more productive with less cost. That is practical farming, so is it a bit nonsensical to call it sustainable and regenerative farming? If there is no clear definition, it is confusing.
It depends on how you value and monitor it. If there is testing, such as soil testing, and evaluation of biodiversity—
That could be good farming practice now.
I support Tom’s point. If we go back in time, sustainable farming has been going on for ever. It is a catchphrase at the moment, and some new husbandry methods are coming forward that are flagged as sustainable and regenerative, but they are just farming.
Most of part 4 could easily sit in part 3 and be drafted accordingly. There is no clear definition. We are using words that have no clear definition as to what they mean, so that needs some review.
Do you think that there is a link back into land management plans and spelling out what the benefits will be, what the restoration and regeneration look like and whether they are monitorable?
Yes, that could be worth looking at.
I will move on. I am interested in your views on the diversification proposals. Are they clear enough? Will they make it easier for tenants to make environmental improvements and supplement their incomes through diversification?
My observation is that what will mostly motivate tenants who are looking to diversify is the generation of additional income from their use of the holding. It is not immediately obvious that pursuing diversification to provide environmental benefit will directly benefit the tenant’s pocket. Although I have no particular objection to those diversification provisions being introduced, I wonder whether that will mean that tenants will pursue environmental schemes on their farms if there is no immediately obvious commercial benefit from them.
Are there any other views?
I do not have anything to add other than that I think that what is in the bill is generally a positive move.
Okay—thank you.
The next question is from me, and a yes or no answer from each of the witnesses would be helpful.
Have any of you ever completed a compensation claim for game damage?
Yes.
One of you has. How many have you done?
Probably a dozen.
How has that been worked out? Was it based on crop loss?
It has been an absolute nightmare.
Okay. Section 20 is about compensation for game damage, which includes damage to crops; fixed equipment, interestingly; and livestock and habitats.
I am trying to work out in my mind the simple situation where a tenant rents some land and the next-door neighbour has a forest. The neighbour has nothing to do with the landlord. There is a shedload of deer in the forest that pop over the fence and eat the tenant’s crops and then pop back over the fence during daylight hours. The landlord, who has no ability to control them unless he spends from 2 o’clock to 4 o’clock in the morning out there shooting them, will be hit for the game damage. Is that what you think that the bill will resolve?
To clarify, the game damage claims that I have done have been specifically for game, as in birds, and damage to them. When I said that it had been a nightmare, I meant that it has been very difficult to accurately assess how bad the damage is, as it goes far beyond what you can see in front of your eye.
I have not done any claims with regard to deer, which I know are a huge issue, particularly where you get marauding deer coming through and damaging fixed equipment. For what it is worth, my thoughts would be that if the tenant has the ability to control the deer on the holding, and not only the tenanted area, that would be a good move forward. A lot of the control happens outwith the area that is within the tenancy and the tenant cannot control that. I appreciate that deer can also come from neighbouring units.
If you follow convention, 50 per cent of the fence, for example, would belong to the landlord of the holding, and 50 per cent would belong to the neighbour. You are going to create a claim for both of them.
I am wondering how important and relevant the provision is in the bill, and whether it will make claiming for game damage easier.
I think that it is highly relevant, because the scale of damage by deer is enormous. It is about not only external fences between neighbouring units, but internal fences, which can often lie with one or the other party—100 per cent. It is a big issue. A relatively small number are affected, but they are massively affected.
I will ask another yes-or-no question. You do not have to answer, Tom, as you have given your opinion.
Do Martin, Hamish and Andrew think that that bit in the bill is relevant and important, and is there a way to improve what seems to be quite woolly drafting?
I am sorry; this will not be a yes-or-no answer. [Laughter.]
I welcome the provisions about compensation for damage by game. Deer damage is an important problem, but it is not the only problem that is being caused to agricultural tenants by game. I have a number of clients who are agricultural tenants and who are severely affected by, for example, pheasants, through pheasant shoots that are grossly overstocked. Pheasants do not only eat crop, but come into farmyards where they litter and cause all sorts of nuisance and damage. I also have tenant clients who complain about the manner in which shoots are conducted, with drives going through fields that contain livestock and causing disturbance to livestock and so on.
