Section 9 — Review of rent under limited duration tenancies

Agricultural Holdings (Scotland) Bill: Stage 3 – in the Scottish Parliament at 10:30 am on 12th March 2003.

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Photo of George Reid George Reid Scottish National Party 10:30 am, 12th March 2003

Group 8 concerns rent review for limited duration tenancies. Amendment 14 is grouped with amendments 58 and 15. If amendment 58 is agreed to, amendment 15 is pre-empted.

Photo of Murdo Fraser Murdo Fraser Conservative

Amendment 14 would add a new subsection after section 9(2), which states when a review is deemed to have taken place. Amendment 14 seeks to add clarification as to whether a rent review has in fact taken place and to determine exactly the circumstances under which one will have occurred.

Amendment 15 seeks to delete "lease" and insert "tenancy" in section 9(3). The purpose of that is to ensure that it is the terms of the tenancy, not just of the lease, that should be considered when the provisions under that subsection are applied. The lease will be only one of several pieces of documentation that will constitute a tenancy. A tenancy may be set up by a lease and other subsequent memoranda and informal writings. In the interests of clarity and certainty, it would be more accurate to refer to a tenancy, as that would ensure that the terms that are referred to in subsection (3) cover not just the lease but the additional documentation.

Having said all that, I note that the wording of the Executive's amendment 58, which will supersede amendment 15, contains "tenancy". In view of that, I therefore do not intend to move amendment 15.

I move amendment 14.

Photo of Allan Wilson Allan Wilson Labour

In response to a number of concerns that were raised with us by tenants, we undertook at stage 2 to lodge amendments at this stage to cover outstanding action to implement the industry-wide agreement on the matter. One of those issues concerned the rent review formula for LDTs. At stage 2, the Rural Development Committee approved Executive amendments relating to tenancies under the 1991 act. Those provisions give greater weight to economic factors, which is what tenants wanted us to do. They make it easier for either party to use a wider range of comparable evidence for the rent review process. That should help to address concerns over the availability of suitable evidence, particularly for tenants, on how rents change in response to prevailing economic conditions.

Amendment 58 introduces corresponding amendments to section 9, which sets out the rent review process for LDTs. Section 9 does not apply to SLDTs, which are subject to rent reviews only where they are specifically provided for in the lease. That is recognised and agreed industry-wide.

As Murdo Fraser said, amendment 14 is designed to clarify whether a rent review has taken place. Our position is that the fact that a rent review has occurred would usually be apparent from the fact that there had been an alteration to the rent paid by the tenant to the landlord; that would be a de facto change. At this late stage, I am reluctant to change section 9 in a way that would not be consistent with the position that has been reached by the industry group on the rent review process. As is the case with similar amendments, we had not been made aware of any general concerns on that point by landlords or tenants.

As Murdo Fraser said, agreement to amendment 58, which I anticipate, will mean that there is no need for amendment 15, and I am pleased that he welcomes the reference to "tenancy" in amendment 58.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

The SNP supports amendment 58 and opposes amendment 14. We support amendment 58 because it leaves intact the important provision under section 9(4)(d) that, when there is a rent review under the new vehicle of limited duration tenancies, it will be possible to take account of

"the current economic conditions in the relevant sector of agriculture."

That is a major step forward for the tenant and I hope that it will address the serious matter that emerges from an analysis of the Scottish Executive's own statistics about the relationship between rent and farm incomes over the past eight years, as is repeated in the relevant paper from the Scottish Parliament information centre, prepared by Tom Edwards. On page 10, the paper shows the relationship between rent and farm incomes between 1995 and 2001. It has emerged that, while rentals rose by a third in those years, farm incomes dropped by 60 per cent—more than half—over the same period.

Although the Executive's statistical data on this topic may not be complete, it appears from the available data that there is a complete dislocation between the amount of rent paid and the amount that a farmer can make from the farm. If the current economic conditions are taken into account, that dislocation can and must come to an end. That is why my party supports the tenant in this matter.

Photo of George Lyon George Lyon Liberal Democrat

I should also like to echo what Fergus Ewing said about taking economic conditions into account in a rent review. To my knowledge and from my experience in farming, rents have always gone up and have never come down. I suspect that my father's generation would say the same because the costs involved made it virtually impossible for a tenant to go to arbitration to seek redress. Therefore, when times were hard it was especially difficult to secure a reduction in rents through the 1991 act. I welcome the fact that the current economic conditions will be taken into account.

However, I ask the minister to address one particular matter in his summing up. Seeking out information on comparable rents is a problem in any rent review. It is almost impossible at times to discover the comparable rents in one's area, or indeed in the wider Scottish context. John Dale, a leading tenants' lawyer, provided me with evidence that a landlord had used a short-term grass-let rent as a comparable rent. Of course, it was a nonsense to take that into consideration in a rent review. Will the minister address the concern about how tenants discover the comparable rents in their area?

I, too, welcome the inclusion of the economic conditions as a key step forward in improving the lot of tenant farmers in Scotland.

Photo of George Reid George Reid Scottish National Party

Before I call Mike Rumbles, I point out that the knife falls at 10.52 and I must get through group 9 by then. I ask members to keep their speeches tight.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

I shall keep my speech very short, Presiding Officer.

Amendment 58 is an indication of the real and radical reform that this Parliament supports. I am delighted that the SNP is supporting the Scottish Executive's moves on the matter.

My colleague George Lyon talked about the difficulty in finding comparable rents. The amendment refers to what the tenancy would reasonably be required to fetch in the open market, which means that farms on the open market can also be used as a comparator. That is another string to the bow. I warmly welcome the amendment.

