Limited duration tenancies

Where a new agricultural tenancy is created after 30 November 2017, it will most likely be a modern limited duration tenancy (MLDT). [1]

There are a few main points of difference between MLDTs and limited duration tenancies (LDTs). In MLDTs:

• there can be a break clause where the tenant is new to farming

• the duration of the lease can be agreed between tenant and landlord, but it must be a minimum of 10 years

• the lease automatically continues for a period of 7 years if the tenancy is not validly terminated

• landlords and tenants must agree on an inventory of fixed equipment, and its condition, within 90 days of the start of the tenancy

• there is an increased right to assign the tenancy, restricting the grounds to refuse assignation where the tenant wishes to assign to a near relative

• tenants are given 12 months to remedy a breach of any irritancy clauses before the clause can be acted upon

A tenant has a limited duration tenancy if: [2]

• they rent agricultural land, and

• their tenancy began between 2003 and 30 November 2017, and

• their lease lasts 15 years or more, and

• their lease does not state that they have a 1991 Act tenancy, and

• they are not employed by the landlord – if they are, they will probably be an agricultural occupier, service occupier or service tenant.

Limited duration tenancies must last at least 15 years, unless the tenant has already had a Short Limited Duration tenancy or tenancies that have lasted 5 years or more, in which case the minimum length of the limited duration tenancy is 10 years.[3]

If the tenant has converted from a 1991 Act tenancy to an LDT, their lease must run for at least 25 years. [4]

The tenant does not need to live on the land itself to be a limited duration agricultural tenant. [5]

Limited duration tenants have the following rights:

• the right to a written lease

• when the tenancy ends, the right to get compensation for any improvements s/he has carried out, and possibly other compensation payments as well

• the right to use the land for non-agricultural purposes

• the right to assign the tenancy to someone else

• the right to bequeath the tenancy to a spouse or relative.

These rights are explained in more detail in this section.

Section 16 of the 2003 Act states that the tenant's lease should include the following information:

• a list specifying any fixed equipment on the land the tenant is renting

• an undertaking by the landlord

  - to ensure, at the start of the tenancy or as soon as is reasonably possible afterwards, that the buildings and fixed equipment on the holding are in a thorough state of repair and that they are sufficient for the tenant to farm the land properly, and

  - to replace or renew any buildings or fixed equipment damaged by natural decay or fair wear and tear

• a provision stating that the tenant is only responsible for maintaining the fixed equipment to as good a state as it was at the start of the tenancy or after the landlord had provided, improved, replaced or repaired it (excluding natural decay and fair wear and tear).

If either the landlord or the tenant wishes to amend the list of fixed equipment specified in the lease once the tenancy has started, s/he can do so by agreement in writing.

Fixed equipment includes: [6]

• permanent buildings, such as farm houses, cottages and barns, required to run the holding properly

• permanent fences, hedges and gates

• ditches and ponds

• water and sewerage systems

• roads, bridges and fords

• electrical equipment, such as generators, fixed motors and wiring systems.

The tenant has the right to withhold rent if the landlord fails to fulfil her/his repairing obligations. [7]

Although the lease should list all the fixed equipment on the land, there is no legal requirement for the tenant or landlord to keep an ongoing record of the condition the equipment is in, and any repairs or improvements carried out to it. However, it is advisable to do this, as it will help avoid disputes in the future. [8]

Agricultural tenants can apply to their local authority for a grant or loan to carry out certain repair work under the local authority's scheme of assistance. However, they can only do this if they would be entitled to compensation for the work as for an improvement. The value of the grant or loan is then deducted from the compensation due. [9]

Tenants have this right even if their leases prohibit it. [10]

A tenant wishing to diversify must send their landlord a notice of diversification outlining their proposal. This must be sent at least 70 days before the changes are due to begin. The landlord can ask for further information if necessary, which the tenant must supply. [11]

The landlord must inform the tenant of their decision in writing within 60 days of the date on the notice of diversification, or 60 days from the date s/he asked for further information. If s/he does not, the tenant can assume that the landlord agrees to the plans (unless the plans involve the planting and cropping of trees).

If the landlord agrees to the proposal, s/he has the right to impose reasonable conditions.

The landlord can object to the proposal if s/he feels it would be harmful to the land or would cause them undue hardship. If the tenant believes the landlord's objection or any conditions imposed are unreasonable, s/he can take the case to the Scottish Land Court. [12]

The tenant's lease may specify when and how often the amount of rent payable can be altered. If not, the procedure outlined below must be followed.[13]

If the tenant or landlord wishes to change the rent, s/he must send the other party a notice requesting a rent review. This must give at least one year but no more than two years' notice of the date of the review. The date of the review cannot be less than three years from the start of the tenancy, or from the last review.

Once the tenant and landlord have agreed on a new rent level, this will be payable from the review date.