The existing provisions are not adequate to address those problems. The provisions in the bill give scope and an opportunity to agricultural tenants to make meaningful claims for damage that they have suffered as a result of irresponsible stocking levels in relation to pheasants, for example, or the irresponsible exercise of sporting rights across the tenanted farm.
Thanks, Hamish. It is interesting that you say that. I have never completed a claim.
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I have never dealt with a game damage claim, so I am speaking from a relatively inexperienced point of view.
I understand that NatureScot has measures in relation to deer damage, but that it does not currently implement them. Therefore, there is already a degree of solution there that could be used, but that is not being used.
I have never done a claim. I have been involved in situations where there has been some game damage and the tenant has approached the landlord and it has been remedied and solutions have been found without any formal claims being lodged.
Personally, I think that the bill goes too far, because it starts to bring in people who potentially have no ability to control the situation, but who become liable.
The deer situation is the biggest issue, and I am not sure that the bill is the right place to deal with deer. We have lots of other legislation in place to deal with deer.
I am very concerned about a complete right being given to all tenants to immediately go and shoot deer without due process and without engaging and communicating with the landlord. On many estates, there will be other people out shooting the deer, and so we need to have that quality communication. We cannot have different people with overlapping rights shooting deer at the same time. That could end up in a very difficult situation.
I think that this provision is in the wrong place, and also that NatureScot has the ability to intervene when there is a problem.
I have been involved with estates for many years, and commuting deer are now a major problem. As a result of the changes in environmental pressures on the high ground, red deer have been pushed down on to the low ground. We now have large populations of red deer on the low ground where we never used to have them before. That is becoming a much bigger issue on low-ground arable farms, where historically it was not an issue.
I would park this somewhere else, personally. Those who are responsible for deer management should step in. We need a process in place to ensure that we have responsible communication before others go shooting deer, where there are overlapping rights.
I just add that it is now about shooting not only all day but all night, with thermal sights.
Just so that the committee is clear, when I said that I had done approximately a dozen claims, a number of them have been repeated claims on the same estates, where the estate or the landowner has been willing to come to the table and do something to recognise the damage. There have been a number of instances of huge frustration where the tenant has been denied or has not been able to get the landlord or the owner to the table to compensate. I echo what Hamish said, in that there is a frustration that there are clients out there who have not been able to claim. Although I have done some claims, they have been in a situation where that specific owner, estate and so on was happy to come and do something.
I will add one extra point that is important, if the provision is to remain in the bill. There are references to the Scottish Land Court in relation to determining the amount of compensation. However, assessing a game damage claim needs a much quicker reaction; it needs someone on the ground to see it almost there and then. If you are referring a claim to the Scottish Land Court, it could be months—if not longer—before it is heard. That looks like extra delay that does not need to be there.
I agree with that. I imagine that it is sometimes difficult to quantify the claim because you do not know whether the crop will or will not germinate as a result of the damage. Sometimes you have to wait for harvest to see what the crop loss will be in order to quantify your claim.
There were interesting comments there.
Douglas Lumsden has the next question.
I will move on to the standard claim procedure in the bill. Should the procedure that the bill sets out for waygo apply to claims of all types and sizes, and is there sufficient flexibility in the procedure to take account of unforeseen circumstances?
Would anybody like to go first? Martin?
I am happy to go first.
The procedure that is set out does not take account of the need to assess various elements at the very end of the tenancy. The principle of front loading is generally a good one, but the timetable that is set out in the procedure is not practical for all elements, and it misses some things out. For instance, growing crops and fodder need to be assessed, if not on the day of the termination of the tenancy, then as close as practically possible to that date. There are dates, in the procedure for assessing elements, that are five months ahead of the end of the tenancy. That is not practical.
The timescale is a key concern.
The timescale looks to be unworkable.
