Land Reform (Scotland) Act 2025: Changes to Agricultural Leasing (Part 6)

Overview

In the preceding articles of this series on the Land Reform (Scotland) Act 2025, we delved into Part 1 of the Act and why it marks a potentially significant intervention in land ownership by the Scottish Government. In this final instalment of the series, we provide an overview of Part 2 of the Act, which addresses agricultural leasing. The key reforms include the introduction of two model leases and changes to both small landholdings and agricultural holdings.

Model Leases

Part 2 of the 2025 Act obliges the Scottish Ministers to publish two model leases, one for environmental purposes and the other for hutting. These sections of the 2025 Act are currently in force, the Scottish Ministers under a duty to publish the environmental lease within two years of 17 December 2025 and the hutting lease within three years of the same. However, the Scottish Ministers have the power to extend this deadline by regulations.

Model Lease for Environmental Purposes

The style environmental lease will be applicable to land used wholly/partly:

1. for sustainable and regenerative agriculture;
2. in a way that contributes towards achieving the net-zero emissions target set by section A1 of the Climate Change (Scotland) Act 2009;
3. in a way that contributes towards adaptation to climate change; or
4. in a way that contributes towards increasing or sustaining biodiversity.

This section does not disapply the agricultural holdings legislation. Therefore, if part of the land is used for agriculture for the purposes of a trade or business, the tenancy would likely default to a short limited duration tenancy or modern limited duration tenancy depending on duration. This interaction between the model environmental lease and the agricultural holdings regime will need to be addressed by the Scottish Ministers when preparing the style lease.

Model Lease for Hutting

The style hutting lease will be designed for letting public land for the purpose of building or occupying huts. A hut is described as a small simple building which: (a) is used intermittently as recreational accommodation; (b) has an internal floor area of no more than 30 square metres; (c) is constructed from low impact materials; (d) is generally not connected to mains water, electricity or sewerage; and (e) is built in such a way that it is removable with little or no trace at the end of its life (see section 12 of the 2025 Act for full criteria).

It is currently unknown what purpose this will serve as public land can already be leased for this purpose.

Small Landholdings

There are estimated to be around 59 small landholdings in Scotland. The 2025 Act will bring these under a new consolidated framework set out in Schedule 2 of the Act, which aligns the protections for small landholders more closely with those of 1991 Act agricultural tenants. Certain provisions relating to common grazings under the old Small Landholders Acts will continue to apply. Furthermore, the Tenant Farming Commissioner’s powers will also extend to small landholdings.

Once the 2025 Act comes into force in these respects, it will become possible to create new small landholdings for the first time in over one hundred years.

Agricultural Holdings

The bulk of the 2025 Act’s reforms apply to agricultural holdings tenancies, with a general theme of improving the position of tenants. We have set out a summary of the main impacts below.

Pre-emptive right to buy: Tenants of 1991 Act tenancies can register their interest in buying the land comprised in their tenancy. If the landlord later decides to sell, this gives the tenant a right of first refusal. The 2025 Act enables Scottish Ministers (following consultation) to make regulations changing how tenants register this interest. The 2025 Act also makes some immediate changes to the existing rules: if there is a standard security over the land, the landlord must send a copy of the registration certificate to the heritable creditor within 28 days; where the landlord formally notifies the tenant of an intention to sell, the tenant has 28 days to confirm they want to buy, but where the landlord takes steps to sell without giving formal notice, there is currently no time limit for the tenant to respond. The right to buy is lost if the tenant tells the landlord they do not intend to purchase.

Resumption: The 2025 Act introduces a new statutory minimum notice period of not less than one year for resumption of 1991 Act tenancies (previously, resumption notice periods were governed by lease provisions rather than statute). For 2003 Act tenancies, the landlord’s notice period remains at not less than one year. In both cases, the tenant’s response period (i.e. the period within which the tenant may elect to terminate the tenancy following a resumption notice) is six weeks. These provisions will apply to leases made before the 2025 Act comes into force. Furthermore, the avenues for tenant compensation are broadened via new criteria and a revised calculation method. Additional compensation may also be recovered by the tenant in respect of “the tenant’s interest in the value of the land being resumed.” At this stage, it is unclear if development potential can affect compensation value.

Compensation for improvements: Schedule 5 of the Agricultural Holdings (Scotland) Act 1991 will be substantially restructured. The current fixed list of compensable improvements is replaced with a principles-based approach using general categories. Part 1 covers improvements requiring landlord consent, being those that make permanent changes to land or fixed equipment that cannot return to former agricultural use, or have a long-term or significant impact on management of the holding (e.g. irrigating land, creating silvopasture and silvoarable systems, restoring peatland). Part 2 covers improvements requiring only notice, being those without such long-term impact (e.g. land drainage, permanent pasture, silos, farm roads, renewable energy installations primarily for on-holding use). Part 3 creates a new category of improvements requiring neither consent nor notice, including protecting trees for agricultural purposes, creating species-rich pasture, converting to organic farming standards, and improving soil health. The landlord must respond to consent requests within 70 days or consent is deemed granted. If consent is refused, the tenant may apply to the Land Court for approval, which must consider whether the improvement facilitates sustainable or regenerative agricultural production. Certain improvements are presumed to facilitate sustainable or regenerative agriculture, including laying permanent pasture, re-wetting wetlands, silvopasture/silvoarable systems, restoring peatland, and renewable energy installations.