If the landlord has carried out improvements to the land, s/he is entitled to put the rent up in line with the increased rental value of the land. However, s/he must give the tenant notice in writing within six months of completing the improvements. [14]

The new rent level should reflect the rent that the tenancy would reasonably be expected to fetch on the open market. When setting the new rent level, the landlord cannot take into account: [15]

• how the fact that the tenant occupies the land affects its value

• any shortage of land to let in the area

• any improvements the tenant has made and paid for, unless s/he was obliged to do so under the terms of the lease, or has received other benefits in return

• any improvements the landlord has made that were paid for by a grant

• any reduction in rental value due to damage or deterioration to the land that the tenant has caused or permitted

• any reduction in rental value due to diversification or conservation work.

However, the landlord should take into account:

• the terms of the tenancy (aside from those relating to rent) 

• rents charged for other similar land in the area

• the current economic conditions in the relevant sector of agriculture

• any rise in value due to diversification

• any improvements the landlord has made and paid for.

Limited duration tenants can only sublet their holdings if their leases permit it. [16]

Limited duration tenants can assign their tenancies to anyone they choose, provided they have their landlord's consent. To do so, the tenant must give their landlord notice in writing, telling them: [17]

• the particulars of the assignee

• what the terms and conditions of the assignation will be

• the date on which the transfer of the tenancy will take place.

The landlord can refuse consent if s/he has reasonable grounds for doing so. In particular, s/he can refuse if s/he thinks the proposed new tenant will not be able to pay the rent or maintain the land properly. The landlord also has the right to override the proposed assignation by taking over the tenancy on no less favourable terms than those that the tenant has set out for the assignee. This means that the tenant can leave the tenancy without having to go through the tenancy termination process.

If the landlord decides to either withhold consent or take over the tenancy, s/he must inform the tenant in writing within 30 days of the notice of the proposed assignation. If the tenant does not hear from the landlord within this time, s/he can assume the landlord consents. [18]

Limited duration tenants have a right to bequeath their tenancy to any of the following people: [19]

• their husband, wife or civil partner

• a blood relative (for example, a child, brother, sister or parent)

• their daughter-in-law or son-in-law.

On the death of the tenant, the legatee must give the landlord notice of the bequest within 21 days, or, if s/he is prevented from doing so by an unavoidable cause, as soon as is practicable afterwards. The landlord has the right to object to the bequest, in which case the legatee can appeal to the Scottish Land Court.

The tenancy will pass to the next successor following the rules under section 16 of the Succession (Scotland) Act 1964 if:

• the tenant dies without leaving a will, or

• the legatee refuses the bequest, or

• the landlord objects to the bequest and their objection is upheld by the Land Court.

The landlord has the right to object to the transfer of the lease and to acquire the new tenant's interest in the lease.

Limited duration tenants do not have the right to buy their land. [20]

Limited duration tenants have a right to a written lease. If the landlord does not provide a lease, or the lease does not include all the provisions listed below or includes terms and conditions that are inconsistent with these provisions, the tenant can request a valid written lease. [21]

If, six months after requesting a new lease, the landlord has not supplied one, the tenant can apply to the Scottish Land Court to determine the terms and conditions of the lease. [22]

General provisions

The provisions required in the lease are set out in Schedule 1 of the 1991 Act. These are:

• the names of the parties

• a description of the land or parcels of land to be let, with reference to a map or plan, to show the extent of the holding

• the duration or term of the lease – if different parts of the holding are let for different lengths of time, this should be stated here

• how much the rent is and when it is due

• provisions concerning the landlord's responsibility to insure and repair the property against fire damage and the tenant's responsibility to insure the crops and stock against fire damage.

The landlord and tenant can agree in writing to extend the term of the lease at any time. [23]

Repairing duties

The lease should also contain provisions concerning fixed equipment and repairs. 

Irritancy clauses

The lease may include irritancy clauses agreed between the landlord and tenant. [24] If the tenant breaks any of these clauses, the landlord is within their rights to evict them. [25] However, this is a complicated area, and in recent cases landlords have been unable to remove tenants using irritancy clauses. Therefore, if a tenant is being evicted for breaking an irritancy clause, the matter should be referred to a solicitor who specialises in agricultural law.

Prohibited provisions

The lease cannot contain any of the following:

• an irritancy clause requiring the tenant to reside on the land [26]

• a provision requiring the tenant to pay for any work the landlord has to do to fulfil their repairing responsibilities [27]

• a clause banning the tenant from using the land for non-agricultural purposes, [28] or for subletting the land as part of a plan to use the land for non-agricultural purposes [29] (see 'diversification').

The landlord can only end the tenancy under certain circumstances, and must follow the correct procedures. There is more information on:

• eviction before an LDT or SLDT lease ends

• eviction when an LDT or SLDT ends

The tenant can arrange to end the tenancy at any time, providing their landlord agrees to this. [30]

If the tenant wishes to end the tenancy when or after their lease expires, they must give their landlord written notice of no less than one year and no more than two years before the expiry date of the lease or the continuation period (the page on eviction at the end of the tenancy explains more about continuation periods). [31]

Application forms for the notices mentioned above can be downloaded from the Scottish Land Court website.

Any disputes over the tenancy can be referred to the Land Court (excluding matters concerning intestate succession). [32] In some cases, the landlord and tenant can also agree to refer the matter to arbitration. [33]