Compensation for agricultural tenants

When a tenant leaves an agricultural tenancy, s/he should receive compensation for any improvements s/he has made to the land. This applies regardless of whether s/he gives the landlord notice or the landlord asks her/him to leave. In some circumstances, the tenant may be entitled to additional compensation for disturbance. If the tenant has allowed the land to deteriorate, s/he may have to pay the landlord compensation.

Unless otherwise stated, this page applies to agricultural tenants with limited duration, short limited duration and 1991 Act tenancies. The laws regarding compensation are complicated, and this page provides only a brief overview, designed to help advisers work out when compensation is likely to be due. A solicitor specialising in agricultural law should be consulted for further information.

This content applies to Scotland

Compensation for improvements

If the tenant has carried out certain improvements to the land, s/he should be paid compensation for this work when her/his tenancy ends. [1] These improvements are set out in Schedule 5 of the 1991 Act. In the case of 1991 Act tenants, this applies even if the tenant has been evicted for non-payment of rent. [2] However, if required, the tenant must have given the landlord notice or received the landlord's permission to carry out the improvements in order to get the compensation. [3]

Compensation for disturbance

If a 1991 Act tenant is issued with a notice to quit and has to leave the tenancy, s/he may be entitled to compensation for disturbance amounting to at least one year's rent, depending on the grounds for eviction stated in the notice to quit. [4]

Limited duration and short limited duration tenants can only claim compensation for disturbance if the landlord resumes the land for a non-agricultural purpose, [5] or if the land is acquired through a compulsory purchase order. [6]

Sum for the reorganisation of the tenant's affairs

A 1991 Act tenant who is entitled to compensation for disturbance may also be able to get a sum of money to compensate for the 'reorganisation of their affairs'. [7]

Compensation for vacant possession

If a landlord wants to sell a tenant's land with vacant possession, s/he can enter into a written agreement with the tenant stating that the tenant will give the landlord notice to leave and be paid compensation in return once the land has been sold. This only applies to 1991 Act tenants and tenants whose 1991 Act tenancies have been converted to LDTs. [8]

Other kinds of compensation

In addition, the tenant may also be able to claim compensation for:

  • holdings let or treated as a market garden [9]

  • continuous adoption of a special standard of farming [10]

  • damage by game. [11]

Compensation for the landlord

In certain circumstances, the tenant may have to pay compensation to the landlord when s/he leaves the land.

An outgoing 1991 Act tenant may have to pay the landlord compensation if s/he has:

  • allowed the value of the holding to deteriorate because s/he has not fulfilled her/his responsibilities to farm the land properly [12]

  • been using the land for non-agricultural purposes and this has caused the land to lose value. [13]

A limited duration tenant may have to pay the landlord compensation if s/he has been using the land for non-agricultural purposes through diversification and this has caused the land to lose value. [14]

Resolving disputes concerning compensation

Any disputes can be referred to the Scottish Land Court for determination. [15] Alternatively, the landlord and tenant can agree to refer matters to arbitration. [16]

Esssential links

Last updated: 29 December 2014

Footnotes

  • [1]

    s.34(1) Agricultural Holdings (Scotland) Act 1991 and s.45(1) Agricultural Holdings (Scotland) Act 2003

  • [2]

    s.20(3) Agricultural Holdings (Scotland) Act 1991.

  • [3]

    s.38(1) and s.39 Agricultural Holdings (Scotland) Act 1991 and s.48 and s.49 Agricultural Holdings (Scotland) Act 2003

  • [4]

    s.43 Agricultural Holdings (Scotland) Act 1991

  • [5]

    s.52 Agricultural Holdings (Scotland) Act 2003

  • [6]

    s.54 Agricultural Holdings (Scotland) Act 2003

  • [7]

    s.54 Agricultural Holdings (Scotland) Act 1991

  • [8]

    s.55 Agricultural Holdings (Scotland) Act 2003

  • [9]

    s.40 Agricultural Holdings (Scotland) Act 1991

  • [10]

    s.44 Agricultural Holdings (Scotland) Act 1991 and s.53(1) Agricultural Holdings (Scotland) Act 2003

  • [11]

    s.52 Agricultural Holdings (Scotland) Act 1991 and s.53(3) Agricultural Holdings (Scotland) Act 2003

  • [12]

    s.45(1) Agricultural Holdings (Scotland) Act 1991

  • [13]

    s.45A Agricultural Holdings (Scotland) Act 1991, inserted by s.51(1) Agricultural Holdings (Scotland) Act 2003

  • [14]

    s.53(2) Agricultural Holdings (Scotland) Act 2003

  • [15]

    s.60(2) Agricultural Holdings (Scotland) Act 1991, inserted by s.75 Agricultural Holdings (Scotland) Act 2003, and s.77(2) Agricultural Holdings (Scotland) Act 2003

  • [16]

    s.61 Agricultural Holdings (Scotland) Act 1991, inserted by s.76 Agricultural Holdings (Scotland) Act 2003, and s.78 Agricultural Holdings (Scotland) Act 2003