New code aims to avoid disputes over tenancies
A new code of practice has been drawn up to ensure tenants, landlords and land agents fully understand the responsibilities and liabilities which they are undertaking when entering into a farm tenancy agreement.
The code – Agreeing and Managing Agricultural Leases – was issued this week by Scotland’s Tenant Farming Commissioner, Bob Mcintosh, and sets out some simple principles and practices to be followed by all parties.
“A decision to sign up to an agricultural lease is one which results in responsibilities and liabilities and should not be taken lightly and without considering the full and implications,” said Mcintosh.
He said that time should be allowed for both parties to negotiate, agree and understand the terms of the lease. He added that in the case of fixed duration leases, it was important that both parties were clear about what was likely to happen when the lease reached the end of its term.
He also said that it was critical to have an accurate record of the terms of agreement: “Misunderstandings, disagreements and disappointments often occur because verbal agreements are not followed up in writing so it is essential that any agreements made are properly recorded.”
The Scottish Tenant Farming Association welcomed the move, stating that it was important to that ensure that there were robust procedures
in place to avoid misunderstandings when a lease was being entered into, when changes were made throughout the term of the lease and when a fixed duration lease ended.
“Scarcity of tenanted land is not a new phenomenon and competition for vacant farms has always been fierce,” said STFA chairman Christopher Nicholson. “It is true today as it was 40 years ago that tenants, having made a successful bid for a farm, are quite likely to sign up to a lease without fully understanding its consequences and implications.”
He admitted that the situation had improved in recent years – although he said that many tenants who had signed away their security of tenure in recent decades for the sake of obtaining more land, a new shed or even just a rent
reduction and entered into limited partnership agreements were now facing a very insecure future.
But Nicholson warned that some tenants in 1991 secure tenancies had recently been asked by landlords to renew their leases for taxation purposes, for the landlord’s benefit – as leases entered into before 1995 are only eligible for 50 per cent inheritance tax relief as opposed to 100 per cent for later ones.
“In most cases tenants have taken good legal advice and ensured that the new lease has the same benefits as the old one, including carrying forward tenant’s improvements, but there are a minority where this has not happened and the tenant’s family’s investment in the holding has been lost.”