Agricultural tenants’ improvements amnesty 2017–2020—Scotland
Produced in partnership with Mike Blair of Gillespie Macandrew LLP

The following Property practice note produced in partnership with Mike Blair of Gillespie Macandrew LLP provides comprehensive and up to date legal information covering:

  • Agricultural tenants’ improvements amnesty 2017–2020—Scotland
  • Background to the amnesty
  • Duration of the amnesty
  • Classes of improvements
  • Normal Procedure when carrying out improvements
  • Procedure under the improvements amnesty legislation
  • What Improvements can be claimed under the amnesty?
  • Formal Procedure under the amnesty
  • Notice by the tenant
  • Response by the Landlord
  • More...

Agricultural tenants’ improvements amnesty 2017–2020—Scotland

The agricultural tenants’ improvements amnesty ended on the 13 December 2020. As the amnesty period is now ended, issues which remain relate to the resolution of claims and amnesty notices served during the amnesty period. For the procedure that may be adopted see the Guidance from the TFC on Dealing with Amnesty Discussions that are Continuing after the End of the Amnesty Period on 13 December 2020.

For background as to the now closed amnesty process, this Practice Note explains the improvements amnesty for certain types of improvements carried out in the past by tenants on let farms in Scotland, but not properly documented at the time. The amnesty allows tenants to apply to have such improvements legally recognised for potential compensation from the landlord at termination of the tenancy. It expired on 13 December 2020 (originally to expire on 12 June 2020 but extended for a further six months by the Land Reform (Scotland) Act 2016 (Supplementary Provision) (Coronavirus) Regulations 2020, SSI 2020/174). Important guidance is in the Tenant Farming Commissioner (TFC) Code of Practice—Amnesty on Tenants’ Improvements (the TFC Code) and Supplementary guidance to the Code of Practice (the TFC supplementary guidance).

Background to the amnesty

For most of the 20th century starting with the Agricultural Holdings (Scotland) Act 1923, (modified by Agricultural Holdings (Scotland) Act 1931 and Agricultural Holdings (Scotland) Act 1949),

it has been permissible for an agricultural tenant to carry out significant works of improvement on the let farm and to claim compensation from the landlord at the end of their tenancy. At common law, there was no entitlement to such compensation.

The Agricultural Holdings (Scotland) Act 1991 (AH(S)A 1991) and the Agricultural Holdings (Scotland) Act 2003 (AH(S)A 2003) allow for tenants of agricultural holdings to claim compensation for improvements they make to their holding during their tenancy. This right is available to tenants on quitting the holding, at the termination of the tenancy.

Compensation for improvements to land which is part of a tenancy formed under AH(S)A 1991 (1991 Act Tenancies) may be claimed under AH(S)A 1991, s 34, and compensation for improvements to land which is part of a short limited duration tenancy, limited duration tenancy and modern limited duration tenancy (2003 Act Tenancies) may be claimed under AH(S)A 2003, s 45.

AH(S)A 1991, Sch 5, Pts I–III list the most commonly encountered types of improvements which tenants of 1991 Act Tenancies and 2003 Act Tenancies may claim compensation for. Any improvement claimed for under AH(S)A 1991, Sch 5, must have begun on or after 1 November 1948. Certain earlier improvements are covered by AH(S)A 1991, Schs 3 and 4 (Pts I, II and III respectively).

Where the tenant wishes to make improvements of the kind set out in AH(S)A 1991, Sch 5, Pt I (ie those that require landlord consent) AH(S)A 1991, s 37 and AH(S)A 2003, s 48 provide that no compensation will be payable unless before the improvement was carried out the landlord consented to the improvements in writing (whether conditionally or upon terms agreed between the parties).

In order to claim compensation for statutory improvements the tenant must serve a notice of claim for Parts I, II or III improvements prior to a date two months after the termination of the tenancy. See further Practice Note: Agricultural tenants’ improvements and fixtures in Scotland.

Failure of many tenants and landlords to document correctly the improvements carried out to agricultural holdings has been common and has two consequences:

  1. the works concerned will not be capable of qualifying for compensation on termination of tenancy, and

  2. it may be unclear as to who has affected improvements, thus making determination of a rent on review more difficult, as the tenant only pays rent on what was provided by the landlord

Duration of the amnesty

The tenants' amnesty is a one-off, time-limited opportunity for tenants to ensure past improvements are agreed with their landlord as being eligible for compensation at waygo. The main relevant legislation is in sections 112–118 of the Land Reform (Scotland) Act 2016 (LR(S)A 2016). The amnesty is only concerned with agreeing what improvements should potentially be eligible for compensation at waygo—it does not affect the current rules applying to determining the level of compensation payable at termination of the tenancy.

The amnesty is available to tenants under 1991 Act Tenancies and 2003 Act Tenancies. Note however that it is less likely that significant improvements will have been carried out under 2003 Act tenancies, because these are fixed term tenancies.

