Jun 16 2014

INSURANCE POLICY BLAMED FOR LAND COURT RENT BATTLE

LAND COURT RENT DECISION BUILDS CASE FOR REFORM

The Land Court’s recent announcement of its decision to raise the rent on  a Roxburghe Estate farm has bitterly disappointed Scottish tenant farmers .  Yet again the Scottish legal system and tenancy legislation has failed in the setting of a viable farm rent.

Commenting on the case, STFA chairman Christopher Nicholson said: “The Scottish Land Court’s decision to fix the rent for John Elliot’s Roxburgh Mains Farm on the Duke of Roxburghe’s Estate at £48,982, a dramatic increase of over 78%, will deal a devastating blow to Scotland’s tenanted sector.

“Furthermore, in a misleading statement to the press, Roxburghe Estates have inferred that the case was influenced by the STFA legal insurance policy.  However, STFA can confirm that John Elliot was not covered by any insurance scheme which could have provided assistance for legal fees, and therefore insurance considerations had no part to play in the decision not to settle out of court.  Moreover, the inference that STFA has backed this and other Land Court cases is totally unfounded.

“STFA do operate an insurance policy available to members; it is not designed to encourage tenants to pursue a case through the Land Court, but does provide some safeguard and evens the balance of power between landlord and tenant.

“In this situation, faced with changing demands from his landlord, settling a rent out of court was not an option and John Elliot had no choice but to defend his interests through the courts.  The delay in hearing the case resulted from the agreement from both parties to cist (put on hold) the case pending the 2012 Land Court decision on the Moonzie rent review case.

“In making their decision, the Land Court has focused almost exclusively on the evidence of a single open market letting and arrived at an annual rent, which in their own words ‘could not be supported by any budgetary evidence’.  By following the strict legal definition of the open market test as set out by Lord Gill in his ruling on the Moonzie case, the Land Court have driven coach and horses through the advice and thinking provided by various professional practitionerss in light of the Moonzie case including the recently published SAAVA ‘Practitioners Guide to Scottish Rent Reviews’, which emphasises the need to ensure that a farm rent is viable by reference to farm budgets and other settled rents.

“Despite other recent lengthy and costly Land Court cases on rent reviews, the process remains extremely uncertain for both parties.  If a tenant such as John Elliot, himself an knowledgeable and respected farm arbiter with experience of conducting rent reviews, can fall foul of the system then there is little hope for the rest of Scotland’s tenants.  This case clearly demonstrates the need for radical change to the legislation governing rent reviews.

This is a complicated legal judgement and once we have time to digest the detail and matters arising from this decision STFA will be making further comments at a later date.

By tfadmin • Uncategorized •

Jun 13 2014

STFA COMMENT ON LANDLORDS’ RENT PROPOSAL

STFA COMMENT ON SL&E RENT REVIEW PROPOSAL

Scottish Lands and Estates have today signalled a revision of their position on rent reviews.   They are now proposing cross industry discussions which would consider the introduction of productive capacity of a farm as a factor in determining rents.

In welcoming Scottish Lands and Estates’ u-turn on rent reviews following over a decade of stonewalling STFA has insisted that agreement to abandon the use of  open market comparables in 1991 rent reviews must be a prerequisite of any discussions on rent review changes.

 STFA chairman Christopher Nicholson commenting on the news said;  “The industry has been discussing rent reviews in the TFF for over a decade now and has made little progress.  Rents are probably the most contentious issue in landlord tenant relationships, a fact that landlords are only now prepared to acknowledge with the advent of the Agricultural Holdings Legislation Review Group and against a backdrop of land and tenancy reform.

 “SL&E’s olive branch on rent reviews has obviously been offered through clenched teeth but STFA firmly believes that the current rent review system is deeply damaging and requires a thorough overhaul.  We are prepared to discuss solutions with other stakeholders as part of the tenancy review but the question of open market comparables is very much a red line issue.

 “The need for change is indisputable, the tenanted sector is awaiting the Land Court’s decision over the latest rent dispute between Roxburghe Estate and one of its tenants.  This rent dispute will have taken nearly six years to resolve involving over fifteen days in court at astronomical cost.  Whatever the outcome of this case, there can be no clearer demonstration of the need for change.

