TFC blog: Succession Planning

Succession planning is important in any business and no less so for farming businesses, especially where a tenant wishes to pass on the tenancy to another person, normally someone in the tenant’s extended family. Bob - portrait NEW

Careful thought needs to be given to when and how to make the transfer.

And tenants must follow the correct procedures as failure to do so may, in some cases, lead to the tenancy being terminated.

I have published a guide that outlines the ways in which an agricultural tenancy can be passed on to another person. It includes information on whether and how a tenancy might be assigned during a tenant’s lifetime; bequeathing a tenancy and transfer of a tenancy when someone fails to leave a Will.

The guide summarises some of the legal basics, but I strongly recommend that you should always obtain independent legal advice that’s relevant to your particular circumstances,  and seek advice in good time as some parts of the process have to be completed within a certain time.

Here are some of the basic rules for assignation and succession:

A tenant can only transfer a tenancy to another individual. Tenancies cannot be transferred to a company, firm or club, or to two or more people, unless the landlord agrees.

You can’t normally pass the tenancy to just anybody, unless you have agreement with the landlord. Preferential consideration is usually given to ‘near relatives’ of the tenant (a full list of these potential transferees is in the appendix of the Guide).

There are three main ways to pass on a tenancy: as a lifetime assignation; as a testate transfer when someone dies, they may be entitled to bequeath their tenancy in their Will, and an intestate transfer (where someone dies without making a Will) where the tenant’s executors may still be able to transfer the tenancy to another person.

In each of these situations the landlord has certain rights to object; these are described briefly in our new guide.

Which route is chosen will depend on individual circumstances but, generally speaking, making an  assignation to a ‘near relative’ during the tenant’s lifetime is likely to be the most straightforward.

It is important for tenants to have a plan in place for assignation or succession to ensure that when the time comes, they can make way for the next generation.

Time for action on making use of our land

Chief Executive Hamish Trench talks about the recent work done by the Vacant and Derelict Land Taskforce. Hamish - portrait 003

POLICY, funding and regulations all need to be joined up – at a national level across Scotland – if we want to tackle the persistent challenge of vacant and derelict land, to bring it back into productive use.

While local initiatives are to be welcomed, the scale of the task is such that we need a national, coordinated approach where priorities for action, finance and support is all aligned.

This week Vacant and Derelict Land Taskforce published a Statement of Intent that challenges all sectors in Scotland to play their part . This includes using the rich data Scotland has about vacant and derelict sites to promote opportunities for re- use of land and learning – through demonstration – what changes are needed in our regulatory, policy and finance systems to deliver change. Importantly also, we need to embed an
ethos of social responsibility into our corporate culture, to prevent future sites being abandoned.

The Statement of Intent has been informed by a report and analysis of the different types of sites on the vacant and derelict land register and the challenges of bringing them back into use. Our report highlights some recent – inspiring – examples of derelict and vacant land being regenerated and shows how local authorities and other public agencies have helped drive these projects forward.

We’ve also sought to understand the factors behind a core of so- called “stuck sites” – usually older , larger and derelict sites, some of which have been on the register for decades with a majority in either current or former public sector ownership.

According to the Scottish Vacant and Derelict Land Survey 2017, at least 60 per cent of sites and 66 per cent of vacant or derelict land on the register , is in current or former public sector (now privatised) ownership. It is these “persistently problematic” sites that we most want to tackle could be used to build new homes to limit urban sprawl, provide new allotments and city farms, create new parks and green spaces and generate renewable energy. There’s a real risk if we carry on “business as usual” of further sites being abandoned, in the future.

A key aim of the Taskforce going forward will be to embed a responsible approach to land reuse in corporate culture, so that it ’s increasingly seen as unacceptable to leave land and buildings vacant . We’re determined to promote action.

This means that relevant policies, regulations and funding opportunities must all be joined up, to unlock the opportunity that this unused land represents. And communities must be at the heart of land re- use, through community- led regeneration. This needs a national effort – by Government and other partners – to create the focus so that we make more of Scot land’s land, for more people.

