Kate McLeish: Relinquishment and assignation of 1991 Act tenancies

Kate McLeish: Relinquishment and assignation of 1991 Act tenancies

Kate McLeish

The Tenant Farming Commissioner (TFC) has published a guide to Relinquishment and Assignation (R&A). Kate McLeish explains the details.

The R&A measure allows secure agricultural tenants to offer to relinquish their tenancy to the landlord in exchange for statutory compensation. If the landlord does not accept the tenant’s offer, the tenant can seek to assign the tenancy to a new entrant or a progressing farmer. Our previous blog on R&A explains more about what those terms mean in practice.

Status of guide and TFC role

The TFC guide provides a helpful overview of the R&A process, but it is not a code of practice. This means that the provisions of the Land Reform (Scotland) Act 2016 which apply to codes of practice are not relevant (and the guide does not impose requirements which must be met in addition to the statutory process). The guide explains how the TFC will carry out his statutory role in connection with R&A, in particular the appointment of the valuer by the TFC following service of a notice of intention to relinquish by the tenant. The TFC needs to make the appointment within 28 days of the notice being served. The TFC has set up a panel of valuers who are interested in this kind of work, but the guide confirms that the TFC will consider a request from the tenant or landlord to appoint a non-panel valuer, provided that they are suitably qualified, experienced and independent.

Recommendations to tenants

The guide highlights the implications of commencing the R&A process for a tenant, including the cost of valuations (which is to be met by the tenant) and the triggering of statutory timeframes. It therefore recommends that:

  • Tenants should assess whether or not R&A is likely to bring an acceptable financial outcome before incurring costs.
  • Tenants should have an informal discussion with their landlord prior to starting the process, with a view to limiting costs and streamlining the process.
  • Tenants should assemble all the relevant information (e.g. relating to improvements) before serving a notice of intention to relinquish so that the valuer carrying out the assessment of any compensation which may be payable will be as well informed as possible and able to comply with the tight timeframes prescribed by the legislation.

Reminder for landlords – additional payments

While the statutory provisions contain a detailed methodology for assessing compensation payable to a tenant in exchange for relinquishing, which takes account of tenant’s improvements and special standards of farming, the guide serves as a useful reminder that there may be other payments due to the tenant at termination of the tenancy. In particular, these include any payment to be made to the tenant for tree planting where the value of the holding has increased. Other outgoing valuations, such as unexhausted manurial values, may also be payable at termination.

Tax

The guide also advises both landlords and tenants to take tax advice. In particular, tenants will need to consider the capital gains tax implications of relinquishing or selling their tenancy. Land and Buildings Transaction Tax will also be relevant to both landlords considering accepting an offer of relinquishment and new entrants/progressing farmers considering purchasing a tenancy for value on the open market.

Kate McLeish: Relinquishment and assignation of 1991 Act tenancies

Kate McLeish is a partner at Brodies LLP

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