 “There is a desperate need for rent reviews to become much more straightforward and less confrontational and the industry should look further afield than the constraints of the 1991 Act for a fairer and more suitable way of agreeing rents.  One simple solution, for example, would be to impose a cap on rental increases or decreases linked to an annual index such as inflation.

“The Agricultural Holdings Legislation Review Group have spent the last few weeks taking evidence from tenants and landlords the length and breadth of the country and we look forward to hearing their views on rent reviews in the interim report next week.”

By tfadmin • Uncategorized •

May 23 2014

LAND REFORM REPORT WELCOMED BY STFA

Report sends strong message to policy makers

The Scottish Tenant Farmers Association has welcomed the final report of the Land reform Review Group published today as a phoenix rising from the ashes.  In contrast to the interim report the Review Group has produced a comprehensive, wide ranging and powerful report on the future of landownership and management in Scotland making sensible and well considered recommendations to diversify land ownership and strengthen rural communities.

Commenting on the report STFA Chairman Christopher Nicholson said; “This is a long report which will take some time to digest but from an initial reading it very much reflects STFA’s thinking over the last few years and will undoubtedly be welcomed by tenant farmers.  Above all the report establishes the link between land and tenancy reform and provides some clear guidance to the Agricultural holdings Legislation Group.

“STFA is especially pleased that the Review Group have recognised the contribution made by tenant farmers in rural communities and the importance of the ‘inter-generational continuity they represent’; a contribution that is rarely acknowledged by policy makers.  The Review Group has also recognised the difficult situation many tenants find themselves in, the bleak future they face and the need for radical reform to the tenancy system.  Tenancy reform is undoubtedly the remit of the AHLRG but it is helpful that the LRRG report has reinforced that need and placed it in the context of land reform.

“The report also comments on the benefits that ownership gives to tenants who freed from the constraints of a tenancy have greater incentive to invest in and develop their businesses.

“The Review Group’s recommendations on the existing tenants’ right to buy are common-sense, the requirement to register an interest in order to trigger a pre-emptive right to buy is unnecessary and has already deterred a number of tenants from registration and the requirement to re-register will account for many lapsed registrations.  Tenant farmers widely support a conditional right to buy which STFA has already recommended to the AHLRG.  We welcome the Review Group’s endorsement, and look forward to seeing how an “actual” right to buy can be applied in the public interest.

“The LRRG’s recommendations to improve the position of Small Landholders by allowing a statutory right to buy will bring a sigh of relief those tenants whose situations have been ignored by successive governments, especially on the Isle of Arran.

“The LRRG report will send out a strong message to policy makers and we hope that many of the recommendations will be implemented as soon as possible.  The establishment of a Lands Commission will be key in monitoring and regulating landownership and management.  STFA does, however, disagree with the proposal to impose non-domestic rates onto farmland.  Although rating farmland could be seen as a useful regulatory tool as well as a means of raising tax the agricultural industry is currently in a state of flux with changes to the CAP regime and volatile markets and the imposition of further cost, especially on tenanted businesses would create added strain to already hard pressed farmers.”

Notes – STFA will be making fuller statement once we have had time to consider the whole report

By tfadmin • Uncategorized •

May 15 2014

SCOTTISH GOVERNMENT MUST HEED THE NEEDS OF THE TENANTED SECTOR IN FINALISING CAP REFORM

SUPPORTING ACTIVITY AND THE IMPORTANCE

OF THE REFERENCE YEAR

STFA have urged Scottish Government to ensure the new CAP regime is based on support mechanisms targeting those actively contributing to Scottish agriculture.  Following a meeting with Scottish Government officials, STFA are hugely concerned to learn that a number of vitally important issues remain unresolved with only weeks to go until CAP proposals must be announced and submitted to the European Commission.

In particular STFA, along with NFUS, view the government’s intention to abandon the use of 2013 as the reference year as deeply detrimental for the tenanted sector.  A historic based eligibility criteria is essential to halt the land grab taking place as landlords seek to benefit from additional support by ceasing letting arrangements. and to ensure support is only available those who are actively farming the land.  STFA would also agree with NFU Scotland that Scottish Government must make use of the ‘negative list’ and other criteria as further means of ensuring support is targeted at active farmers.