TFC Blog: Less than one year left under amnesty for agricultural tenants

Tenant farmers across Scotland have less than a year left to consider if they have improvements to notify their landlord about, under the waygo amnesty. Bob - portrait NEW

The amnesty, introduced by the Land Reform Act (Scotland) 2016 runs until June 2020 and

  • allows tenants to rectify any outstanding issues around past improvements that should qualify for waygo, despite missing notices or consents
  • does not apply where the landlord objected to the original improvement notice or the improvement is significantly different from the original notice
  • may be essential when it comes to rent reviews and relinquishment of 1991 Act tenancies

The definition of an improvement is broad and includes any buildings including houses and cottages. It also includes improvements to land such as ditches, drainage, removal of stones; field boundaries and access improvements

With only one year remaining of the amnesty, I urge all tenants to decide promptly whether to use it – or not.

It can take a bit of time to pull together all the evidence you may need to submit through an amnesty notice, so it’s best not to leave it too late.

The amnesty is a one-off opportunity for tenants to ensure that past improvements are eligible for compensation at waygo. In a nutshell, tenants must

  1. submit a list of claimed improvements which are within the scope of the eligibility rules
  2. meet with your landlord on the farm to review the list
  3. assemble as much evidence as you can to resolve any disputed items
  4. record your agreement to the final list

A leaflet that explains the process with useful case studies can be found on our website at www.landcommission.gov.scot/tenant-farming where you’ll also find the Code of Practice,  guidance and templates.

Moving forward…

Scottish Land Commission CEO, Hamish Trench, looks at the discussions and engagement Hamish - portrait 003following publication of the Commission’s report on scale and concentration of land ownership.

In March this year the Land Commission published a major report on scale and concentration of land ownership in rural Scotland. Addressing one of the core drivers for land reform, this has attracted welcome and wide-ranging responses and comment.

We made recommendations for some significant changes that would address the concentration of power, safeguard the public interest and improve the accountability of land use decision making. Some of these require statutory measures, while there is also much that can be done within land ownership sectors through good governance and practice.

I’ve been pleased by the level of discussion and engagement this report has stimulated. Over the last few months we have been speaking, and listening, with a wide range of stakeholders.  There is huge inherent value in being able to discuss openly around the table the issues of power and participation that emerged as central themes in our report on land ownership. We held a number of workshops bringing together different perspectives to discuss both the findings and the recommendations in our report. These discussions also drew out some of the significant connections between land ownership and the opportunities for delivering the healthy and dynamic rural environments, economies and communities we want in Scotland.

Ministers have asked us to progress these recommendations. Over the coming year we will continue to develop these recommendations into options and proposals for practice, policy and legislative change. As we do this, we will continue to engage widely and keep a focus on the ways in which land reform can help unlock wider economic and social opportunities.

Even in recent months, the relevance of land ownership and use continues to come to the fore. The Scottish Government has committed to a net-zero climate target for 2045, with significant implications for land use change. Expanding Scotland’s forest cover, restoring our peatlands, making the most of renewable energy assets and long-term carbon management all require a proactive approach to land ownership and use and a clear framework for the public interest in land.

The pressing need for housing in rural and remote Scotland continues to rise on the agenda. The new planning act requires the National Planning Framework to consider the desirability of resettling rural areas, and to connect to the Land Rights and Responsibilities Statement.  A new Ministerial group will also consider population challenges, including a focus on ensuring benefits of population growth are spread across Scotland. That the rural housing challenge requires a multi-faceted response combining planning, funding and infrastructure issues is not in doubt. Neither is the recognition that land availability, in the right place at the right price, is core to securing long term renewal of remote rural populations. Land ownership is key to making this happen.

Now, more than ever, it is evident that our framework for land ownership and use is part of the solution to major public policy challenges. It would be odd if we didn’t think of land – one of our most fundamental assets – as being core to Scotland’s ambitions for inclusive growth. The ways in which land reform can help unlock economic growth and public value will be the focus for our conference later this year ‘Scotland’s Land and Economy’ at Dynamic Earth on 2 October.

