Appeal judges throw Moonzie tenancy case back to Land Court

The Court of Session yesterday asked the Land Court to reconsider its decision on what was reckoned to be a landmark case in farm tenancies – and part of this reconsideration should include a valuation of the level of subsidy going into the farm.

The original decision by the Land Court in 2010 in a dispute between landlord Richard Morrison-Low and the executors of the late Thomas Paterson, tenant, over the rent for Moonzie Farm, by Cupar, Fife was that the single farm payment (SFP) should not influence the level of rent.

However, in his ruling at the Court of Session in Edinburgh, Lord Gill, the Lord Justice-Clerk, said “I regret to say that I differ from the view of the Land Court on the central issue. I am of the opinion that the court misdirected itself in deciding the issue on considerations such as whether the SFP belonged to the farmer or the landowner, whether it was an asset attached to the farm and whether it should properly be seen as part of the earnings of the farm.

“In my opinion, the true question is to what extent, if any, the prospective tenant’s entitlement to SFP would influence the amount of the successful offer of rent in a letting in open market competition.”

Lord Gill noted that previous subsidies had been a material factor in assessing rent, and SFP was a subsidy intended as a straight replacement for the earlier system.

“I cannot see how the payment to the tenant of one form of agricultural subsidy in place of another can justify the conclusion that the new form of subsidy must be irrelevant to the assessment of an open market rent,” he said.

“The land court accepted a submission for the tenant that SFP was merely part of the tenant’s general income, unrelated to occupation of the holding, like, say, a pension or the income from a lottery win.

“In my view, that is not the case. It is directly related to the occupation of agricultural land. It is that occupation that unlocks the payment. It is paid to the recipient on the condition that the land is farmed or kept in good agricultural condition.”

In his view, Lord Gill said that farm lets should be based on open market value suitably adjusted to take into account factors such as scarcity of land.

He blamed “inept draftmanship” of the 2003 Agricultural Holdings legislation as contributing to the current problems being experienced by landlords and tenants.

Lord Gill, sitting with Lords Bonomy and Brodie, said the appeal should be allowed, and the case returned to the land court so it could revise its valuation.

Chris Addison Scott of CKD Galbraith, who acted for the landlord in the Land Court, described it as a good decision: “It’s what happens in the real world.”

For Angus McCall of the Scottish Tenant Farmers, Association, the fact that two Scottish Courts could come to such divergent views showed a weakness in the legal process. Apart from the time delay –this dispute centres on the 2008 rent review at Moonzie – he said the costs were now well into “six figures”.

He called for a complete overhaul of rent reviews which were “patently not fit for the 21st century”.

“A fairer cheaper more expedient system must be put in place,” he said.

David Seed, president of the Scottish Agricultural Arbiters and Valuers Association, agreed, saying they were working with the Tenant Farmers, Forum to develop a more straightforward rent review system.