Land Reform (Scotland) Bill: What are your rights when your landlord wants to grant options for renewable energy development?

The Land Reform (Scotland) Bill was introduced on 13^th March 2024. The Bill aims to reform the law around large landholdings and certain types of leases of land.

Resumption

One of the most important aspects of the Land Reform (Scotland) Bill is resumption in relation to agricultural tenancies – both secure 1991 Act tenancies and fixed duration tenancies.

Resumption is the means by which landlords can take land back in hand, removing it from the tenancy. It is often a cause for concern in relation to renewable energy developments.

For 1991 Act tenancies, the current position is that the right to resume land must be in writing – with a minimum two months’ notice – and is part of the written lease agreement. The Bill, however, proposes to extend the minimum notice period to at least one year, overriding existing lease provisions stating a shorter notice period.

If implemented, these provisions would significantly alter the ability and timescales for which landowners may be able to resume land for renewable energy projects. Or for any other diversification projects for that matter.

These proposals could create major issues where Option Agreements are already in place. Where they state that vacant possession can be obtained within a period of less than a year, there is a question as to whether that would place the landowner in breach of contract. This would be the case for renewable energy developers exercising their option after securing planning permission.

Another aspect of the proposals is additional compensation payments to the tenant. The amount is proposed as a half share of the difference in value between land subject to the tenancy and the land with vacant possession, along with disturbance and reorganisation payments. The Tenant Farming Commissioner would be responsible for appointing the valuer to determine the level of compensation, with the landlord meeting the costs.

It should be noted that political debate could lead to the changes not taking effect as currently proposed – or that it may not be retrospective. It should also be noted that several provisions within the Land Reform (Scotland) Act 2016 are still not in force after 8 years, and therefore even if the provisions are implemented without change there may be a long lead in time.

It is, however, something to be mindful of when drafting agreements where the landlord would need to be able to give vacant possession of land. It would also be recommended to consider the potentially more significant compensation that may be payable to tenants to obtain vacant possession in any considerations.

Land management

The Scottish Ministers are to publish a model lease designed for letting land so it can be used for environmental purposes, and the introduction of rights relating to small landholdings including the right to buy and diversification.

Community engagement and right to buy

The Bill also expands on the existing rules surrounding Community Right to Buy.

Currently, communities as well as secure agricultural tenants can register a pre-emptive right to purchase land, meaning the land could not be sold before notice was served on the community and they have been given the option to purchase.

The Bill takes this further, requiring landowners of holdings of 1,000 hectares or more to give notice to communities when intending to sell all or part of their holdings – regardless of whether a right to buy has previously been registered. It is hoped that these provisions can have a de-minimis threshold, given the proposals as they stand would be triggered for even the smallest disposal such as boundary rectification or, for example, adjacent garden ground being sold to an individual.

In respect of agricultural holdings, changes are proposed in connection with an agricultural tenant’s right to buy and registration of interest, though much of the detail is awaited on this as it is to be made by separate regulation.

It is also proposed to give powers to Scottish Ministers to regulate how certain holdings are sold.

These include preventing the transfer of large holdings without a prior lotting decision i.e. potentially forcing a landowner to sell multiple smaller lots to different purchasers. A right to appeal the lotting decision and compensation provisions will complement the lotting provisions. These proposals all appear to attempt to break up large land holdings and the concentration of land ownership within a small number of individuals/entities across Scotland.

If you would like further information on how the Land Reform (Scotland) Bill may affect you, please contact Harper Macleod’s dedicated Rural team.