16 July 2015

In recent weeks, there have been a number of proposed legislative changes affecting country estates in Scotland. These have included the publication of the Scottish Government’s Land Reform (Scotland) Bill 2015 and the UK Government’s confirmation of the early closure of the Renewables Obligation for on-shore wind farms. In this article bto considers some of the issues facing its clients.

Land Reform (Scotland) Bill 2015 – extension of tenant farmers’ right to buy in certain circumstances.

Throughout 2014 the Scottish Government’s Agricultural Holdings Legislation Review Group considered proposals for reforming the agricultural holdings sector in Scotland with a particular focus on revitalising the tenanted farming sector. Of the topics considered, undoubtedly the most divisive was the proposal to introduce an absolute right for tenant farmers to buy their farms from the landowner. Ultimately however, earlier this year, the review group published its final report in which it recommended against the introduction of an absolute right to buy. Other recommendations were put forward and the detail of these proposed legislative changes has now been confirmed in the recently published Land Reform (Scotland) Bill.

Section 80 of the Bill removes the requirement for a tenant to register their right to buy. Previously it was necessary for a tenant to register such an interest and this was noted in the Register of Community Interests in Land. The removal of the requirement to register means that all tenants with a secured lease under the Agricultural Holdings (Scotland) Act 1991 will now have an automatic, pre-emptive right to buy if and when the landowner wishes to sell the land in question. While this is clearly not as dramatic a step as the introduction of an absolute right to buy, it is still a significant change for tenant farmers. There is however justifiable concern from landowners that the removal of the register of such interests will result in a lack of clarity and added confusion in farm or estate sale transactions. Without the ability to simply check the register to find out if a right to buy exists, potential purchasers will be unsure about whether a right to buy exists. This will undoubtedly mean that further investigations and diligence are required, most likely at the cost of the landowner.

Section 81 gives power to an agricultural tenant to apply to the Land Court for an order for sale of the holding where their landlord is in breach of obligations under the tenancy and this is affecting the tenant’s ability to farm in accordance with the rules of good husbandry. There has generally, in recent years, been calls to strengthen the tenant’s position in respect of agricultural leases and this section is intended to address this. From the landowner’s perspective however the balance may have shifted unfavourably towards the tenant as there is some lack of clarity on how significant or “material” the breach of the obligation must be.

Land Reform (Scotland) Bill 2015 – removal of business rates exemption for sporting estates

Under Section 66 of the Bill this exemption, which has been enjoyed by sporting estates since its introduction by John Major's Conservative government in 1994, will come to an end. Once the changes come into force, Section 7 of the Local Government (Scotland) Act 1975 will apply in respect of shootings and deer forests. These will be liable to non-domestic rates, based on the assessors’ valuations.

The primary criticism of the proposed changes is that they will significantly affect those sporting estates whose profit is “marginal”. These estates, many of which will have built up viable business models over the last 20 years based on the exemption will suddenly find themselves unprofitable. It is feared that the most likely outcome of this will be a significant loss of jobs amongst gamekeepers, ghillies, wildlife managers etc.

Early closure of Renewables Obligation to new onshore wind generating stations

On the 18th of June, the Secretary of State for Energy and Climate Change confirmed in an announcement to Parliament, that the UK government intends to close the RO early to new onshore wind. This vital subsidy, which has been responsible for a huge growth in onshore wind development will now end on 1 April 2016, a year earlier than originally anticipated.

The Government has confirmed that a grace period will be available for projects which are able to satisfy certain criteria as at the dated of announcement (18th June). In order to be eligible, projects will need to provide evidence that they already have planning consent and a grid connection offer and acceptance. They will also need to give confirmation that the scheme has the right to use the land. Projects able to satisfy the necessary criteria will be eligible for a one year grace period.

However, even with the proposed grace period, with around 3,000 new onshore wind farms in the pipeline in the UK (about 70% of which are in Scotland) the impact on the onshore renewables industry will be significant.

Contact: David Gibson Partner dbg@bto.co.uk T. 0141 221 8012