A decision on the architecture of the new scheme is expected in June and final details are still unclear, leaving farmers in a position of great uncertainty.  The CAP consultation and wider discussion with stakeholders have identified an issue with targeting support within the rough grazing region (RGR), with a wide diversity of land type and activity making a single payment rate impossible.  STFA has urged Scottish Government to consider a split within the RGR category or a coupled support payment for the sheep sector as a means of overcoming the issue.  STFA does not believe the recently introduced  ‘French model’ of regional redistributive payments, front loading payments on the first 54Ha, will effectively address the issue of targeting support within the RGR.

Speaking on these issues Christopher Nicolson, STFA Chairman said:

“STFA remain firmly opposed to a move away from using the farmed area in 2013 as a reference point for allocating area based entitlements in 2015.  The consequence of Scottish Governments reluctance to confirm 2013 as the reference year is already being felt, with many tenants losing land as landlords take land back in hand in a bid to benefit from the new scheme.  The evidence shows that much damage has already been done over the last few years as landlords and their agents manoeuvre to repossess land.  This gives STFA huge concern over the future of let land in Scotland.

“Much of the work of the Agricultural Holdings legislation Review Group looking at ways of reinvigorating the tenanted sector will now be put in jeopardy unless the ability fpr landlords to take land back in hand is not  restricted.  As Scotland contemplates what will be the biggest reform to its tenanted sector since 1948 it is vitally important the CAP reform helps rather than hinders this process

“We appreciate the wish of government to simplify the administration of payments but this must not take place at the expense of the objectives and desired outcomes of the new support scheme.  It surely must be imperative that we support activity and profitable agriculture which lies is at the heart of Scotland’s ambitious food and drink strategy.”

By tfadmin • Uncategorized •

Apr 4 2014

STFA survey of members gives a clear mandate for land and tenancy reform

STFA survey of members gives a clear mandate for land and tenancy reform

 The Scottish Tenant Farmers Association recently met with the Agricultural Holdings Legislation Review Group (AHLRG) to put forward an initial submission based on their recent survey of members.  The results and analysis of the survey show an increasingly strong desire amongst tenants to see land and tenancy reform in Scotland:  A previous NFUS survey of tenants in 2001 showed 58% support for ARTB; the STFA survey shows support for ARTB remaining at 58%, but there is now a further 26% support for a conditional right to buy for tenants.

After meeting with the AHLRG, STFA chairman Christopher Nicholson commented: ‘It is clear that the current tenancy legislation is failing to provide a platform which can support the high levels of investment in infrastructure required for businesses to remain competitive in modern agriculture.  The survey shows that 46% of tenant respondents have had no landlord investment in the last 10 years, and 85% believe that as tenants they will not receive fair compensation for their improvements at way-go.  These results point to an unhealthy state of affairs in the tenanted sector which require solutions beyond tinkering with the existing legislation.

“An analysis of the survey results show that landlord investment is the key factor that creates healthy tenancies.  The 13% of respondents with landlords willing to make investments when necessary have attitudes, experiences and relationships which set them apart from the remaining 87%; they are 4 times more likely to have a good relationship with their landlord, twice as likely to have diversified, and 3 times more likely not to have had a diversification project objected to by their landlord.”

“Recognising impasse in the tenanted sector, the STFA are developing proposals for the use of ARTB in cases where there is a clear public interest argument.  We also propose that secure tenancies become freely assignable which would put tenants on a more level playing field with owner occupiers with regard to ability to invest in their holdings as well as providing access to holdings with secure tenure for new entrants moving into and through the sector.”

With an assignable lease the value of the tenant’s improvements would be reflected in the value of the lease which if freely assignable could be used as a standard security with a bank.  This would vastly improve a tenant’s ability to borrow, and for the first time allow a tenant to benefit fully from the value of his improvements.  Furthermore, instead of relying on compensation for improvements from a reluctant landlord at way-go, the tenant would have the option to assign their leases for value to a third party.

STFA are also addressing other areas of tenancy reform including replacing the open market rent test with a test which is based on the earnings potential of the farm, and widening family succession and assignation to all family members.

Commenting on the future of the tenanted sector Christopher Nicholson went on to say: “In the event of the Scottish Government introducing ARTB it is highly likely that not all tenants will buy their farms and there will be a continuing need for a tenanted sector and so it is vital that we identify and remedy current shortcomings.  As well as recommending legislative change STFA has also proposed the establishment of a Lands Commission or a Land Agency to take on the role of tenancy ombudsman to monitor the operation of the sector and act as an interface between landlord and tenant.  We see this as key to the smooth operation of a future tenanted sector, an idea shared by 89% of respondents to the survey.

