How to transfer tenancies for succession in Scotland

Key guidance has been released in Scotland for transferring agricultural tenancies from one person to another before or after the tenant’s death.

Bob McIntosh, tenant farming commissioner – a role created by the Scottish Land Commission, which was established under the Land Reform (Scotland) Act 2016 – has published a new guide on transferring tenancies by assignation and succession.

An agricultural tenancy can be: passed on during a tenant’s lifetime; bequeathed; or assigned after a tenant’s death.

See also: How can start date of tenancy be proved?

Which route is chosen will depend on individual circumstances but making an assignation during the lifetime of the tenant is generally the simpler route.

In each of these situations the landlord has certain rights to object, and failing to follow the correct procedures can lead to the tenancy being terminated.

A tenancy cannot be transferred to an entity that is not a single individual, unless the landlord agrees.

The exact rules depend on whether the tenancy is under the Agricultural Holdings (Scotland) Act 1991 or one of the more modern fixed duration tenancies under the Agricultural Holdings (Scotland) Act 2003.

Independent legal advice relevant to the particular circumstances should always be taken.

1. Lifetime assignation

1991 Act tenancies

During the tenancy term, a tenant may assign the lease to anyone listed (see panel) if the landlord consents or a refusal is overridden by the Land Court. The ability of the landlord to withhold consent is different if the assignee is a near relative.

The tenant must give the landlord notice in writing, providing details of the assignee, the terms of the proposed assignation and the date it will take place.

Objections to non-near relatives include: the person will not be able to pay rent or maintenance; or does not have the skills or experience required to manage the land in accordance with good husbandry rules.

Objections to near relatives include: the person is not of good character; or does not have sufficient resources to farm efficiently; or does not have enough training or experience in agriculture.

If the landlord wishes to withhold consent, the grounds have to be given to the tenant in writing within 30 days of the tenant’s notice. If these grounds are disputed, the existing tenant must apply to the Land Court.

Short limited duration tenancy

The tenant has no right to assign the lease and must rely on the consent of the landlord.

Limited duration tenancy (LDT)

There is no restriction on to whom an LDT may be assigned. On receiving a notice, the landlord can: consent; object; or acquire the tenant’s interest in the lease.

The grounds for and process of objecting are the same as with 1991 Act tenancies.

Modern limited duration tenancy (MLDT)

The ability to assign an MLDT, the notice, the grounds and process of objecting are the same as for an LDT. However, the landlord has no right to acquire the tenant’s interest by buying it back.

2. Transfer through a bequest in a will

1991 Act tenancies

A tenant may be able to bequeath the tenancy to a nominated person in a valid will if the terms of the lease allow this.

The range of potential beneficiaries is the same as the list of people to whom the tenancy may be assigned during the tenant’s lifetime (see panel).

The person the tenancy has been bequeathed to must give notice of this to the landlord within 21 days of the tenant’s death or, if there is some unavoidable reason for being unable to do so, as soon as possible thereafter.

In the case of a dispute, the Land Court may be called upon to decide whether the delay was reasonable.

The grounds for objecting to a near relative are the same as with lifetime assignations. The landlord must give the objection to the legatee (the person inheriting the tenancy) within one month of receipt of the claim. The onus is then on the landlord to apply to the Land Court within one month of the objection notice for an order declaring the bequest null and void.

If the landlord fails to justify the objection or fails to meet the deadline for submission, the Land Court will order that the legatee will succeed to the tenancy.

Fixed duration tenancies

The rules are the same as for the 1991 Act tenancies.

3. Intestate succession

In both 1991 Act and 2003 Act tenancies, if a tenant dies without bequeathing the tenancy in a will, it may still be possible for the executors to transfer the tenancy to another person. This requires a two-stage process and the landlord can object to the transfer.

The executor must establish that the deceased was a tenant and state the deceased’s interest in that lease as a specific item of estate and attribute a value to it.

The executor may transfer the interest to anyone listed (see panel) and must do so within one year from the death of the tenant.

Once the person taking on the tenancy has received the transfer, written notice of the acquisition must be given to the landlord within 21 days. The landlord then has one month in which to issue a counter notice of objection.

The grounds for objecting to a near relative are the same as with lifetime assignations. Within one month of issuing the counter notice, the landlord must apply to the Land Court for an order terminating the lease. The onus is on the landlord to justify their objection.

If the acquirer is not a near relative, the landlord has one month to issue a counter notice of objection and state that the tenancy will be terminated on a date between one and two years of the date of the counter notice.

The acquirer can appeal to the Land Court within one month of the issue of the counter notice.

At a Land Court hearing, both sides will present evidence to support their case but the onus is on the acquirer to convince the court there is a reasonable ground for not preventing succession to the tenancy.

Depending on the result, the court will issue an order quashing the counter notice or terminating the tenancy.