Driven by limited supply and increased demand, once again farmland values in Scotland rose during 2021. Growing numbers of forestry, lifestyle, and Environmental, Social and Governance (ESG) buyers are entering the market for carbon capture or rewilding opportunities adding to the competition with farmers and crofters. Agricultural land values can be highly variable depending on productive capacity, soil type, location, previous land management, and opportunities for diversification or renewables. Arable land values increased by over 20% from £5,800/acre in 2020 to £7,500/acre in 2021 on average but peaked at £19,500/acre in East Lothian, while rough grazing or hill land suitable for trees fetched between £2,500/ acre and £5,500 per acre. Farmland unsuitable for forestry planting ranged from £200/acre to £2,000/acre. It is predicted that the supply of land will increase over the next few years, because of changing agricultural policies and landowners seeking early retirement and to capitalise on the strong market. However, at the same time the demand from forestry and ESG buyers is expected to increase. Whist this may mean that the ultimate dream of owning your own land is on hold or not an option, there are several other opportunities available to enter the agricultural industry. Alternatives to land ownership include seasonal lets, tenancies, and joint ventures. In crofting areas, sub-letting of crofts is also possible.
These are short term lets not exceeding 364 days. Included in this category are grass lets for grazing or mowing that usually cover the period of 1st May to 31st October. It is also possible to rent land for growing cereals or vegetables under seasonal lets.
There are three main types of tenancies available Short Limited Duration Tenancies (SLDTs), Modern Limited Duration Tenancies (MLDTs) and 1991 act tenancies. SLDTs last no more than 5 years, whilst MLDTs are for a minimum of 10 years but there is a clause that means new entrants may break the tenancy after 5 years. Since 28th February 2021, it has been possible for tenant farmers with 1991 act tenancies to relinquish their tenancy to new entrants or progressing farmers. Upon taking on a relinquished 1991 act tenancy, new entrants accept the same rent terms as the previous occupier held. Further details on relinquishment and assignation of tenancies can be found in the webinar recording and factsheet detailed later.
As a guide some rental values can be found in the Farm Management Handbook but these are highly variable and can be influenced by location, farm type, duration of tenancy, facilities, and farm size. These opportunities are highly sought after, so competition can be fierce.
Joint ventures are a form of co-operation between two or more parties formed in a legal manner. To be successful the right mix of people, good communication, trust, and the use of an independent adviser are essential.
In contract farming the landowner engages the services of a contractor to undertake farming operations over a fixed period, usually 3 – 5 years on pre-arranged terms. In return for the provision of labour, machinery (including incurred costs), and management expertise contractors receive a set contractors fee quarterly or annually. Livestock can also be contract farmed under a hire agreement.
In share farming two independent businesses work on the same plot of land and share the output from the farm. There is no standard form of agreement or fixed duration, and it is possible to start with a small share and build this over time.
Business equity partnerships
Multiple investors can work together in a business equity partnership to form a company that pools the capital, skills, and resources of the investors to generate higher investment growth. The company can then identify investment options such as purchasing land, machinery, or livestock. The type of investor influences he type of agreement in place, but there are several different formats possible.
Where to look for opportunities
Many opportunities are advertised in the local newspapers and more commonly online. Social media platforms are increasingly becoming valuable tools to match new entrants with land, so keep an eye on land agent pages and many of the agricultural groups and forums. Registering with a land agent or agricultural consultant and letting them know what you are looking for is advisable too, as they will be able to alert you to any suitable opportunities in the area, some of which may not be openly advertised. Don’t forget local councils, Scottish Water, Forestry Land and Scotland, and some churches often have pockets of agricultural land that are let out on seasonal lets or short duration tenancies. The Scottish Land Matching Service (SLMS) advertises joint venture opportunities and allows new entrants to post adverts detailing what they are interested in if no immediate matches are available. SLMS can facilitate introductions and discussions between matches on the database and act as an excellent source of support as the venture grows.
Further information on buying agricultural land, tenancies, seasonal lets and joint ventures is available on the New Entrant pages of the FAS website
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