I agree entirely with what Martin said. From a practical point of view, the end of a tenancy is not an easy situation. It is often contentious. By bringing things forward by nine months, you are potentially invigorating a dispute at an early stage. I agree that there need to be long-stop dates on things, but to bring things forward within a rigid timescale is causing more problems and creating a bigger issue.
We are looking at the bill and ways to improve it, so what amendments would you recommend that could make it workable? Is it just about timescales and making it more compact at the end of a tenancy?
There are some practical angles. The heads of terms could be agreed at certain dates, but, as Martin Hall said, a number of things cannot be assessed until the end of the tenancy. Some of the things that are included in the procedure will not be completed until the end of the tenancy.
The heads of terms and the items of claim should be agreed, and there should be a point after the end of the tenancy when the quantum of those items should be clarified. So there are two stages, one is the heads of terms and the second is the calculations thereafter.
That is helpful. Andrew Wood, do you have a comment on that?
I agree entirely. Even just pulling together all the documentation takes some time, particularly in relation to the cropping and soil testing and all that sort of thing that has to be done as you roll up to the end of the tenancy. The final weeks or months of the tenancy is when you bring all the information together, inspect the property and the crops, and find out the condition of the buildings at the point of pulling the claim together.
That is not something that happens every day. For a lot of us, the ending of tenancies is pretty infrequent, and they are not all contentious. A lot of them are amicable, such as when the tenant has decided that he is retiring or going off to do something else, and you settle the claim under due process.
Is the bill too prescriptive then?
I think that it is too prescriptive, particularly in relation to the timescales, definitely.
The timescale that is vitally important is the date by which the claim should be finalised and agreed post the tenancy. That should be narrowed down, because there are situations where tenants who have left the holding are still waiting to be compensated months or years later and the can has been kicked down the road. There needs to be a long-stop date by which things need to be finalised, and that should be within a relatively short period of time after the end of the tenancy.
The provisions are cumbersome. If it is necessary to give notice in advance of the event, the standard claim procedure could only ever arise in waygoing situations. It would be impossible to give advance notice of a game-damage issue, for example.
The procedure that is outlined in the bill demands a high level of information in the preliminary notice, which will most often be served by a tenant. In my view, it would be next to impossible for a tenant to be able to negotiate those provisions without engaging professional advice at a very early stage. Many tenants will be completely unaware of the statutory process to go through, and it adds costs and burdens to the tenant.
I agree with Tom Oates that speeding up the determination of claims post the end of the tenancy would be a good idea. However, I am worried that the provisions in the bill are too prescriptive and unnecessary, and that they will make it more rather than less difficult for tenants to navigate their way through waygo claims at the end of the tenancy.
But do they offer some protection for tenants?
I am not sure that they do, because, at the moment, a tenant is able to make waygo claims by service of a much simpler notice than is provided for in the bill. At the moment, the legislation provides timescales—albeit that those are quite long—for parties to attempt to agree their differences, then the matter will end up in the Land Court. Nothing in the bill would stop a dispute between a landlord and a tenant about whether something should be compensated for, or what the value is. Nothing in the bill would stop that dispute from ending up in the Land Court anyway.
I have a question on something that may be a unique Highland issue. Often, sheep are hefted to a hill and form part of waygo compensation, because they know their way around. If you have a waygo in November, the ram may have been out with them, but you have no idea whether they are in lamb, because you have not got them back in. At that stage, you probably do not know how many sheep you have anyway, because they could have wandered all over the country, which makes timescales very prescriptive. Is that a fair comment, and would it cause problems?
Having done a number of sheep stock valuations, I think that, in practice, what happens is that the parties will come to an agreement on when tups are to be released, and the valuation of sheep stock may be brought forward to, say, 1 November, prior to the tups going out—in fact, a lot of tenancy agreements have it stated that the landlord or the incoming tenant has the ability to release their own tups on to the sheep stock prior to valuation. The practical angle is that the parties will come together and work through what a sensible solution might be.
But perhaps not five months in advance.
