Public interest test for Scotland’s land ownership raises questions

The concentration of Scotland’s land ownership has long been a concern to some individuals and stakeholders, perceived as being a barrier for those who live and work in an area in exerting influence over the decisions that affect them. This particular aspect of the Land Reform discussion has recently risen in prominence. February saw the publication of the Scottish Land Commission’s discussions on the concentration of land ownership in Scotland and we expect its recommendations to be considered by the Scottish Government in due course.

The discussion paper identifies the need for further work and stakeholder consultation before proposals can become functional legislation.

However, questions are already being asked about how the proposals - speci̬cally the proposed Public Interest Test for significant land transfers or acquisitions - might impact on businesses and private affairs.

The test, applied when control of a landholding transfers from one party to another, aims to determine whether or not a speci̬c, signi̬cant acquisition of land is likely to create or perpetuate “excessively concentrated power”, which could act against the public interest.

Typical questions that arise around the test’s impact include:

Could this prevent land from being inherited by families?

Potentially, yes. For the test to be effective, the SLC paper acknowledges that it must apply to all transfers of control, including for inheritance. Transfer of an estate to the next generation is not a process that the SLC appears to take issue with, and indeed it is di̮cult to envisage how an asset would otherwise be handled on the owner’s death. However, the detail of any resulting legislation will likely determine how the law might apply to interfamily transfers.

How might this affect future sales of large farms?

The SLC recognises that uncertainty and disruption of process would be unhelpful for Scotland’s property market

In practice this may mean that properties below a certain size are automatically exempt from the test - 1,000 hectares was cited as an example threshold, although that will likely be debated. The SLC also envisages a scoping process whereby a potential land disposal could be reported in advance so that it may be considered in the context of the test before going to market.

As the test focuses on excessive market power arising through land sales, a buyer’s identity is critical, so any pre-marketing scoping may be of limited use. The nature and duration of the scoping process will help ensure that it does not significantly delay a sale once a buyer is identified.

The narrative to date suggests that the sale of an owneroccupied farm is unlikely to be affected by any legislation that is passed as a consequence of the SLC’s recommendations.

Will this affect the forestry investment market?

Not obviously. There is evidence of investment funds and corporates acquiring more forestry assets traditionally held by individual investors. However, growing corporate interest in forestry and planting land is attracting new entrants to the sector, which will reduce the likelihood of any owner ‘monopolies’.

Scale of ownership alone will not prevent a potential acquisition, so long as it would not otherwise create structural risks that could harm the public interest. Examples are where one party holds excessive control of local employment, infrastructure, housing land supply or local housing stock. These potential concerns do not obviously relate to forestry or downstream processing sectors in their current forms.

Indeed, restrictions on freedom to acquire or sell land will always need to be considered in light of the European Convention on Human Rights and there will be much to be discussed, if any of the SLC’s recommendations are written into law.

Graeme Leith is a partner at Brodies LLP, specialising in the rural sector.