TFC blog: Regulations on private water – queries tackled

Private water regulations now apply to a far wider range of properties than previously: all farms with residential property subject to agricultural tenancies and all directly let residential properties, are now covered.Bob - portrait NEW

Introduced in 2017, the Regulations set out the duty of local authorities to protect public health and to take samples of water from both tenanted and tied properties.
Consequently, local authorities are contacting many more agricultural landlords and tenants, who have been asking us to help them.

I thought it would be helpful to cover some of the questions we’re being asked most often, to help clarify things.

Firstly, the new regulations apply only to the old ‘Type A supplies’, which are now referred to as ‘Regulated Supplies’ and do not impact on exempt supplies, known as ‘Type B supplies’ in earlier legislation.

Exempt supplies are those which supply less than 10m3 of water per day (2200 gallons) or serve fewer than 50 people.

It’s difficult to imagine many farms using 2200 gallons of water a day, when the average domestic consumption is about 80 gallons a day.

So for most simple cases where the water supply serves a single farm and perhaps a couple of cottages, the only action required as a result of the new Regulation is to make sure that anyone using an exempt supply, is informed about this and also about how they can protect their health from any potential contamination of the supply.

However, if the water is supplied to any premise used for a commercial or public activity, such as holiday lets, the exemption does not apply and a Relevant Person must be identified.

In most agricultural situations there will be more than one Relevant Person and the guidance recommends they get together to agree on what action might be needed and how any costs should be shared. If the parties cannot agree on who the Relevant Person is, the Local Authority will decide.
The following examples might help to illustrate:

• A landowner on whose land the water source is situated, supplies water to two let and two owner-occupied cottages. The landowner is the Relevant Person for the let cottages, but the owners of the other cottages are also Relevant Persons.

• A tenanted farm has a private supply, the source of which is located on land within the tenancy but the supply infrastructure is part of the fixed equipment supplied by the landlord. Both the landlord and tenant are Relevant Persons. The tenant bears the primary responsibility for maintaining the quality of the water because they control the land around the water source.

• A tenanted farm has a private supply, the source of which is located on land owned by the landlord. Both landlord and tenant would be designated as Relevant Persons but as the landlord controls the land around the water source the primary responsibility for maintaining the quality of the water might rest with the landlord.

While there will be complex cases, the principle is that anyone who owns, controls or manages any part of the water supply infrastructure or the land from which the water comes, is likely to be a Relevant Person so a shared responsibility is to be the norm.
The Scotland’s Drinking Water Quality Regulator guidance is useful to read.

Internship creates a road to somewhere

The Land Commission’s work programme covers a wide range of issues – everything from land value tax to community ownership – and as part of that we’re looking to the academic community in Scotland to help us gather evidence, spark debate and develop new approaches to make the most of Scotland’s land.  We recently funded an internship to create an interactive map identifying land owned and managed for non-profit purposes in Caithness, Sutherland and Ross-shire, which might help to support local community ventures.  This is a move by North Highland Initiative (NHI) to encourage community projects to build on the increased numbers of visitors and interest in the area due to the success of the North Coast 500.  The Commission approached Adopt an Intern who were able to place Sam Mackinnon to the internship.

Here Sam blogs about the work he did for the Land Commission and his experience of the internship:

 

Late last year the Scottish Land Commission asked me to create a new resource for local community organisations operating in the north Highlands. The aim of the project was to produce a map illustrating all the land operated for non-profit purposes in the region that could be used for economic development planning. The stimulus for this was the new and successful North Coast 500 route launched by the North Highland Initiative: now that more tourists than ever were flowing through Ross-shire, Sutherland and Caithness, something had to be done to enable communities to capture all the economic potential of this.  The final product of this project will allow communities to see what public resources are available for them to harness.

Undertaking this project was a rewarding experience for me both personally and professionally.

Personally, because I grew up in the Outer Hebrides, a place similarly fighting economic and population decline. I am even more conscious of this as I myself am evidence of the problem, having lived for the past 5 years between Aberdeen and Glasgow. This background has fuelled my interests in urbanisation and my concern about rural decline. Being given a real opportunity to address these issues is fulfilling and something I am grateful for.

