An important new opportunity for secure tenants

Bob McIntosh, Tenant Farming Commissioner, shares his thoughts on the Relinquishment and Assignation provisions introduced by the Land Reform (Scotland) Act 2016, which come into force early in 2021.

It is welcome news that early in the new year the Relinquishment and Assignation provisions introduced by the Land Reform (Scotland) Act 2016 will come into force. The legislation will provide a valuable opportunity for tenants with secure 1991 Act tenancies wishing to retire or quit the holding.

The legislation has a dual purpose. We know that many tenants are often reluctant to retire or give up a secure tenancy because of the financial consequences of doing so. The new arrangements for relinquishing tenancies will enable tenants to realise the value in a secure tenancy when they relinquish it and we also expect that this will release more tenanting opportunities for new entrants to farming.

The provisions will enable a tenant to offer to ‘sell’ the tenancy to the landlord at a price that is determined by means of a formula set out in the legislation. Essentially the tenant would receive half of the difference between the open market value of the holding and the value with a tenant in place, plus compensation for any eligible tenant’s improvements, minus any compensation due to the landlord for dilapidations.

If the landlord choses not to ‘buy’ the tenancy, the tenant will be able to assign the tenancy for value to someone who qualifies as a new entrant to farming or as someone who is progressing within the sector. The ‘price’ of the tenancy will be a matter for negotiation and the incoming tenant will take on the tenancy on the existing terms and at the same rent.

As Tenant Farming Commissioner (TFC) I have a specific statutory role. I must appoint an independent valuer to calculate the amount payable by the landlord to the tenant for the relinquishment of the tenancy. To meet this requirement, I will set up a panel of experienced valuers to draw on to calculate the compensation due.

Tenants and landlords will be invited to nominate their preferred valuer – and the norm will be for the TFC to appoint that valuer. However, if the tenant does not notify the TFC of a preferred valuer, the TFC will appoint a valuer from the panel to undertake the valuation.

As the tenant is responsible for meeting the cost of the valuation, members of the panel will be invited to submit a quote for the required valuation to ensure value for money for the tenant. Those valuers invited to submit a quote would usually be determined by locality, unless specific expertise is required.

It is in the interests of the tenant to provide comprehensive information at the outset as this will enable valuers to quote effectively and accurately within the given timeframe and help to ensure the valuer’s time is used to maximum effect. Guidance on the information required will be published. 

It is good to see this legislation being enacted and providing an opportunity for both retiring tenants and new entrants. The legislation is to come into force by the end of February 2021 so I am inviting suitably experienced valuers to apply to sit on this new panel. Applications will close on 29 January 2021 and all of the relevant information can be found on the Scottish Land Commission’s website. 

New guidance will be available shortly for those who are considering relinquishing their tenancy under this new legislation. In the meantime, a TFC Guide on the proposed legislation on relinquishment of 1991 Act tenancies can also be found at this link.