Classes of improvements

Tenant improvements have always been divided into three classes by statute namely

  1. those requiring the landlord’s prior consent (Part 1 improvements)

  2. those requiring prior notice to the landlord (Part 2 improvements)

  3. those requiring neither (Part 3 improvements)

See Practice Note: Agricultural tenants’ improvements and fixtures in Scotland—What are statutory improvements?

The activities which have been capable of being treated as improvements and compensatable at waygo have changed over time, and these are set out in the AH(S)A 1991, Schs 3, 4 and 5.

Schedule 5 deals with the position since 1 November 1948 and is the schedule most commonly come across in practice. Various kinds of works can be improvements, eg:

  1. the erection of buildings

  2. provision of drainage

  3. carrying out improvement works to a farmhouse and many others

The same types of improvements have sometimes fallen within different ‘Parts’ of the schedules under the different AH(S)As over time. The relevant schedule is that in effect when the relevant improvement was carried out.

For the details of what qualifies under which the three schedules, see AH(S)A 1991, Schs 3, 4 and 5. These have now updated to keep in line with modern farming practice, most recently by LNB News 23/10/2018 57—Agricultural Holdings (Scotland) Act 1991 (Variation of schedule 5) Order 2018 effective from 10 January 2019. The changes in this version are most unlikely to be relevant for the amnesty, as anyone carrying out these, post-2019 improvements could scarcely do so before the amnesty ends on 12 June 2020.

Normal Procedure when carrying out improvements

As set out in the schedules, and AH(S)A 1991, s 34, in some cases the landlord’s consent to the improvement must be obtained, in others notice is to be given before the improvement works are commenced. In the case of Part 3 improvements neither consent or notice is required, see Practice Note: Agricultural tenants’ improvements and fixtures in Scotland—Procedure before carrying out tenant improvements.

In practice, it has been very common that works have been carried out by tenants under 1991 Act tenancies which would have fallen within the definition of Part 1 or Part 2 improvements, but where the procedure for obtaining consent or for the prior notification of the landlord has not been followed or documented in any way.

Works carried out by a tenant which did not follow the applicable procedures to be classed as an ‘improvement’ may fall to be treated as ‘tenant’s fixtures’, see Practice Note: Agricultural tenants’ improvements and fixtures in Scotland—What are tenants’ fixtures?

Procedure under the improvements amnesty legislation

What Improvements can be claimed under the amnesty?

Part 1 improvements cannot be claimed under the amnesty where:

  1. there was a failure to obtain landlord’s consent, or

  2. the improvements have been carried out in a manner ‘substantially different’ from the manner consented to by the landlord

It is mostly only improvements which were Part 2 improvements at the time they were carried out that are likely to be claimed under the amnesty.

Part 3 improvements can only be claimed under the special circumstances in AH(S)A 1991, s 34(8) (carrying out certain repairs).

Formal Procedure under the amnesty

It is for the tenant to initiate the amnesty process. The Supplementary guidance to the Code of Practice points out however that there is nothing to stop the landlord from initiating the process. There are benefits to both tenant and landlord from successful completion and the TFC Code is clear that both parties should be prepared to bring to the table any evidence from records about the origin and ‘ownership’ of claimed improvements.

Notice by the tenant

The tenant may serve an amnesty notice on the landlord, stating what items of improvement are claimed to be statutory improvements under the legislation.

The amnesty notice must be given in writing before the expiry of the amnesty period and must include the following details:

  1. names and designations of the landlord and tenant

  2. name and address or such other description of the holding

  3. details of the relevant improvement including the manner in which it was carried out

  4. the tenant’s reasons as to why it is fair and equitable for compensation to be payable for the improvement on the tenant including the holding at the termination of the tenancy

Note that the actual value of the compensation for any given improvement at waygoing is irrelevant to the amnesty process, the issue is whether the improvements concerned come within the appropriate schedule of AH(S)A 1991, given the date they were carried out.

Response by the Landlord

The landlord then has to respond, if they wish to object to the amnesty notice, and must do so within two months of receiving it.

This objection must be in writing, be dated and state the landlord’s reasons for objecting to the improvement.

Only three reasons for objecting are permissible:

  1. it is not fair and equitable for compensation to be payable

  2. the landlord carried out the improvement in whole or in part

  3. the landlord gave or allowed a benefit to the tenant (under the lease or otherwise) in consideration of the tenant carrying out the improvement, whether or not the landlord agreed to such benefit in writing

Tenants’ response to landlords’ objection

Where the landlord has issued a notice of objection, the tenant, if they wish the improvement to be accepted, must within two months of receiving the notice apply to the Land Court for approval of the relevant improvement.

Powers of the Land Court

The Land Court has broad powers to deal with applications under the amnesty.

They may approve the improvement as eligible for compensation at waygo, either unconditionally or conditionally, or

 

Popular documents