“Past efforts at tenancy reform have merely tinkered around the edges, and the time is now ripe for some root and branch change.  The Review Group have a wide-ranging remit backed up by an ambitious programme of evidence gathering.  We expect that this review will lead to the most far-reaching reform of tenancy legislation since 1949 and it is imperative that we get it right.”

Initial Analysis of STFA member survey 

Summary

The results of the survey demonstrate a high level of frustration amongst tenants with a tenancy sector that is failing to provide a platform fit for modern agricultural businesses.

The survey revealed strong support for ARTB for 1991 Act tenants, with only 16% of members opposed to ARTB.

Similarly there was strong support for introducing freedom of assignation (84% support) or ring fencing tenancies (90% support).

These results, strong support for both ARTB and wider assignation, may at first appear to be antagonistic, however they both solve similar problems for tenants, and those who responded to the survey would have assumed that their pre-emptive RTB would still exist under wider assignation.

ARTB and freedom of assignation would both improve tenants’ confidence and ability to invest in their holdings due to:  (i) Both measures would allow tenants to use the value of their improvements as collateral with banks thus improving access to finance; (ii) both measures remove the worry tenants have as to how fair their compensation for improvements will be at way-go, because they would have the option of sell freehold to a third party if they had bought their farms, or sell their leases with their improvements if they had freedom of assignation; (iii) and both measures would allow tenants to have control over succession decisions for their businesses.

Analysis

Through cross tabbing of the questions asked in the survey, it is possible to analyse the survey results to see which criteria have the greatest influence on the success and wellbeing of a tenant’s business.

1.  Landlord Investment

By analysing responses according to how tenants answered this question it is clear that the 13% of respondents who have landlords who are willing to make regular investments in the holding when necessary have attitudes, experiences and relationships which set them far apart from the remaining 87%.  This criteria, whether or not a landlord invests, appears to have the greatest influence on landlord/tenant issues.

These 13% of respondents with landlords who invest regularly are:

• 4 times more likely to oppose ARTB,
• 4 times more likely to have good landlord relationships,
• 12 times more likely to believe that they will receive fair compensation for improvements at way-go,
• Twice as likely to have diversified,
• 3 times more likely not to have had a diversification proposal objected to,
• Are more likely to have a resident factor instead of factoring by outside agents.

These are significant differences which show that in the relatively few cases where landlords are investing the tenants have significant advantages and better experiences in running their businesses.

Nevertheless, there were some strong similarities between the 3 groups of respondents to Question 27; irrespective of whether or not their landlord invested, all tenants showed equally strong support for wider family succession, open assignation or ring fencing, and changes to the rent test to remove the open market criteria and base rents on what the farm is capable of producing.

Interestingly, the 13% with landlords who invested showed the strongest support for a Lands Commission to act as a tenancy ombudsman, possibly because they had personal experience of the tenancy system working well under fair conditions.

2.  How the tenant is factored

This appears to be the next most important factor to influence landlord tenant issues.  The 51% of respondents who are factored by outside land agents are:

• More likely to support ARTB
• Least likely to have an interested eligible successor
• Least likely to have had landlord investment in their holdings
• Least likely to have diversified
• Twice as likely to have had permission to diversify denied
• Most likely to have a poor relationship with their landlord.
• More likely to have grass lets as opposed to SLDTs or LDTs

It is interesting to note that although resident factors would appear to foster healthier tenancies, tenants with resident factors show the strongest support for a blanket ARTB for all 1991 Act tenancies as opposed to a qualified ARTB.  This is probably due to resident factors remaining on only the larger estates, where due to the concentrated ownership of land tenants show greater support for more diverse land ownership

3.  Length of time family have been on main holding

This criteria, length of time on holding, appears to have had little effect of responses except for the 20% who have been on their main holding for over 100 years who are:

• More likely to support ARTB
• Least likely to have had landlord investment
• Most likely to have had objections of diversification proposals
• Least likely to believe that they will receive fair compensation for improvements at way-go
• Least likely to have good landlord relationships

The differences observed with the ‘over 100 years’ group may be due to their leases being pre 1949 leases where Section 5 (landlord fixed equipment obligations) does not apply resulting in less obligations from the landlord to invest.

4.  Type of tenancy

Looking at differences according to type of tenancies there appears to be consistent and strong support from all tenancy types for land and tenancy reform, ARTB, ring fencing tenancies, and the creation of a Lands Commission.

