Agreeing and Managing Agricultural Leases - the latest code from the Tenant Farming Commissioner

  • Insight

04 April 2019

The latest publication from the Tenant Farming Commissioner ('TFC') is a Code of Practice for Agreeing and Managing Agricultural Leases. This Code is aimed at landlords, tenants, and their agents. Its focus is on three events in the life-cycle of an agricultural lease: creation, variation, and termination.

Why has this code been produced?

Issuing codes of practice is part of the TFC’s remit under the Land Reform (Scotland) Act 2016 (which also established the role of TFC). Generally, the aim of the TFC Codes is the promotion of dealings and negotiations that are reasonable and fair between landlords and tenants in an agricultural context. The Codes are effectively soft law – that is, they are guidance, but not legally enforceable. However, the TFC can conduct an inquiry into an alleged breach of a Code, and the resulting report can be used in arbitration or in proceedings before the Land Court.

The Code makes clear however it is not the function of the TFC to mediate, arbitrate or to persuade either party to see things the way the other does or to forego any legal rights which the parties may have.

What does the Code say?

The Code seeks to minimise misunderstandings in several ways. First, four key principles are given. Taking adequate time to reflect before entering into any agreement is advised. Any agreements should be made in writing, with a copy for each party. Ongoing dialogue about any progress or change in a party’s aspirations is recommended. And for fixed-term tenancies, “it is desirable that discussions about the aspirations and intentions of both parties at the end of the lease begin well in advance of the termination date in order to minimise uncertainty”.

After that, specific considerations are identified in relation to the following:

• Entering into a new lease – the emphasis is on understanding what is being offered (duration, rent review, maintenance of fixed equipment) and understanding the other options available. A landlord who does not provide a tenant with a full draft lease for consideration at least one month before the commencement date will be in breach of the Code. Tenants are urged to seek professional advice, where appropriate.

• Managing the lease – any agreement to do something other than what is provided for in the lease should be made in writing and any statutory requirements followed.

• Ending the lease – fixed term tenancies are just that – for a fixed term – and may not be renewed. If a lease is to be terminated, sensitivity and early dialogue is encouraged. The important of sufficient time to prepare for the end of a tenancy is underlined.

• The short limited duration tenancy ('SLDT') – in some circumstances, where the tenant does not remove from the holding at the end of the tenancy, an SLDT may convert to a modern limited duration tenancy. An outline of these legal aspects is given. Alongside that, where the SLDT is for more than 3 years, failure of the landlord to discuss termination with the tenant at least 6 months before the end of the lease will be a breach of the Code.

• The limited duration tenancy ('LDT') and the modern limited duration tenancy ('MLDT') – no new LDTs can be created but many are still running. An outline of the legal requirements for termination is given, and a reminder that failure to adhere to these will result in the tenancy continuing for a fixed period. The TFC recommends a mid-term review of the lease.

Breaches of the Code

Anyone directly involved who believes that another party is in breach of the principles and procedures can make a report to the TFC who will investigate the allegation. Further details are available on the TFC’s website and a summary is included in the Code.

Other codes issued by the Tenant Farming Commissioner

The other five Codes – 'Late Payment of Rent', 'Amnesty of Tenants’ Improvements', 'Planning the Future of Limited Partnerships', 'The Management of the Relationships between Agricultural Tenants and the Holder of Sporting Rights', and 'The Maintenance of the Condition of Tenanted Agricultural Holdings”' – are available via the TFC’s website.

As with previous codes consultation was made with various interested bodies: Scottish Land and Estates, the Scottish Tenant Farmers Association, the National Farmers Union Scotland, The Royal Institution of Chartered Surveyors and the Scottish Agricultural Arbiters and Valuers Association.

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