No. Five months in advance is way too long. In practice, there is no way that you could do a hill sheep valuation in August. Comparable evidence comes from draft ewe sales, which, quite simply, have not happened.
And, during that period, you will not know whether the ewes will be in perfect condition for the rams, so the landlord is in somebody else’s hands if he is to buy them. So there are problems—is that what you are saying?
Potentially, there are problems, but it is in the interests of the landlord, the incoming tenant and the outgoing tenant to make sure that the process is dealt with as smoothly as possible.
Everyone then gets value for money, surely.
Agreed.
The next questions come from the deputy convener, Michael Matheson.
Good morning. The 2016 act made provision for changes to the rent review process that were never fully implemented, largely because, from what we can see in evidence, the process was viewed as being unworkable. Will the changes to the rent review process being proposed in the bill be more workable than what was in place previously?
I will pick that up and run with it.
I feel that I have to take some responsibility for the provisions in the 2016 act, as a member of the agricultural holdings review group whose work led to the agricultural holdings provisions going into the act to begin with. The group recommended a productive capacity test; I was then a member of the working group that tried to work out such a test, but it proved to be unworkable in practice.
I therefore welcome the bill’s changes to the rent review procedure. It will balance a number of competing factors without setting out a hierarchy for doing so, taking into account
“the productive capacity of the holding”,
for example, as well as the “rent ... on similar holdings” and
“the prevailing economic conditions in the sectors of agriculture that are relevant to the holding.”
Generally speaking, my overview of the rent review provisions is that they are workable and will represent an improvement to the sector.
11:30
I am looking to see whether anyone is shaking their head. Tom Oates has nodded his head, so I assume that he agrees with Hamish Lean.
Yes, I agree with Hamish’s point. The one point that I would like to make, though, is that I am concerned about the reference to
“the productive capacity of a holding”.
Production is only one part of it. That is the output, not the profit. You can ramp up the output, and there are occasions when landlords will look simply at the output and then try to charge a percentage of output as a rent. That is a very dangerous situation, because output is not real.
Martin Hall, did you want to add something?
No, I do not really want to add anything, but Tom Oates does make a fair point, and there might be scope to look at using phrases such as “earning potential” or something similar. In principle, I am aligned with what Hamish Lean and Tom Oates have said.
There are a couple of practical things that the committee should take account of. First, a new definition is being introduced with the use of the term “fair rent”. That is a new term; it is not well understood in the agricultural sector, and we need to better understand what it actually means. Secondly, the proposed amended wording for rent reviews has omitted to adopt some of what is already in the 1991 act in relation to the disregards for comparable holdings. That seems to have been missed altogether, and, in my view, should be put back in.
I agree with Martin Hall on that. We should mirror some of the wording in the 1991 act. I have no idea what “fair rent” means in relation to this legislation, either.
The difficulty when it comes to earning potential and productive capacity is that you can inspect the farm, look at the grade of the land and assess it on that basis—that is, what you think it can deliver, if it is well farmed—but the fact is that not all farms are as well farmed as the one next door, or vice versa. You have to take all those factors into account; it is not straightforward. Comparable evidence is vital in assessing what the appropriate rent should be. We touched on the issue of diversification earlier, and that will be a factor in the actual earnings of a farm. All those factors must be taken into account.
That is helpful. I am not sure whether Martin Hall was referring to this in his comments, but the bill as drafted does not make provision in relation to charging for tenants’ improvements. Should the bill contain such a provision, given that it is in the original 1991 act?
Under section 13 of the 1991 act, there are things that you take account of and things that you do not take account of when you compare holdings. My understanding is that that has been missed out.
And your view is that it should be included.
Yes, it should be included.
Thank you.
Turning to the changes in the rules on good husbandry and good estate management, I note that, in his contribution, Mr Oates referred to the issue of sustainability and regenerative practices and how they can be quite difficult to define. The bill changes the rules in that respect, with specific reference to “sustainable and regenerative agriculture”. Do you think that the right approach has been taken to changing those rules? Could the provision be further improved to give greater clarity?