Professionally, as even despite my limited experience in this area, after being provided with the overall aims I was trusted to plan, organise and execute the project with complete independence. This level of responsibility made it enjoyable but also increased my capacity to learn, taking up new useful tools, ways of working and presenting information that I never would have thought of doing otherwise.

Especially beneficial was that the internship required me to learn how to use Geographic Information Systems software, often used for economic analysis and planning across different geographic environments. This is something that I have since introduced into my daily work as a full-time researcher at a Glasgow-based think tank, where I have also been carrying research into land economics in Scotland and Europe.

Overall, I have been made a better researcher thanks to this project. Now I hope that communities in the north Highlands can benefit from the new resource available to them just as I have benefitted from being given the opportunity to create it.

Sharing Land Values – there is no quick fix!

After the publication of ‘Advice to Scottish Ministers on Options for Land Value Uplift Capture’ to Scottish Ministers, Shona Glenn, Head of Policy and Research, discusses how a Shona - portrait 001 - compressedmore collaborative approach to land development, in which the public and private sectors share risks and reward, should be a long-term aim. 

The value of land depends on where it is and what you can do with it – and what you can do with it is largely determined by the planning system. That is why, when planning permission is granted – or there is an expectation that it might be granted in the future – the value of land tends to increase. As this value is publicly created, there is a strong argument that it should be used to pay for the infrastructure needed to develop the kinds of places people want to live.

When the Scottish Land Commission was created one of the first things the Government asked us to do was to investigate how this could be achieved. This week we published some suggestions.

Our first suggestion is that we need to stop looking for quick fixes – they don’t exist! History has shown that poorly designed solutions don’t last long and tend to provoke conflict and resistance while they do last. Such an approach will not help to increase the supply of new homes.

Proposals to simply exclude hope value from the compensation local authorities pay to landowners when exercising compulsory purchase powers risk falling into this category. But the ambition to use this value for common benefit seems entirely right.

Commentators often point to Germany as an exemplar to follow so we looked at the German system to see what we could learn. What we found was that, while planning authorities in Germany can acquire land at existing use value, it is fundamental differences in their planning system that allow this to happen – not different compensation rules.

At the heart of this is a trade off between certainty and flexibility.

Planning in Germany is a very systematic affair with a formal hierarchy of plans and large public investments in the implementation of those plans. There is a lot of legal certainty about what kind of development will be permitted at an early stage so land values tend to be determined very early on. This means there is relatively little scope for hope value to arise and market value tends to be much closer to existing use value.

Scotland could move toward a more plan-led, German style, planning system – but it will take more than a simply changing compensation rules to achieve that.

Part of what we need to do is get better at using the planning system to actively shape land values – over the long-term this should help to reduce the gap between market value and existing use value.

A step toward this would be more clarity and consistency in the use and application of developer contributions across the country (the Land Commission has recommended a national review). The Infrastructure Levy proposed in the Planning Bill would be a further step in the right direction.

But this will only take us so far. If we want to move to a more plan-led system in which decisions about what to develop, where and when are driven more by the public interest than market forces then we need to take a serious look at how land is allocated for development. Over the next year the Land Commission will be working with stakeholders to do just this.

Planning policies can be an effective tool for shaping land values but this approach is likely to be most effective in areas where there is significant value to capture. In many parts of Scotland this is not the case. That is why we also need to recognise the need for the public sector to take a more proactive role in initiating and driving forward major development in Scotland and to accept the risks – and associated costs – of doing so.

Moving toward a more plan-led system will also take time – but the housing crisis is happening right now – so what can we do?

We believe that the Masterplan Consent Areas (MCAs) contained in the Planning Bill could be part of the solution. To do this they would need to be designed to provide a framework for collaboration that would allow the risks and rewards of development to be shared more equitably between the public and private sector. (Land value sharing anyone?)

This would be very different to our current approach, that tends to see large-scale development as a zero-sum game in which the public interest can be achieved only at the expense of commercial interests. What we are proposing is based on the principle that a more proactive involvement by the public sector should enable additional value to be created that would not otherwise exist. We believe that creating a framework that would enable landowners and developers to share in this value should make it possible to harness their own rational self-interest in pursuit of the common good.

