New Guidance on Rent Reviews
27 July 2010
In an admirable briefing to members of the CAAV, Jeremy Moody describes Morrison-Low v Paterson (a decision of the Scottish Land Court made on 2 June 2010) as "the first major case on agricultural rent review law perhaps since Childers v Anker". That is not an understatement.
Scottish legislation is different to that in England & Wales. Nevertheless the rent review mechanism governed by section 13 of the Agricultural Holdings (Scotland) Act 1991 (as amended by the Agricultural Holdings (Scotland) Act 2003) does address issues common to rent reviews under the Agricultural Holdings Act 1986. As a consequence, the conclusions of the Court bear careful scrutiny for those advising in relation to rent reviews under the AHA 1986. In summary:
The Court allowed comparables in relation to limited duration tenancies to be used as evidence. This would equate to rents in relation to farm business tenancies being used as comparables in respect of lettings under the AHA 1986.
The Court interpreted the Scottish legislation in respect of the disregard of scarcity as a principle not giving rise to an assumption of equality of available farms and prospective tenants, but simply excluding more extreme bids.
The Court determined that (applying the same approach as the Court of Appeal in Childers v Anker) while marriage value is to be excluded when considering comparables, the issue as to whether there is any marriage value in respect of the subject holding did fall to be considered.
Single Payment Scheme (SPS)
It was recognised that neither SPS entitlements nor the payments themselves in effect attach to the holding. Nevertheless, the Court allowed a modest rental element to reflect the opportunity offered by the land to claim the single payment, relying on the relatively low payment figures for naked acres readily available in the Scottish market. The logic of this is that it is the eligibility of the land that enables the payment to be claimed. That low figure led in turn to a relatively high fraction of the pre-rent surplus also allocated to the rent, partly to reflect the farmhouse. The different circumstances of the English markets for entitlements might lead to different arithmetic.
The old chestnut of how to assess residential units within an agricultural holding on rent review was considered. The analysis is of limited worth because of concessions made. Nevertheless, in relation to two sub let cottages, on the facts of this particular case, the Court allowed one half of the rental income to be paid to the landlord of the holding. In relation to a cottage which was occupied by the farmer's son, the Court considered that if, under the terms of the tenancy, the farming might be by contract and it was possible to let the cottage, then it should be let and a rental equivalent should be taken into account when assessing the rent for the entire holding.
As will be appreciated, this case provides a valuable analysis in relation to these issues which should assist in advising under the AHA 1986.