Publication of the Rent Review Working Group’s report must act as a stepping stone to genuine progress in the rent review process in Scotland between tenants and landlords.

Rent reviews on tenanted land in Scotland leased under the Agricultural Holdings (Scotland) Act 1991 (“the 1991 Act”) are currently undertaken under the terms of Section 13 of that Act. These are broadly stated and open to professional interpretation as part of the rent review process. A Court of Session ruling this year (the Moonzie farm case) made observations about the factors that are routinely taken into account in rent reviews, about their relevant order and weighting.

In response to that ruling, the Tenant Farming Forum (TFF) set up the independent Rent Review Working Group (RRWG) in June 2012 to consider specific aspects of agricultural rent review procedures.  The group’s report has now been published and its recommendations for change will be considered by the TFF.

While welcoming much of the review group’s report, NFU Scotland’s Tenants Working Group has voiced its disappointment with the group’s conclusion that no amendments were required to section 13 of the 1991 act which relates to how rental rates are established based on comparables.

On other recommendations around a code of conduct for rent reviews, a rent register, and dispute resolution, the Union believes these are steps in the right direction but that only by becoming mandatory requirements could they achieve the desired outcome.  

NFUS welcomes the speed of the review group and recognises that its approach had been to avoid the uncertainties of a legislative pathway and the inevitable delay in clarity, which would result. To make progress, NFU Scotland, through the TFF will be asking the review group to consider a three-strand approach to improving the rent review process.

NFU Scotland President Nigel Miller said:
“Our Tenants group is deeply disappointed that the RRWG conclusion is that no amendment is required to Section 13. The group do not agree that, even following adjustments, it is possible to compare the conditions of a 1991 Act tenancy to a Short Limited Duration Tenancy (SLDT) or a Limited Duration Tenancy (LDT).  

“However, we are encouraged that the RRWG do believe that there is a role for budgets in determining rents and that this should be enshrined in the practitioner’s guide on how rent reviews should be conducted. We are concerned that a voluntary code may not be widely adopted and believe that Government may need to legislate to make the code mandatory should it not be widely taken up.

“We are also in favour of establishing and maintaining a rent register as outlined in the report.  For this to function in an effective manner, it should also be a compulsory requirement and not the suggested voluntary approach.  That would ensure the necessary participation levels and the transparency, which is required to facilitate an equal footing for all parties concerned with rent reviews.

“It is imperative to include a record of condition, which should be updated in the register at each rent review.  This would give rise to fewer disputes at waygo, and encourage landlords to take tenants improvements into account when seeking a rent review.

“As members of the TFF, our suggestions for progress are three-fold.  Firstly, on the controversial area of Section 13 and rent setting, we want the use of open market comparables backed up by a mandatory requirement for rents to be lodged on a database.

“Any adjustments to rentals should then be determined through a formula that takes issues like scarcity, key money and marriage value into account.

“Thirdly, any rental rate must be judged against a budget for the farm to test the viability of the rent proposed for that business.   In discussions with the RRWG, we believe that they may share the view that this should be enshrined in the practitioner’s guide to rent reviews.

“With the commitment of all interested parties, we believe the practitioner’s code, the formula for adjusting comparables and the dispute resolution system could all be up and running by spring of next year.

“We would also want the review group to meet again in a year’s time to assess and review how widely its recommendations have been adopted.  If there is no progress, the Scottish Government should remain prepared to legislate if the voluntary recommendations on guidance, codes and data collection are not taken up widely by the industry.”

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Contact Bob Carruth on 0131 472 4006