Michael, the only person looking at you is Andrew, so I will bring him in now and then we will see what everyone else has to say.
Defining good husbandry is incredibly subjective, and we practitioners have all been struggling with it for many years. It particularly comes into play when it is quite obvious where good husbandry is not being carried out, but as for how you define it and how you encourage the resolution of such issues, previous legislation has never really cracked that nut, and neither does the bill.
It is worth exploring the matter further, but it is such a difficult thing to define. Usually, not having good husbandry is a multifaceted issue. It is about whether the livestock are being cared for properly, whether the grass is being managed properly, whether the fences are upright or are all hanging loose, whether the drains are being cleaned and whether the buildings are painted under the terms of the lease. It is all of those things, and it is extremely difficult to deal with the matter in a practical context.
We need to continue to discuss the issue, but I am not sure that the bill quite gets there.
In questions involving landlords and tenants, the rules of good husbandry are important in practical terms, because a landlord has a right to apply to the Scottish Land Court for a certificate that the tenant is not practising good husbandry. If the Scottish Land Court agrees, it issues a certificate of bad husbandry, and if it does that, the landlord is in a position to serve an incontestable notice to quit. The rules of good husbandry are in no way esoteric—they have real effects in the real world.
The proposals to change the rules on good husbandry are quite modest in scope; they would change the definition from being “efficient” to farming in a “sustainable and regenerative” way. For example, the bill adds the phrase
“the health and welfare of livestock”.
In and of themselves, those changes are straightforward and welcome. I was involved in a case in which, according to one view, the tenant was guilty of bad husbandry and, according to another, was practising sustainable and regenerative agriculture. If we are attempting to encourage tenants to farm in a sustainable and regenerative way for the benefit of the wider environment, that change to the rules of good husbandry is welcome, because it would allow tenants to do so without their being at risk of challenge under a set of bad husbandry rules that were promulgated at the end of the second world war, when the circumstances in society were very different.
I see that Andrew Wood wants to come in, but can I ask witnesses to say whether they have ever applied for and had issued to them a certificate of bad husbandry?
I could not quantify how many over the course of my career, but there have been a number of issues.
I thought that it would be helpful to give an example in the context of what Hamish Lean has said. Many older leases specifically require the tenant to do certain things that are deemed to be good husbandry, such as the removal of gorse and the management of wetlands to ensure that they are drained. Nowadays, those actions completely go against the rules of the conservation approach. Many leases still have those historical clauses in them, but such acts would not be considered appropriate nowadays.
Even improving the land can now be considered contentious in some cases. Many leases still have that as an absolute requirement, so we are framing the issue in that context.
Does anyone else want to come in? All the witnesses are looking away, Michael. Do you have another question?
No. I will hand back to you, convener.
Bob Doris wants to ask a specific question.
A little bit of knowledge can be a dangerous thing. I was trying to find out a little bit more about fixed-term tenancies, because there were some things that my notes did not tell me. There are short limited-duration tenancies, which last for a maximum of five years. Those can be converted to limited-duration tenancies, which last for a minimum of five years and a maximum of 10 years. There are also modern limited-duration tenancies.
That made me wonder whether, from the 2003 act onwards, there has been no such thing as a short-term tenancy, because the tenancy could dribble on, by custom and practice or by arrangement, for 10, 15 or 20 years. If that is the situation, should we look again at whether waygo is fit for purpose? Should resumption be considered? Perhaps I am being a daft laddie, but I wonder whether that situation is a wee bit different.
I think that the industry would say that that is a vexed problem. The 2003 act introduced short limited-duration tenancies, which could last for up to a maximum period of five years, and limited-duration tenancies, which had a minimum term of 10 years. I am sorry—the limited-duration tenancy that was introduced in 2003 was for a minimum period of 15 years, but that was pulled back to 10 years in 2011. The 2016 act introduced a modern limited-duration tenancy, which was, in essence, a variation on the limited-duration tenancy that gave some additional rights to tenants. The modern limited-duration tenancy is also for 10 years.