Photo of Allan Wilson Allan Wilson Labour

I welcome the support from the chamber for amendment 58. As has been outlined, the new provisions will give greater weight to economic factors and will make it easier for either party to use a wider range of comparable evidence. That should help to address concerns that George Lyon expressed about the availability of suitable evidence, particularly for tenants who in the past have often been unable to obtain helpful comparative information to support their case.

Photo of Murdo Fraser Murdo Fraser Conservative

Briefly, I am happy to advise that the Conservatives are content with the wording of amendment 58, and we will support it.

As far as amendment 14 is concerned, it is not satisfactory for the deputy minister to continue to parrot that, because the landlords and tenants have agreed, we do not need to worry about the detailed provisions of the bill. The Law Society of Scotland has expressed concern about the wording in section 9. Rent reviews can take place where there is no formal documentation of them and disputes can thereafter arise as to when the rent review took place and what the level of rent was. I am sure that anybody in legal practice is aware of such circumstances. Amendment 14 would provide a useful clarification of the law, which would make matters easier to deal with if the bill is passed. Therefore I press amendment 14.

Members:

No.

Division number 8

For: Aitken, Bill, Davidson, Mr David, Douglas-Hamilton, Lord James, Fraser, Murdo, Goldie, Miss Annabel, Johnstone, Alex, McIntosh, Mrs Lyndsay, Monteith, Mr Brian, Mundell, David, Scanlon, Mary, Scott, John, Tosh, Mr Murray
Against: Adam, Brian, Alexander, Ms Wendy, Baillie, Jackie, Barrie, Scott, Boyack, Sarah, Brankin, Rhona, Brown, Robert, Butler, Bill, Canavan, Dennis, Chisholm, Malcolm, Deacon, Susan, Eadie, Helen, Ewing, Fergus, Fabiani, Linda, Ferguson, Patricia, Finnie, Ross, Gibson, Mr Kenneth, Gillon, Karen, Godman, Trish, Gorrie, Donald, Grahame, Christine, Grant, Rhoda, Hamilton, Mr Duncan, Henry, Hugh, Home Robertson, Mr John, Hughes, Janis, Hyslop, Fiona, Ingram, Mr Adam, Jackson, Dr Sylvia, Jackson, Gordon, Jamieson, Cathy, Jamieson, Margaret, Jenkins, Ian, Lamont, Johann, Livingstone, Marilyn, Lochhead, Richard, Lyon, George, MacAskill, Mr Kenny, Macdonald, Lewis, Macintosh, Mr Kenneth, Maclean, Kate, Martin, Paul, Marwick, Tricia, McAllion, Mr John, McAveety, Mr Frank, McCabe, Mr Tom, McLeish, Henry, McLeod, Fiona, McMahon, Michael, McNeil, Mr Duncan, McNeill, Pauline, McNulty, Des, Morgan, Alasdair, Morrison, Mr Alasdair, Muldoon, Bristow, Mulligan, Mrs Mary, Munro, John Farquhar, Murray, Dr Elaine, Neil, Alex, Oldfather, Irene, Paterson, Mr Gil, Peacock, Peter, Peattie, Cathy, Quinan, Mr Lloyd, Radcliffe, Nora, Raffan, Mr Keith, Robison, Shona, Robson, Euan, Rumbles, Mr Mike, Scott, Tavish, Simpson, Dr Richard, Smith, Elaine, Smith, Iain, Stephen, Nicol, Stevenson, Stewart, Stone, Mr Jamie, Wallace, Mr Jim, Watson, Mike, White, Ms Sandra, Whitefield, Karen, Wilson, Allan

Photo of George Reid George Reid Scottish National Party

The result of the division is: For 12, Against 81, Abstentions 0.

Amendment 14 disagreed to.

[Amendment 58 moved—[Allan Wilson]—and agreed to.]

Photo of George Reid George Reid Scottish National Party

Group 9 relates to the meaning of improvements. Amendment 59 is grouped with amendments 60, 61, 80 and 82. Members should note that amendment 80 is pre-empted by amendment 23, which will be debated in group 17, which relates to factors to be considered in valuation.

Photo of Ross Finnie Ross Finnie Liberal Democrat

Amendments 59, 60, 61, 80 and 82 introduce to the bill the definition of improvements that is set out in schedule 5 to the 1991 act. They build the definition into the bill and make related tidying changes.

I move amendment 59.

Photo of Alex Fergusson Alex Fergusson Conservative

I am perplexed by amendment 82. At times like this, I wish that I had a legal background, rather than an agricultural one. I have read the amendment several times and am instinctively opposed to it. Is it right that a tenant can farm in a way contrary to a landlord's wishes—indeed, to what the tenant and landlord have agreed in the lease—that could result in a coincidental increased value for which the landlord must provide compensation? If that is the case, is legislation in this area really necessary? The provision appears to remove any flexibility from the arrangements for compensation. I would be grateful if the minister would clarify those points.

Photo of Ross Finnie Ross Finnie Liberal Democrat

Amendment 82 must be read as a whole. The first part of amendment 82 does exactly what I have described. It inserts in the bill the definition of improvements that we agreed needed to be included and that is set out in schedule 5 to the 1991 act. Paragraph (b) of the new subsection inserted by amendment 82 relates to that.

Alex Fergusson is puzzled by the amendment, but I am puzzled by his comments. Paragraph (b) refers to

"the continuous adoption by the tenant of a standard of farming or a system ... more beneficial to the land than the standard or system required by the lease or, in so far as no system of farming is so required, than the system of farming normally practised on comparable agricultural land".

That must be read in the context of paragraph (a) of the new subsection, which introduces the standard that is set in schedule 5 to the 1991 act. Given that there has been no disputation about that standard, its application is perfectly reasonable and does not give rise to the problem that Mr Fergusson perceives. I hope that that addresses his point.

Amendment 59 agreed to.

[Amendment 60 moved—[Ross Finnie]—and agreed to.]