New legislation – Tenanted farms

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Relinquishment & Assignation of 1991 Act Tenancies

New legislation set out under The Land Reform (Scotland) Act 2016 came into force on 28 February 2021 and has sparked conversations amongst the tenanted sector. The legislation enables most tenants with a secure 91 Act tenancy to offer to relinquish their tenancy to their landlord. If the landlord does not wish to buy the tenancy, the legislation allows the tenant to advertise their tenancy on the open market and to assign it, for value, to a new entrant or ‘progressing farmer’.

This is an opportunity for farmers considering retirement or to move on from their tenanted farm, it is also an opportunity for new, young people to enter the industry. The legislation aims to encourage conversations amongst farming families about succession planning and the opportunities this statute could provide.

Tenants should think long and hard before taking steps in the formal process to relinquish their tenancy. The legislation sets out a strict timetable and a demanding list of information required for the process to be carried out, so it is vital that tenants have considered all aspects before proceeding.

If the decision is made to progress with a formal notice of intention to relinquish, the Tenant Farming Commissioner will appoint a valuer to calculate the amount payable by the landlord to the tenant. Several factors will be assessed including the market value of the holding with and without vacant possession as well as consideration for any tenant improvements and dilapidations.

Perhaps, most importantly, tenants should consider whether the value of the tenancy would provide sufficient funds for the farmer to retire, along with the tax implications of obtaining payment for the tenancy. Any professional costs of valuers and legal advice will all be the responsibility of the tenant, so we advise informal discussions between landlord and tenant are entered into before serving any notices.

Our team is on hand to provide guidance from these initial early stages, so if you are considering acting in relation to this new legislation or would like more information, please contact your local D&R office.

Article by Stephanie Adams, Surveyor, Berwick Office

Stephanie Adams

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