Hansard

Thank you, Presiding Officer.

This Government has two key policy objectives for tenant farming in Scotland: first, to ensure that tenant farmers have legislative protection; and, secondly, to have a vibrant tenant farming sector in Scottish agriculture so that the sector can continue to put food on our tables and help to care for Scotland’s environments.

I think that all members recognise the important role played by all our diverse agriculture in Scotland, and I am sure that members agree that Scottish agriculture continues to punch above its weight in our economy. That is underlined by the incredible success of our food and drink sectors that was announced only yesterday, with overseas exports of Scottish food and drink increasing by a massive 19 per cent in 2011 alone. Those exports are now worth around £5.5 billion to the Scottish economy and are achieving our national targets about six years early—that is just an illustration of the booming success in recent years of our food and drink sectors.

Our tenant farmers are of course an integral part of Scottish agriculture. Prior to 1883, the relationship between tenant farmers and their landlords was determined by freedom of contract. Since then, farming leasing arrangements between landlords and their tenant farmers, and their relationships, have been regulated by a series of acts of Parliament.

Before the Agricultural Holdings (Scotland) Act 2003 was passed, the only formal leasing arrangements that legislation permitted were a seasonal let of less than one year—my notes refer in brackets to a lease of 364 days, not 365 days, in the legislation—or secure tenancies, such as those in the Agricultural Holdings (Scotland) Act 1991, with which we are all familiar. When a tenant farmer has a long-term protected lease that is heritable, it can now be broken only by non-payment of rent or a material breach of the lease.

Many factors—not just legislation—influence the trends in agricultural tenancies. Economic factors, the availability of land and labour, our farming systems, the health of the marketplace and changing rural communities all influence the sector’s health.

The purposes of agricultural holdings legislation are to protect the rights of the tenant and the landlord and to do what we can to enhance the productiveness of our land in Scotland. The legislation achieves that by encouraging tenant farmers to maintain proper husbandry of the land until the end of their lease while enabling them to receive value for the improvements that they have made to the land. The aim has been to ensure that neither party is disadvantaged by a tenancy agreement, and the bill has the same aim.

For some, tenant farming provides the first foothold on the farming ladder. It is a family tradition for some and it provides for others the opportunity and flexibility to farm in a way that suits their needs.

I am well aware that some tenant farmers face extreme hardship or economic difficulties, because they tell me that when I travel the length and breadth of Scotland. I know that there are difficult landlords and unscrupulous land agents, and we all wish that that was not the case. I know that tenant farmers provide some of our best produce and are dynamic businessmen. Many have contracts with leading retailers and provide some of the best beef and lamb that can be got anywhere. It is important to recognise that there are also excellent proactive landlords and fair-minded agents.

It is not easy to achieve growth and dynamism in an industry that is based primarily on the relationship between two individuals, in a country in which available land is limited. Balancing the needs of both parties is often challenging. It would be easy to sidestep some of the difficult issues that need to be addressed. I expect that I speak for many members when I say that we in the Scottish Government do not wish to take the easy option. The Government and I are committed to tenant farmers and to a vibrant tenant farming sector. The bill is one of the many tools that we are using to achieve that.

The bill marks the final stage in implementing the package of recommendations that were made to the Government by the Scottish tenant farming forum, with which we have worked closely in recent years to achieve our aims. I was disappointed when we could not include in the Public Services Reform (Agricultural Holdings) (Scotland) Order 2011 the two main amendments that are in the bill, but we could not abuse the power to make that order. I introduced the bill to enable the Government to complete its commitment to implement the final two parts of the package of measures that our key tenant farming stakeholders proposed and to implement a further recommendation from the industry on VAT.

Section 1 of the bill amends part III of schedule 2 to the 1991 act to extend the definition of a “near relative” to include grandchildren. The current definition includes a surviving spouse or civil partner and a natural or adopted child of the deceased tenant farmer. The amendment will help to meet our objective of widening the class of people who are entitled to a degree of protection when succeeding to a secure 1991 act tenancy. It should also make it easier for grandchildren to inherit farm tenancies and should help new and younger entrants to get a start in tenant farming, which will be a key benefit to the agricultural sector.