It is interesting to note that support for a Lands Commission is strongest from LP, SLDT & LDT tenants, possibly because they are in the weaker positions when disputes arise.

There appears to be no difference in landlord’s investment across tenancy types.

As noted in (2) above, in the case of newly let land, SLDTs and LDTs are favoured by resident factors while grass lets are favoured by outside land agents.

5.  Type of farming

Looking at responses according to farm type there were no significant differences except for:

• Dairying was least likely to have landlord investment
• Hill farms are most likely to have had objections to a diversification proposal
• Hill farms are the least likely to have a diversification

The diversification situation on hill farms probably results from increased opportunities for wind and hydro projects compared with lowland farms, and these types of renewable diversifications are often strongly opposed by landlords.

By tfadmin • Uncategorized •

Mar 29 2014

2014 – International Year of the Family Farm

2014 – International Year of the Family Farm

 Published in Press and Journal 29th March 2014

Angus McCall

Last December the UN General Assembly designated 2014 as the International Year of the Family Farm.  This has gone virtually unnoticed in Scotland although family farms are seen globally as the bedrock of sustainable agriculture, vital to food security and the environment.  Their value isn’t limited to small landholders in developing countries, they are equally important in larger scale farming systems such as in Scotland.  EU Commissioner Dacian Ciolos has attached huge importance to family farming in CAP reforms so maybe it is now time to move this topic up the Scottish political agenda?

 Family farms come in all shapes and sizes.  Some develop into large-scale agri-businesses which may be viewed as an inevitable consequence of the market place as producers strive towards greater efficiency with economies of scale.  However, is bigger better?  The agricultural sector is becoming increasingly dominated by a few very large players and we only need to look to the consequences of supermarket monopolies and domination to decide if this is always desirable.

 Accelerating land and rental values have made land unaffordable to all but very large businesses.  Although the pressure on smaller family farms doesn’t get much media attention, the family farm is used to stimulate the public’s interest in farming and food production making programmes more folksy and interesting for general consumption.  BBC’s popular “Lambing Live” currently has viewers tuning in nightly to get a glimpse of the trials, tribulations and triumphs of the lambing shed on several family farms throughout Scotland.  We step into the everyday lives of these families where continuity and succession is fundamental to their small businesses which successfully contribute to the wider economy and community life of the Scottish countryside.

 However the desire to pass on small family businesses isn’t exclusive to owner occupied farms.  Many tenanted livestock farms in Scotland have been in the same family for many generations and these tenant farmers would also like their successors to follow in their footsteps inheriting their farms and skills and knowledge which have been honed over many generations.  Government statistics reveal that the number of tenanted family farms in Scotland continues to diminish at the alarming rate of around a 100 farms being lost annually to the sector.  So just what is happening to those farms, farmhouses and businesses?  Is the role of the family farm in danger of being overlooked in Scotland?

 Whilst this uncomfortable aspect of family farming may be too hot a political potato for the media, it is not going to go away until it’s acknowledged and addressed.  Both land reform and farm tenancies are currently in the spotlight with review reports due later this year.  The Scottish government is looking at ways of stimulating the sector and encouraging new entrants.  Accessibility and long-term security of tenure of land have to be main objectives for any sustainable future of the tenancy system

 2014, the International year of the Family Farm has never looked like a better time to re-evaluate the role of the tenanted family farm in Scotland and realise the full potential of this very neglected sector of our rural and national economy.

28^th March 2014

By tfadmin • Uncategorized •

Mar 21 2014

DENSITY MAP OF TENANTED FARMS ACROSS SCOTLAND

PERCENTAGE OF TENANTED FARM LAND BY PARISH IN 2013 (excluding tenanted croft land).

Please click on the link below to view the map-

http://www.scotland.gov.uk/Resource/0044/00442215.pdf

The map shows the density of tenanted land per parish. It was produced by the Scottish Government. Please note, that where there are only a small number of tenants in a particular parish, these farms have not been included due to Data Protection legislation.

The Scottish Government Tenancy map has been edited by Andy Wightman to show some of the large estates and their dominant position over large areas of Scotland’s best agricultural land. Thanks to Andy for allowing the reproduction of his work. Please click the link below to view:

By tfadmin • Uncategorized •

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.”

By tfadmin • Uncategorized •