New legislation to relinquish and assign farming tenancies

New legislation for secure farming tenants comes into force at the end of February. It applies to tenants who want to relinquish a tenancy or assign it to a new entrant or progressing farmer.

The legislation will provide a valuable opportunity for tenants with secure 1991 Act tenancies wishing to retire or quit the holding. The provisions allow a tenant to offer to ‘sell’ a tenancy to their landlord at a price that is determined by means of a formula set out in the legislation. The relinquishing tenant will receive half of the difference between the vacant possession 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.

Tenant Farming Commissioner, Bob McIntosh, said:

“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 will enable tenants to realise the value in a secure tenancy when they relinquish it and this may release more tenanting opportunities for new entrants to farming.

“If the landlord chooses not to ‘buy’ the tenancy, the tenant can 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.”

The Tenant Farming Commissioner (TFC) will appoint an independent valuer to calculate the amount payable by the landlord to the tenant for the relinquishment of the tenancy. A panel of experienced valuers has been set up to draw on to calculate the compensation due. Tenants and landlords will be invited to nominate their preferred valuer and, subject to checks for independence and suitable knowledge and experience, 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.

Details of the panel of valuers, which launches today, are available on the Scottish Land Commission website: landcommission.gov.scot/tenant-farming. 

Tenants must meet the cost of the valuation, so panel members will be invited to submit a quote for any required valuation to help ensure value for money for the tenant. Those valuers invited to submit a quote will usually be determined by locality, unless specific expertise is required.

The Scottish Land Commission has produced a guide to the Relinquishment and Assignation of 1991 Act Tenancies, which provides an overview of the process, including the responsibilities of both tenants and landlords. It is available at this link.