Land Reform (Scotland) Act 2025: How the New Community Buy-Out and Lotting Rules Affect Land Transfers (Part 2)

The Act introduces two regimes that could lead to significant delays when transferring LLHs.

Community Buy-Out System

Under the community buy-out regime, a transfer made in breach of the prohibition on transfer pending publicity of the proposed sale, or the further 70-day prohibition where a community body has indicated an intention to register an interest (each described below), is of no effect, meaning title does not pass to the purported transferee. The owner of a LLH (and any creditor in a standard security with a right to sell) is prohibited from transferring the land or taking any action with a view to a transfer, such as marketing or entering into negotiations, until the Scottish Ministers give notice that the prohibition is lifted. The prohibition may be lifted following a request by the owner or creditor, which triggers a publicity duty on the Scottish Ministers to publicise the possible transfer by making prescribed information publicly available on a website and notifying community councils, local authorities, National Park authorities and persons who have registered to receive notifications about possible transfers in the area.

Once the Scottish Ministers have fulfilled their publicity duty, a 30-day window begins during which community bodies may submit a note of intention to register an interest. If no such note is received, the Scottish Ministers must give notice lifting the prohibition, which they must do within 60 days of fulfilling their publicity duty. If a community body does submit a note of intention within the 30-day window, the Scottish Ministers may impose a further 70-day prohibition to allow time for the community body to apply to register its interest. Certain transfers are exempt, and the Scottish Ministers may disapply the prohibition where the owner would suffer financial hardship (a term which is not defined in the Act but may be clarified in secondary legislation or guidance).

Lotting System

The lotting regime is designed to promote community sustainability by potentially requiring LLHs to be broken up and sold in smaller lots. Under this regime, a transfer of land to which the lotting provisions apply is of no effect unless a lotting decision is in effect or the transfer is exempt. Land is caught by the lotting provisions if it forms part of a LLH, or, under an anti-fragmentation rule, if it exceeds 50 hectares and forms part of a larger holding where notice has been given in respect of other parts of the holding and the total area being transferred exceeds 1,000 hectares. The anti-fragmentation rule is designed to prevent owners from avoiding the regime by transferring their land in smaller parcels.

On receiving a valid application, the Scottish Ministers must decide within six months whether the land should be transferred in specified lots or need not be lotted. The Scottish Ministers may only require lotting where they consider it to be in the public interest, having regard in particular to whether ownership in lots would make communities in the vicinity of the land more sustainable. The Scottish Ministers must also have regard to the extent to which ownership of land in the community’s vicinity is concentrated.  In reaching their decision, the Scottish Ministers must take into account a report from the Land and Communities Commissioner.

A lotting decision requiring land to be transferred in lots may be appealed to the Court of Session within 28 days. A lotting decision ceases to have effect after five years, and the owner may apply for a review after one year. Where land has not been transferred because a lotting decision has made it less commercially attractive, the Scottish Ministers may offer to purchase the lots at a price determined by an independent valuer.

Where an owner faces financial hardship (a term which, as with the community buy-out regime, is not defined in the Act but may be clarified in secondary legislation or guidance), the Scottish Ministers may bypass the full process by making an expedited lotting decision stating that the land need not be transferred in lots.

Landowners and creditors are entitled to compensation from the Scottish Ministers for loss or expense arising from compliance with the lotting process, from the prohibition on transfer pending a decision, or from a lotting decision itself. The amount is to be determined by the Scottish Ministers (or, on appeal, the Lands Tribunal), with the detailed methodology to be set out in secondary legislation. Any deed giving effect to a transfer must also include a prescribed declaration confirming compliance with the lotting requirements and, separately, a declaration confirming compliance with the community buy-out requirements, which are practical conveyancing obligations that solicitors will need to bear in mind.

How can we help?

While the Act represents a significant statement of legislative intent, much of its practical impact will depend on secondary legislation that has not yet been laid. The community buy-out regime and lotting system are not yet in force and await commencement regulations by the Scottish Ministers. Key matters such as procedural requirements for transfer notifications and the scope of exempt transfers will be prescribed in regulations yet to be drafted.

For landowners of holdings that may exceed the 1,000-hectare threshold, whether individually or through aggregation with connected persons’ holdings, it will be important to assess exposure to the Act’s requirements at an early stage, well in advance of commencement. Our team is monitoring the Scottish Government’s secondary legislation programme closely and is well placed to advise on the Act’s implications as they emerge. If you have any questions about the Land Reform (Scotland) Act 2025 or its impact on your landholding, please contact Darren Thomson or another member of our Estates and Land team.

This article was written by Darren Thomson and Bryn Davies.