Diversification: The 2025 Act makes significant changes to the diversification framework. Notices of diversification must now specify any environmental benefit intended from the non-agricultural use. The grounds upon which landlords may object are refined: prejudice to future agricultural use now applies only where the use of the whole of the land comprised in the lease for sustainable and regenerative agriculture would be substantially prejudiced (replacing the previous test of simple prejudice to agricultural purposes). Detriment to estate management must now be substantial. The Land Court is given enhanced powers: when determining whether a landlord’s objection is reasonable, the Court must consider whether the intended non-agricultural use is likely to have positive effects in facilitating or enhancing sustainable or regenerative agricultural production on the whole of the land, or on the environment generally. If such positive effects are likely, the Court must weigh whether they outweigh any negative effects. A new tenant extension notice mechanism allows tenants to extend the landlord’s response period by 30 days to facilitate negotiation.

Game damage: The 2025 Act substantially expands tenant compensation for damage caused by game or game management. Tenants will be entitled to compensation for damage to: (a) crops grown or seeds sown for agricultural or permitted non-agricultural purposes; (b) trees grown for agricultural or permitted non-agricultural purposes (including fruit trees, shelterbelts, and trees for silvopasture or silvoarable systems); (c) fixed equipment; (d) livestock (including suffering, injury or disease); and (e) habitats. “Game management” is broadly defined to include not only the killing and taking of game but also any steps taken or not taken in connection with the exercise of game rights. The landlord’s liability applies only where the tenant does not have the right to kill and take game, or written permission to do so. Where the right to kill and take game is vested in a third party, the landlord may seek indemnity from that person.

Standard Claim Procedure/Waygo: The Tenant Farming Commissioner will be involved in a new procedure for compensation claims. The procedure outlined by the 2025 Act requires claims to be made nine months before they fall due and paid within two months after that date.

Rent review: The unenacted rent review provisions introduced by the Land Reform (Scotland) Act 2016 will be amended. The new system sets out specific criteria the Land Court must consider when determining fair rent, including: the productive capacity of the holding; the open market rent of any fixed equipment or land used for non-agricultural purposes; the rent payable on comparable holdings; and the prevailing economic conditions in the relevant sectors of agriculture.

Good Husbandry/Estate management: The rules of good husbandry and good estate management in Schedules 5 and 6 of the Agriculture (Scotland) Act 1948 are reformed to embed sustainability. For estate management, landowners must ensure land is managed for “efficient, sustainable and regenerative production” (previously just “efficient”). The requirement for “regular” control of vermin is removed, and the obligation changes from “eradication” to “control” of vermin. For good husbandry, tenants must similarly maintain “efficient, sustainable and regenerative production” with additional consideration for the health and welfare of livestock. The Scottish Ministers may prescribe conservation activities that are to be treated as being in accordance with the rules of good husbandry, providing greater certainty for tenants undertaking environmental measures.

Assignation and Succession: The class of persons to whom a tenancy may be assigned or bequeathed is reformed and simplified. The previous lengthy lists of qualifying relatives are replaced with a streamlined structure based on: (a) any person entitled to succeed on intestacy under the Succession (Scotland) Act 1964; (b) a spouse or civil partner of a tenant’s descendant or sibling; and (c) in relation to a tenant’s spouse or civil partner: that person’s sibling, the spouse or civil partner of such sibling, and descendants of such sibling. Importantly, stepchildren and stepsiblings are now expressly treated as equivalent to children and siblings, and two people are “siblings” if they have at least one parent in common (capturing half siblings). Time limits for landlord responses to assignation requests are standardised to 28 days (previously 30 days in some cases). Similar provisions apply to succession on death: legatees and acquirers on intestacy must specify their relationship to the deceased, and landlords’ counter-notice periods are aligned at 28 days. The grounds for landlord objection to near relatives (good character, sufficient resources, sufficient training or experience) remain but procedural timeframes are clarified.

How can we help?

Despite the seemingly long road ahead to the 2025 Act’s full implementation, these reforms signal a strengthening of tenant rights in agricultural leases. If you are a landlord or tenant of an agricultural holding and would like to know how the Land Reform (Scotland) Act 2025 could affect your plans, please contact Darren Thomson or another member of our Estates and Land team.

This article was written by Darren Thomson and Bryn Davies.