“Planning the Future of Limited Partnerships” is the latest publication by Scotland’s Tenant Farming Commissioner.
The code, which can be viewed here, has been issued, as have previous guidance notes, in association with the Scottish Tenant Farmers’ Association, The National Farmers’ Union Scotland, Scottish Land & Estates and The Royal Institution of Chartered Surveyors. It is the latest in a suite of codes intended to guide and shape behaviour and processes in the interactions and negotiations between landlords, tenants , agents and intermediaries in the agricultural sector.
Context of the Code of Practice
Prior to the implementation of the Agricultural Holdings (Scotland) Act 2003, a Limited Partnership was used as a vehicle for letting farms for a fixed period. The landlord or a party connected with the landlord is the Limited Partner and the General Partner is the working farmer. The landlord is able to take the land back in hand on the dissolution of the partnership as the tenant ceases to exist. Following the enactment of the 2003 Act it has not been possible to create new limited partnership tenancies for this purpose but around 500 such tenancies still exist, either having not yet their planned dissolution date or continuing from year to year arrangement, neither of which are conducive to a long-term approach to land management and leasing. The Code of Practice prescribes steps that should be taken when a Limited Partnership is approaching its dissolution or when either party feels it is appropriate to discuss the future of the arrangement between them, with a view to minimising uncertainty for both.
The underpinning principles identified are:-
1. Key principles
The Code recommends that discussions over the future of a Limited Partnership tenancy should take place well in advance of the scheduled dissolution date, or in the case of those continuing on a year to year basis, as soon as either the General or Limited Partner identifies a need to discuss future arrangements. The parties should aim to discuss the wishes of both parties and all options should be considered in an attempt to meet the wishes of both and to support the future management of the farm.
2. Initiating a review
The Code proposes that either partner may initiate a review and should do so in writing setting out the reasons why they consider a review would be beneficial. A request should be made well in advance of a scheduled or anticipated end date to allow time for discussion.
Where the Limited Partnership is to end on a specified date without the need for notice, the parties should agree to meet at least 12 months before the dissolution sate. In practice it is more common for limited partnerships to continue to operate after the initial period on a year to year basis until terminated by notice given. Where notice of termination is needed to dissolve the partnership, the parties should agree to meet in advance of any notice being served.
3. Meeting to discuss options
The Code recommends that within one month of the review being initiated the parties should meet, ideally on the farm to discuss the way forward. Discussions should include consideration of changes in circumstances since the arrangement was first set up – for example, the availability now of Short Limited Duration Tenancies and the availability shortly of the Modern Limited Duration Tenancy. The discussions should consider the wishes of both the limited partner, landlord and the general partner. The parties should agree a written record of what was discussed which summarises their views and records any agreements. If the initial meeting does not result in an agreed way forward, the parties should agree to meet again and continue discussions until agreement is reached until it becomes clear that such agreement is not possible. The parties may wish to consider the involvement of a trained mediator to facilitate discussion, ideally with a view to completing the discussions within 6 months.
4.Notices of dissolution
It may be that, notwithstanding discussions, the end result is the dissolution of the partnership. The Code proposes that the issue of a dissolution notice should follow the discussions in Section 3 and should never precede them.
5. Making a complaint
Either party who feels that the other party or an agent of the other party acts in a way that breaches the Code of Practice, may make a complaint to the Tenant Farming Commissioner.
Review of agents’ conduct begins
In addition, the Tenant Farming Commissioner has started work on the review of the conduct of agents of landlords and tenants. The review will look at views and experiences of tenant farmers and landlords with regard to the conduct of professionals engaged by either party to act on their behalf. The Scottish Land Commission has issued a Notice on Public Contracts Scotland asking for contractors to submit tenders to carry out the necessary research preparatory to a Code being issued.
Joint industry guidance
We have previously issued updates on a number of the sector guidance notes and these can be viewed here in our 2016 end-of-year rural update.