Getting transfers of tenancy right

Most farm tenants who are secure tenants governed by the Agricultural Holdings (Scotland) Act 1991 are aware that the rights which they possess as secure tenants are extremely valuable.

However, a large part of the value of security of tenure under the 1991 Act is the ability to hand the tenancy on either during the tenant’s lifetime or after his or her death.

The rules about lifetime transfer (or assignation) and succession after death are complicated and not well understood.

The consequences of failing to understand how the law is applied in such situations can be very grave indeed and has often led to the tenant’s family losing the benefit of the secure tenancy and in some cases being forced to give up occupation of the farm altogether.

Two common examples which, unfortunately, I have encountered on a number of occasions during my professional practice illustrate the point. The first circumstance is where a tenancy is held by joint tenants, for example, a father and son.

Some tenancies are written in such a way that on the death of one of the joint tenants, that interest passes automatically to the survivor. This, however, is relatively rare.

Where there is no such “survivorship clause”, the deceased joint tenant’s interest must be passed on to a suitable family member, perhaps the joint tenant who has survived or another close family member.

If this is not done, the tenancy will lapse and the surviving tenant will be

forced to give up occupation or agree new and much less favourable terms and the benefit of having the secure tenancy will be lost.

The other common scenario is that a written lease will often expressly prohibit the tenant from being able to make a bequest of their interest as tenant in their will. Such clauses are perfectly legal. As a result the tenant is unable to make a bequest in their will.

A different procedure applies to the transfer of the tenancy after death, which is dealt with by the tenant’s executors who have a year from the date of the death to make the transfer.

However, on occasion, such prohibitions in the lease are ignored or not understood and the tenant makes a will in which they grant a specific bequest of the tenancy to a particular family member.

If the family member then gives a notice to the landlord that they accept the bequest, an opportunity then arises for the landlord to be able to get the farm back. In one particular case where this happened, the landlord sat back and did not issue rent invoices.

It didn’t occur to the new “tenant” to offer to pay rent direct and when the time limit of one year for the deceased’s executors to transfer the tenancy had lapsed, the landlord’s agents wrote to the “tenant” demanding that they give up vacant possession and unfortunately there was no defence to that.

Accordingly, I was very pleased to see that Bob McIntosh, the tenant farming commissioner, has issued a guidance note explaining in straightforward terms the law behind the transfer of tenancies by assignation and succession both for Secure 1991 Act tenancies and for short limited duration tenancies, limited duration tenancies and modern limited duration tenancies.

This is the latest in a series of extremely helpful guides issued by the commissioner and should greatly benefit tenants and landlords in their understanding of what can be a complex area of law.

However, as the commissioner himself points out in the guide, tenants and their families who are considering either the lifetime transfer of the tenancy or are making plans for succession to it after death should always seek legal advice at the soonest opportunity.

This is not an area of law in which the tenant or their family can afford to make a mistake.

“The rules about lifetime transfer (or assignation) and succession after death are complicated and not well understood

Seeking legal advice as early as possible is key.