A framework for delivering this approach that is consistent with the existing provisions for MCAs contained within the Planning Bill already exists. Over the next few months we will be working with stakeholders to look at how it could be made to work in practice.

Today’s recommendations to Scottish Government are informed by 18 months of research, including a joint report from the Scottish Land Commission and Scottish Futures Trust, Funding Scotland’s Infrastructure published today:

The Commission started by looking at lessons we could learn from the past. Last year we published a research report looking at historic attempts to capture land value uplift in the UK.  We have also published discussion papers on Public Interest-led development in Scotland; on local authority land acquisition in Europe and the lessons for Scotland.

TFC blog: Discussions and Advice Vital for Diversification

Tenant Farming Commissioner, Bob McIntosh, gives an update on the latest his latest Guide to Tree Planting on Tenanted Agricultural Holdings. Bob - portrait NEW

With the current economic uncertainty surrounding agriculture, and increased pressure on business margins, more farm operations are looking to diversify into a range of different non-agricultural activities for future security.

This, along with a focus by Scottish Government on increasing woodland in Scotland, is causing more farmers and landowners to consider the pros and cons of woodland creation.

This new Guide outlines the rights of both tenants and landlords to plant trees and provides information on applying for permission to plant.

Importantly, a tenant of a secure tenancy or a limited duration tenancy wishing to use the land for a non-agricultural purpose such as tree planting can now do so provided they obtain written consent for diversification activity.

Before 2003 a tenant had no right to plant trees on the holding or, if they did, had no right to harvest them.

The guide also provides information about ‘waygo’ compensation.

This determines whether a tenant or landowner might be entitled to compensation depending on whether the planting has increased or decreased value of the land.

A tenant is entitled to compensation when the value of the trees is more than the loss of rent to the landlord in retaining the trees until their likely date of cropping plus the cost to the landlord of returning the land to agricultural use.

If the assessed value of the trees is less than this, the landlord will be entitled to compensation from the tenant to the value of the difference.

The trees should be valued on the basis of their worth to a willing purchaser for future cropping.

This is an important and potentially decisive issues affecting a tenant’s willingness to plant trees.

If a tenant were to quit the holdings when the trees are still pre-harvesting age, and given that the cost of returning the land to agriculture could be significant, the tenant may find that they have to pay compensation to the landlord so it is important that all aspects and implications are carefully considered at the outset.

As with most forms of diversification, a tenant needs to ensure correct procedures are followed and that any necessary consents are obtained.

Since tree planting is a long-term business that will affect the land use and associated costs and incomes well into the future, tenants are advised to discuss their plans at an early stage with their landlord so that discussions can take place around the best way to achieve the most favourable outcome for both parties.

Similarly, landlords who would like to see more woodland on their land have the opportunity to discuss a variety of business arrangements with the tenant in order to achieve this.

 

TFC blog: Guide Designed to Help Farmers and Landlords

Tenant Farming Commissioner, Bob McIntosh, writes about his work to improve relations with tenants and landlords.Bob - portrait NEW

I’ve recently published a new code of practice, designed to avoid the sort of issues that sometimes hit the headlines when tenant farmers and landlords have different aims and aspirations.

The new code of practice for agreeing and managing agricultural leases is designed to ensure there are robust procedures in place to avoid misunderstandings when a lease is being entered into, disagreements when changes are made during the term of the lease and disappointment when a fixed duration lease is ended.

The code sets out some simple principles that both tenants and landlords can follow.

This includes taking the time to fully understand the lease. An agricultural lease comes with responsibilities and liabilities.

Both parties, but particularly tenants, ought to take time to question and understand the terms of any lease they are signing and seek professional advice if they’re unsure.

Another principle in the new code is to record agreements in writing.

In any tenancy, agreements may be reached which alter the rights and responsibilities of both parties.

It could be a relatively simple matter such as the tenant notifying the landlord of an intention to construct a new shed. Whatever the issue, it is important that neither party relies solely on verbal or unwritten agreements.

Memories are short and personalities change, so to avoid future disagreements and misunderstanding both parties should ensure that agreements that impact on the rights and obligations of either party, are properly recorded in writing with both parties retaining a copy of the record. The new code also suggests holding regular reviews.