Accordingly, at the moment, landlords can choose whether to grant a short limited-duration tenancy of up to five years or a modern limited-duration tenancy of 10 years or longer. If a short limited-duration tenant remains in occupation after five years and the landlord does nothing about it, the tenancy becomes a modern limited-duration tenancy of 10 years, which will be backdated to the original start date. If a tenant who has a modern limited-duration tenancy remains beyond the expiry date and the landlord has not terminated the tenancy through the double notice procedure—the provisions are really quite complex—an automatic seven-year continuation kicks in.
Prior to the Land Reform (Scotland) Act 2016, the default provisions for a limited-duration tenancy involved a cycle of continuations of three years, three years and then 10 years. Out there in the real world, people often have a problem in trying to work out on what basis a tenant is occupying the ground. That has been a problem that I have wrestled with in the Land Court, and which the Land Court has made numerous decisions about.
There is no escaping the fact that those provisions are unduly complex, and there must be scope for simplification.
Could the bill be a vehicle for that? I suppose that it could be. However, there are tenants out there who have rights that date back to the 2003 act, and 10 years on from now, in 2034, there could be tenants out there who will have been farming land for 30 years. Another committee in 10 years’ time might think that they should have the protection of full resumption rights. Do you have any reflections on that, Hamish?
11:45
I doubt that there is any time or scope to introduce significant reform into this bill because, as that is such a complicated area, it would demand a great deal of consultation to arrive at provisions.
That was one of the most difficult issues in the 2003 act, when fixed-duration tenancies were introduced, and it is the reason why we have the odd situation of tenancies being for up to five years and now for 10 years or longer.
I was meant to be asking a very brief question, but I ask Tom Oates to respond, with the convener’s permission.
The point is that a 1991 act secure tenancy gives a clear line of succession, and a resumption would mean that you lose the ability to have that going forward. Albeit that a fixed-term tenancy can be extended, there is a short period of time for which the tenant will have that land available to him. The resumption compensation for a 1991 act tenancy potentially deals with generations down the line, whereas a fixed-term tenancy is relatively short term. There are some longer-term LDTs out there although, to my knowledge, not that many.
That is helpful. If the convener permits, I would like to hear from Andrew Wood.
Hamish Lean’s answer has helped you to understand just how complex the issue is. There is a real issue with confidence in letting land.
We will come to that in a minute.
Then I will shut up.
Thank you for cutting your answer short so as not to pre-empt my question.
Rhoda Grant has some questions.
Most of my questions reflect on what we have heard today, and my first is for Martin Hall. When you talked about crofting and smallholdings, you said that they are intrinsically different. I know that the legislation is different, but what happens on that land does not to me appear to be different in practice, although you seemed to suggest that it might be.
It is not particularly different: in general, outwith the crofting counties, small landholders often operate in the same way as agricultural holdings. That was the reason for my view. I do not deal specifically with crofting, so I have less working knowledge of that.
I think of crofting as a form of agricultural holding, but with different legislation, so I was trying to find out whether anything was different for smallholdings.
I imagine that the activity that takes place on both is largely agricultural.
So, apart from the obvious difference in legislation, they are similar.
Can I push you a little further on the issue of different leases and the environmental lease? We have had some discussion of how the leases that are in place at the moment might work against environmental good practice, and how that might be seen as not being good husbandry either. Is there any way that, rather than creating a different lease, the bill might change the circumstances for all leases? We could have one lease that covers good environmental practice and sees that as good husbandry. I am reflecting on the fact that agricultural funding is going to be much more reflective of how farmers look after the whole area. Rather than create two separate leases, could the bill be an opportunity to bring all that together?
We must be careful here. It should be acknowledged that good profitable farming practice already involves care of the land and sustainable and regenerative farming. We must be very careful with any attempt to split those things apart. Farmers are farmers: they care for the land and are doing a good job. Trying to create leases for new environmental practices, when that is just an evolution of farming, would be trying to split the thing when we are actually all going down one line—it is all agriculture. Buzzwords such as “sustainable” and “regenerative” are potentially dangerous because it is just agriculture and moving things forward.