Section 2 will amend section 9 of the 2003 act to nullify lease terms in limited duration tenancies that provide for upward-only and landlord-only initiated rent reviews. In a limited duration tenancy under the 2003 act, the tenant and the landlord enjoy freedom to contract and are not restricted in any way when agreeing the contractual provisions on rent review that appear in the lease. It is therefore possible at present for parties to agree to upward-only rent reviews or to a provision whereby only the landlord and not the tenant farmer can instigate a rent review. Our amendment will help to prevent landlords from burdening their tenants with limited duration tenancies that have uneconomically high rents. Our proposals will ensure that, when such clauses appear in leases in the future, any such terms should be struck out.

We do not propose to make the provision retrospective in order not to interfere with the contractual position of parties who have already entered into leases that contain such terms. Agreements between landlords and their tenant farmers that are already in place will continue to be unaffected by the provision until their expiry.

Section 3 contains the third provision, which will amend section 13 of the 1991 act, which relates to VAT and rent reviews. Under section 13 of that act, rent reviews take place in a three-year cycle, and any variation in rent prevents the parties from having a rent review for a further three years. The amendment simply clarifies that, if the VAT rate changes or the landlord chooses to change the VAT treatment of the rents, that will not qualify as a variation of rent. The amendment therefore avoids the situation in which a landlord and a tenant are unable to go to the Scottish Land Court for a rent review. Again, that has been agreed by the tenant farming forum and it mirrors a recent amendment to English legislation that arose from a recent court case. An agreed and carefully negotiated set of proposals has been provided that commands the support of the tenant farming forum, which includes all the main stakeholders in tenant farming in Scotland.

I know that the sector faces many other challenges and that many of those difficult issues have featured in the debate on the bill, but I also know from speaking to many tenant farmers and others that they wish their legislators to tread quite carefully, given the deep complexity that we are dealing with. Stakeholders have certainly said to me that they wish to avoid embarking on a further round of rushed changes to the legislation that may be well intentioned but which those with the necessary expertise to ensure that the changes will work have not been able to fully think through and analyse at this stage. I for one wish to heed their advice.

That is why, following my consideration of all the background information and the stage 1 evidence and committee reports, I will lodge only one of the amendments that the Rural Affairs, Climate Change and Environment Committee proposed. There will be a stage 2 Government-led amendment to the transition provision that is contained in section 4 so that the changes to the definition of “near relative” will apply in cases in which a tenant has died before the bill comes into force but notification has not yet been given to the landlord under the relevant provisions.

I have also considered the recent decision of the Court of Session in the Moonzie rent review case. As I indicated to the committee yesterday in writing, I will not lodge a stage 2 amendment to amend section 13 of the 1991 act. Some stakeholders may take the view that the Moonzie case highlights deficiencies in the formula for undertaking rent reviews in 1991 act tenancies, but all stakeholder groups agree that the rent review system is a complex topic and that any legislative change should be carefully considered to allow full consideration of potential impacts. We need detailed consultation on and discussion of that issue with the industry. Indeed, we have met the TFF to discuss the way forward on it, and I will hold a summit meeting with the TFF on 4 April in Inverness, at which we will discuss such issues. Let me be clear: I recognise that we need a system for determining rents that is fit for purpose. In that forthcoming meeting, we will consider whether an independent panel should be set up to assist in the process and to enable progress to be made in a much shorter timescale than might otherwise be the case.

Members will be aware of the recent Court of Session decision in the Salvesen v Riddell case. That case is still before the courts, so I am quite limited in what I can say about it, but we are considering all our options, including the option of appeal.

I am only too aware that there are other important tenant farming issues that need to be addressed and to be acted on within a realistic timescale. At the summit that we will hold in a few days’ time with the tenant farming forum, we will discuss many of those issues, which cover rent reviews, dispute resolutions, broader succession issues, waygo arrangements and issues to do with fixed equipment. I do not want to pre-empt the TFF work plan, but I want a strict timetable that we can stick to.

Members will be aware that we have given a commitment that we will have a full review of all the legislation within 18 months of the bill becoming law. We will then take any action that requires to be taken in the Parliament, provided that the opportunity arises.

Given the complexity of the issues that we are considering, ours is the right course of action. The Government believes that it is important that the bill, which has been developed in close partnership with the key stakeholders, deserves members’ support, which I urge all members to deliver.

I move,

That the Parliament agrees to the general principles of the Agricultural Holdings (Amendment) (Scotland) Bill.