Mar 21 2014
STFA REACTION TO RENTAL REPORT
LAND AGENTS MUST EASE RENTAL PRESSURE
The Scottish Tenant Farmers Association is cautioning land agents against expecting large rent rises in 2014. Reacting to Smiths Gore’s claims that Scottish rents in 2013 rose at their fastest rate since 2009 STFA has warned that with CAP support set to rapidly decline over the next few years there is absolutely no justification for further rent hikes in the coming year.
Chairman Christopher Nicholson said: “Land agents must moderate their expectations for rent demands, particularly in the intensive livestock sector where the pain of CAP reform will be the most acutely felt. Scottish tenants have seen regular 3 yearly rent increases over the last decade and it is now time to pause rent reviews while we adjust to the new CAP regime and allow the Agricultural Holdings Review to come to its conclusions. Landowners have called a halt to letting land meantime and it is only right that rent reviews are also put on hold.
“Smiths Gore’s rental figures add further proof of the pressing need for changes to rent reviews as we see the gap between open market rents in England and regulated traditional tenancies widening. Open market rents south of the border are increasing at twice the rate of traditional tenancies. According to Smiths Gore’s figures, arable open market rents in 2013 have risen by 57% to average £160/ac whilst arable rent on AHA traditional tenancies have risen by 30% to average £85/ac.
“The restricted market for tenancies in Scotland has led to some massive rents which will inevitably drive all rents upwards with little prospect of ever falling. Unlike Scotland, England operates a two tier system with no direct comparison made between sitting traditional tenants rents and open market rents. As a result long-term tenants in England are not subject to the same rental pressure as their counterparts north of the border.
“STFA has been arguing for years now that Scotland must move to a similar two tier rental system by removing open market comparables in favour of basing farm rents on what the farm is capable of producing and its potential earnings. Already we are seeing some savage rental increases as a consequence of an over-heated open market. Moreover, due to difficulties in resolving disputes, tenants now feel they are powerless to resist unreasonable rent demands as the alternative is an expensive, time consuming and stressful appeal to the Land Court.
“STFA will be meeting the Agricultural Holdings Group shortly and is in the process of analysing responses from our survey of members who have, almost unanimously, called for a long overdue overhaul of the rent system. In responding, 88% of tenants thought the rent review process was becoming unworkable, 95% would like to see rents reflecting the productive capacity of the farm and 90% would like to see a statutory cap placed on annual rent increases.
“In contrast with most commercial situations, rent reviews are the single most contentious issue and cause the greatest disruption in relationships between landlord and tenant. It is high time that this festering sore was dealt with and we hope the Review Group will now do so once and for all.”