Aspects of Land | Spring/Summer 2018

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Aspects of Land Spring / Summer 2018 32
The Land Reform Act in Scotland has led to many changes
for rural landowners. One of these is the way in which
agricultural rents are set and Savills has been advising
on the best way to make the new system workable for all
The history of land
ownership and agricultural
rents in Scotland is long
and complicated. Since
1948, there has been
legislation that has given
long-term agricultural
tenants a security of tenure. However,
the flip side to this is that it reduces the
capital value of the land. As a result,
landowners tend to let less land on a long-
term basis preferring to use short-limited
duration tenancies or grazing lets.
In addition, the way in which rents are
reviewed in Scotland has relied on an
open-market basis. This takes information
about rents on comparable properties
into account, but is not directly linked
to the economic conditions of different
farming sectors.
Since the current Scottish Government
came to power, it has been looking to find
a way to change how rents are set based
A FAIR PRICE
on a farm’s productive capacity rather
than the land’s market value.
Last year it commissioned Savills,
along with consultants Hamish Lean and
Watson Bell, to analyse the process and to
suggest the best way to calculate a farm’s
productive capacity in a way that was fair
to all involved.
In January, the Scottish Government
published this report: Testing of the
Rent Review System. It makes several
key suggestions, one of which is that the
landowner and tenant should agree
key factors from the outset before they
start discussing figures. This would
streamline the rental agreement process
and potentially reduce the need for
disagreements to be resolved in the
Land Court (the Scottish court that
deals specifically with disputes between
landlords and tenants in farming).
Hannah Guild of Savills Rural Estate
Management was one of the report’s
authors. “We suggest a model that uses
accountancy practices based on the land’s
capable output, to calculate how much
profit the farm can make,” she explains.
“This figure is then split equally between
landlord and tenant to give a rental value.”
To limit conflict, the landlord and
tenant would have to agree a statement
of facts about the land in advance. This
would include factors such as the likely
yields of each field and what the most
appropriate farming system would be
for the land. It would also cover areas
such as residential accommodation and
diversified land use so that all the ways
the farm is generating a profit are taken
into account. And both parties would need
to agree who owns any fixed equipment
and be clear on the lease’s obligations to
ensure transparency. Only when those
elements are agreed, should financial
figures be put together.
While it’s a new way of operating,
Hannah says the report’s recommendations,
which will be debated by parliament
later this year, don’t have to bring added
complications to agreeing rents.
To help the review process run smoothly,
her advice is for tenants and landowners
SCOTLAND
UPDATE