Certainly, the new Agriculture and Rural Communities (Scotland) Act 2024 looks at “sustainable and regenerative” farming as part of what subsidies will be based on. Information will come out on that.
I wonder whether the environmental leases are geared more towards things such as carbon offsetting. Is that their purpose? If so, will they bind the landowner and subsequent tenants to carry out such things? People sequestrate carbon in order to offset carbon generation elsewhere, and I wonder whether the environmental leases could create an issue whereby somebody has bought 100 years’ worth of forestry on land, for example, to offset their carbon elsewhere. Could those leases be abused in order to do that?
Everyone is looking at me in a very puzzled way.
No—we have asked previously about whether a tenant has a right to sell off carbon credits and therefore bind the landowner’s hands indefinitely over what can be done with the land. We struggle with the issue of carbon credits. Does anyone have any views on that? Tom Oates is shaking his head; I think that he wants to stay away from carbon credits, as does everyone else at the moment.
Does anyone have any views? I am sorry for jumping in, Rhoda.
If the tenant was to sell something that should stay linked to the holding, he might find that he has a claim situation. To go back in time, some of us have been around for long enough to remember the problems that were caused by transferable milk quotas and similar issues. I would be inclined to try to keep those parked. One party’s selling something when they should not do so could be difficult.
I will go back to the environmental lease question. We have the ability to have freedom of contract. We can have a commercial lease that deals with those issues, which can be drawn up by eminent lawyers and say exactly what is needed on the tin, whether it is for forestry production or other things. Such leases exist. There are forestry leases that include other environmental factors. The question is, therefore, whether we need what is in the bill, when we can use specific contracts for specific situations. That should be considered as well.
The difficulty with what Andrew Wood has described—those commercial contracts for environmental activities or tree planting or whatever—is that you cannot undertake agricultural activity; otherwise, they fall under the definition of agricultural holdings. That is the difficulty, and we are identifying a potential need to avoid that happening, so that a vehicle that can be used largely for environmental purposes will not, through the doing of some agricultural activity, default into a set of rules that was not intended when the lease was entered into.
So there may be a place for environmental leases, but not quite as drafted. The provision needs to be tidied up a little to ensure that some agricultural work can be carried out at the same time as environmental work.
But it should fall outwith the definition of agricultural holdings. The bill allows the Parliament to produce a model agreement, and there is a period of time in which that can be done. A bit more work is required on that to get there.
The environmental lease might allow a tenant to unlock sources of funding and investment to carry out environmental activities. However, in such circumstances, a funder will be looking at the terms of the lease—and, more fundamentally, the length of the lease—to ascertain whether it would be justifiable to make an investment and provide the tenant with funds to carry out an activity. The investor would need to know that the environmental benefit—whatever it was—would continue beyond the end of the environmental lease, because, of course, the landlord is not bound to continue whatever the tenant was doing for environmental purposes. Tenants certainly could not sell carbon credits in a lease of that nature.
Thank you.
As convener, I get to ask the last question, which is a simple one, and I encourage you to give a yes-or-no answer to it—you have all been reticent about doing that, for good reason. I guess that the majority of parliamentarians and people who are involved in the sector want more tenants to come into agriculture and increase the tenanted farm sector. Will the bill do that? I ask Hamish Lean first.
Thank you, convener. [Laughter.]
Yes or no?
No—not on its own.
Largely, no. It depends on the land use tenancy. If that could be introduced, it would make a significant difference. Without it, though, my answer is no.
No. The bigger driver is tax.
No—
You do not get a second chance if you say no first. You should have said the other bit first and then said no at the end, but you did not do that.
Thanks very much for giving evidence this morning. It is really helpful as we go through the bill. I appreciate your coming in to help the committee in our deliberations.
We move into private session.
11:56 Meeting continued in private until 13:03.Air ais
Subordinate Legislation