Scottish industry bodies launch new guidance on tenant’s improvements

Leading organisations representing landlords and tenants from across the country have today (27 October) launched new guidance on agreeing and recording tenant financed investments on farms in Scotland.

The move follows similar initiatives by the NFU Scotland, Scottish Land & Estates and the Scottish Tenant Farmers Association on limited partnerships and rent reviews, and reflects a growing willingness in the sector to promote self-regulation of landlord/tenant relationships.

The guidance is based on existing legislation which allows the tenant to invest in the farm and claim compensation for some investments when the lease ends.

In some cases the consent of the landlord is required before the investment can proceed, and disagreements sometimes arise about the kind of investment that should be allowable.

The guidance describes the investments that should be permitted under three broad headings:

• Investment in fixed equipment or land improvement which is reasonable and desirable on agricultural grounds for the efficient management of the holding.
• Upgrading living accommodation to a reasonable level compatible with modern standards and expectations.
• Environmental enhancement or business diversification where the investment is being encouraged and financially supported through a Scottish Government promoted scheme.

Welcoming the move NFUS President Allan Bowie said: “This guidance is long overdue, and will be extremely important in helping landlords and tenants to plan investment in the farm going forward. Scottish farming needs every pound of new investment that it can get if it is to successfully address the challenges currently facing the industry”.

SLE Chairman David Johnstone was keen to underline the support of landlords for industry led guidance. He added: “This work builds on an earlier initiative when we published a summary of what responsible landownership looks like in the SLE Landowner’s Commitment. Most landlords and tenants already enjoy highly productive working relationships, and industry bodies have a vital leadership role in ensuring that this happens right across the sector”.

STFA Chairman Chris Nicholson also emphasised the theme of productivity on tenanted farms. He said: “It can be very difficult for tenants to raise long term capital, and clarity about future compensation rights is a vital part of investment security. In my lifetime I have seen an extraordinary increase in the proportion of farm investment coming from tenants, and agricultural productivity in Scotland now depends heavily on tenants being able to do this going forward”.

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