I recommend that tenants and landlords periodically review progress to check their initial understanding about the duration of the tenancy and the impact of any subsequent changes.

If either party changes their plans, I recommend that they tell the other party promptly.

Another principle in the code is discussing the end of the lease – in good time.

With tenancies of fixed duration, it’s best if discussions about the aspirations and intentions of both parties at the end of the lease start in good time, to minimise uncertainty and allow both parties to prepare for a change in circumstances.

The full code of practice can be found here.

This is the sixth code of practice I have issued as Tenant Farming Commissioner to help shape positive relationships between landlords and tenants.

 

International Perspectives Pose Questions for Scottish Land Reform

Land Commissioner, Megan MacInnes, reflects on last week’s Macaulay Development

Land Commission board portraits
Megan MacInnes, Scottish Land Commissioner

Trust workshop on Scottish land reform in a global context held at James Hutton Institute with participants from the US, Canada, Norway, Denmark, Slovakia, the Netherlands, Ireland, South Africa, as well as the UK.

As a self-confessed land reform geek, getting to spend two days sitting down with people who are researching and working on land reform from around the world sounds pretty perfect. Last week was such an opportunity, with the James Hutton Institute bringing practitioners and scholars from more than ten countries together, to discuss how Scotland’s efforts at land reform fit within the global context.

From initially focusing on our own model of community land ownership and how it compares to community, communal and municipal land ownership in other countries during the initial webinar, the presentations and conversations became more wide ranging over the course of the workshop.

Some topics were all too familiar: the challenges for young people wanting to get into farming; the ways in which community land trusts and other community groups are improving access to affordable housing in urban areas; and the extent to which land reform, in any context, is connected to a wider range of needs – soft and hard infrastructure, economic development, access to finance and unfavourable policy environments.

Others were radically different: how local communities are responding to large-scale land grabbing for agribusiness in the Philippines; how first nation communities in Canada were using land and property codes to gain greater autonomy over their own reserves; and the challenges of campaigning for and implementing land reform where there are long-term conflicts and internal displacement such as Myanmar faces.

Much bigger-picture questions the group tried to grapple with were the need for a new conceptualisation of land rights and responsibilities within land reform, away from the traditional focus of private property rights, and on this Scotland has a lot to share. Likewise, whether the future trajectory of land reform is radical, based on social justice, or whether it is steady, evolving through existing structures and frameworks is something that is still up for debate.

My personal reflections throughout were on community land ownership – what could Scotland learn from other countries, and what do we have to show in return? From my own experience working on land reform in Asia and internationally (particularly around strengthening community land rights) the direct comparisons are tantalisingly close, yet elusive. This is because the historical and contemporary context of community land ownership in Scotland is so very different from community and customary land ownership in much of the world. In fact, the most obvious comparison between arrangements for community and customary land and natural resource governance internationally is our crofting system, but even then significant differences are clear.

What is clear though is that like in Scotland, models of community land and natural resource ownership have a clear and prominent role in achieving future sustainable development and delivering broad public benefits.

Where I think there can be lessons learnt are around the governance structures enabling community-based models of land ownership. This includes how ownership models can be transparent and accountable, how to overcome the challenges of limited capacity and high burn-out of community members, and how to ensure governance models are forward-looking and not just reflecting the past. If we are going to truly normalise community land ownership in Scotland then I think there is much to be learnt from international experiences of hybrid and joint ownership models between community groups, the public and private sectors.

Where Scotland is already demonstrating leadership in community land ownership globally is our focus on legal title (rather than just recognising access or user rights) and the explicit and positive connection between land reform and the economic, social and cultural human rights.

We ended the conference with suggestions for ongoing research, discussions and more gatherings – so I am sure we shall have plenty of opportunities to continue the conversations.

The international experience and discussions from the webinar will be incorporated in to the review of ‘International experience of community, communal and municipal land ownership’ we have commissioned and the final report from SRUC, in cooperation with the James Hutton Institute, the University of the Highlands and Islands, the University of Aberdeen and Ting Xu, will be published in the coming months.

Featured Image – James Hutton Institute