Mixed reaction to report on Scotland’s rent review regime

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Professional bodies involved in farm rent reviews will be asked to sign up to a voluntary code of conduct to improve the transparency of how rents are arrived at, under proposals put to the Tenant Farming Forum (TFF) yesterday by the rent review working group.

But the group’s failure to recommend new legislation to back up their recommendations for new procedures in settling rent disputes between landlords and tenants has dismayed both NFU Scotland (NFUS) and the Scottish Tenant Farmers Association (STFA). However, the landowners’ organisation, Scottish Land and Estates (SLE), has welcomed the report.

The four-man review group was set up by the forum in June, under the chairmanship of former Clydesdale Bank 
agricultural manager Henry Graham, to consider possible improvements to the operation of Section 13 of the 
Agricultural Holdings (Scotland) Act 1991 under which most let farms in Scotland are rented and which provides security of tenure.

The study was launched in response to criticisms of the present rent review system by Lord Gill in a Court of Session judgment in the celebrated Moonzie case.

Lord Gill over-ruled a judgment by the Scottish Land Court by decreeing that single farm payment received by the tenant should be taken into account in determining farm rents and that comparisons with short and limited duration tenancies were legitimate. The result was that the rent of Moonzie farm in Fife was considerably reduced from that awarded by the Land Court.

But despite calls for changes to the current legislation, the review group has unanimously concluded that the main problem is lack of clarity and understanding of the procedures, and not the legislation itself, and that the problems can be adequately addressed by a voluntary, rather than a mandatory, code of practice.

The group’s main recommendations are for the development of a practitioners’ guide, an explanatory note to be sent out with rent review notices, the preparation of a lay person’s guide, improved access to comparable rents through a voluntary rent register and the development of alternative dispute procedures, based on arbitration or expert determination, to reduce the cost and time of dispute resolution.

“It is clear that there is a lack of knowledge and no guidelines as they have in England as to how rent reviews should be carried out,” said Graham. “We came to the view that we need a code of conduct covering how those involved should go about rent reviews.”

Many landowners and resident factors had close relationships with their tenants and problems tended to arise more often when non-resident land agents were involved. This could lead to long drawn-out and costly disputes which often finished up in the land court.

“What we are proposing should help smooth the process and get rid of much of the “black art” in determining rents,” he said.

“It should make it easier for the tenant to glean meaningful information on comparative rents and introduce guidance on how the factors to be taken into account are determined.”

Forum chairman Prof Phil Thomas said the TFF would consider the recommendations as a matter of urgency and have dialogue with interested parties with a view to seeking a consensus to introduce agreed changes by next spring.

However, both NFUS and STFA, while welcoming the main thrust of the proposals, expressed disappointment that no amendments are proposed to the Holdings Act. Both take the view that determining secure tenancy rents on the basis of rents for short and limited duration tenancies does not provide a valid comparison.

“Recommendations around a code of conduct for rent reviews, a rent register and dispute resolution are steps in the right direction but only by becoming mandatory requirements can they achieve the desired outcome,” said NFUS president Nigel Miller. “But we are deeply disappointed that the review group has taken the view that there is no need to amend Section 13 of the Holdings Act.”

But the union welcomes the suggestion that budgets should play a role in determining rents.

STFA chairman Angus McCall echoed the union view.

“There were high hopes that the review group would take the opportunity to correct mistakes of the past,” said McCall.

But the landowners organising welcomed the review group’s contention that Section 13 of the Act is fit for purpose.

“The recommendations will hopefully encourage even better relationships between landlord and tenant,” said SLE chief executive, Douglas McAdam. “We are in favour of a three-year rent review cycle.”

He added that the report reflected the fact that the overwhelming majority of rent reviews were agreed amicably.