The Courier & Advertiser (Fife Edition)
Case clarifies rent review questions
The Land Reform (Scotland) Act 2016 introduced a new method of calculating the rent to be paid on a traditional tenanted farm. It revolves around the concept of a fair rent based primarily on the productive capacity of the farm, looking at the landlord’s fixed equipment only.
The new method isn’t in force yet and is the subject of testing commissioned by the Scottish Government.
It’s not at all clear when the testing will be completed and the new procedure will be introduced, but it is unlikely to be before next year at the very earliest.
Rent reviews initiated by notice prior to the introduction of the new test will be carried out under the existing open market test.
A recent case under the existing rules in the Scottish Land Court, Cawdor Farming Number 1 Partnership v Cawdor Maintenance Trust, has clarified some previously unanswered questions in relation to who can rely on a rent review notice and when a rent review application should be lodged with the Land Court if the parties can’t agree the new rent.
The tenant, the Cawdor Farming Number 1 Partnership, applied to the Land Court for an order varying the rent.
The application was lodged with the Court on November 28, the date from which any varied rent would take effect.
However, the tenant hadn’t served the rent review notice, which instead had been served by the landlord.
The landlord had decided not to do anything about its rent review notice and the tenant was relying on the landlord’s notice to go to the Land Court to vary the rent downwards.
Previously, opinion had been split among the legal procession on whether the party on whom the notice had been served was able to use that notice themselves to force the rent review if the other side didn’t want to proceed.
In this case, the landlords argued that the tenant wasn’t entitled to rely on the landlord’s notice.
Ultimately, the Land Court decided that the landlord was correct.
As a matter of law, the tenant wasn’t entitled to rely on the landlord’s rent review notice and, therefore, its application to the Land Court was incompetent.
Had the landlord actually raised proceedings on its own behalf, it would have been perfectly competent for the tenant to argue for a lower rent but that wasn’t possible where the landlord decided not to go to court.
The only way that a tenant can guarantee being able to press the issue with the landlord and to force the rent down, should that be appropriate, is themselves to serve a rent review notice on the landlord.
The other issue which arose in the case was whether the rent review application should have been lodged prior to November 28.
Ultimately, the Land Court did not have to decide this question because its decision about the tenant not being able to rely on the landlord’s rent review notice was sufficient to dispose of the case.
The court did observe that it did not think that there was a binding rule that an application had to lodged prior to the effective rent review date.
However, the court reserved its opinion because the case had been resolved without having to decide the issue.
The safest course of action is to make sure the application is made before the rent review date.
When the new fair rent test is introduced, it will be possible – unlike the position now – for the other side to rely on the notice to force the rent review in court.
The new rules will also provide that if the parties can’t reach an agreement, an application must be lodged with the court prior to the rent review date itself.
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As a matter of law, the tenant wasn’t entitled to rely on the landlord’s rent review notice