A very important date for tenant farmers to keep in mind is 12 June 2020. This day will mark the end of the 3 year period for the one-off opportunity to agree compensation for improvements to a let agricultural property – the Tenants’ Amnesty. The Scottish Tenant Farmers’ Association (STFA) recently warned that more than half of Scotland’s tenant farmers have not yet completed the amnesty process and most of those have not even begun, urging all tenants to take advantage of this “golden opportunity” to put their lease in order and secure the value of their tenancy for future generations.

Background: The Tenants’ Amnesty was introduced by the Land Reform (Scotland) Act 2016 in order to provide tenant farmers with the opportunity to ensure that they are compensated at the end of their lease for particular improvements which they have completed to the properties upon which they work. The Act sets out a process for landlords and tenants to agree such compensation notwithstanding that the correct procedures for notification may not have been followed at the time the improvements were actually carried out. The Amnesty was inspired by a variety of factors, including poor record keeping and the resulting disputes when a farming tenancy reached its conclusion.

Which Improvements?: The Amnesty applies to improvements carried out prior to the introduction of the amnesty process on 13 June 2017. To be eligible, the improvements must also otherwise comply with statute – the list of eligible improvements is found in Schedule 5 to the Agricultural Holdings (Scotland) Act 1991. It should be noted that the list of improvements in Schedule 5 was updated in January 2019, however the Amnesty only strictly applies to the original list of improvements contained in the 1991 Act prior to that date. It is open to the parties to agree to include the new improvements in their agreement and indeed to agree to include improvements carried out after 13 June 2017, however the statutory process does not require it.

Process: As well as the statutory requirements set out in the 1991 Act, the STFA and the Tenant Farming Commissioner (TFC) have published guidance for landlords and tenants to assist with the amnesty process, which can be briefly summarised as follows:

Step 1 – It is for the tenant to initiate the process. The first step is then for both parties to gather all relevant information they have regarding any improvements and to be prepared to share this with the other party. This includes invoices, correspondence and any other document which may relate to the improvements being claimed against.

Step 2 – The tenant and the landlord, or their agents, should then meet on the property to discuss the improvements and, where necessary, physically view the work undertaken by the tenant. It is important to note that there are several conditions relating to what can and cannot be claimed. For example, generally, where a landlord has previously objected to the work, or where they have not objected but the work has been completed in a very different manner than the landlord had intended, compensation under the Amnesty may still not be possible.

Step 3 – The parties should promptly acknowledge and respond to any further communications regarding the improvements and ultimately should prepare an Amnesty Agreement which should clearly record the improvements that have been agreed as being eligible for compensation at the end of the lease. The parties should aim to finalise the Agreement within 9 months of the start of the amnesty process. The TFC suggests that the cost of the Agreement should generally be split evenly, as it is in both parties’ interest to have an up to date record of improvements to the property.

Disagreements: If there are still any disagreements at this stage, it is recommended that the parties look to use dispute resolution methods such as mediation or arbitration, as these are much less costly and generally less time consuming than referral to the Land Court.

Amnesty Notice: While the 2016 Act provides for agreement on compensation to be reached between the parties as above, it also sets out a statutory right for the tenant to prepare an Amnesty Notice and to serve it on the landlord prior to the end of the Amnesty period (that is, by 12 June 2020). The Notice must set out the detail of each improvement claimed for (such as the nature of the work, the approximate date of the work and the cost being claimed) and must also state why the tenant believes it is “fair and equitable” for compensation to be paid for it. The landlord will have 2 months from the date of service of the notice to object. If the landlord does object, the tenant has a further 2 months from the date of the landlord’s objection to petition the Land Court for approval of the improvements claimed.

The STFA and TFC recommend that the parties should reach agreement wherever possible and that the Amnesty Notice procedure should only be used as a ‘last resort’ where all other attempts at agreement have failed. As the deadline of the end of the Amnesty period approaches however, tenants should be aware of their right to serve such a Notice in order to preserve their position.

Another Route: It is important to note that it is open to the parties to agree a position on compensation in whatever way they may choose, without going through the above stages, however any such alternative agreement would be outwith the scope of the Amnesty and a tenant would need to rely on the consent and cooperation of their landlord. It is recommended that any agreements on improvements and compensation, however they are reached, are fully and carefully recorded in writing.

Continuing Review: Once the process is complete, and the improvements eligible for compensation are agreed, the record of improvements should continue to be regularly reviewed and updated throughout the remainder of the lease as an integral part of rent review, assignation and lease termination negotiations.

Deadline Looming: The STFA suggests that the Amnesty process can take at least 6 months. It is therefore now very important that tenant farmers who are eligible look to begin their claim as soon as possible.

Contact us: For further information and advice on the Tenants’ Amnesty and the approaching deadline, please get in touch with our team.

The TFC guidance is also available here.