When asked about the issues most likely to affect their business, most tenant farmers will reply ‘brexit’ and it’s acknowledged that preparing for brexit isn’t straightforward. However there are some elements of future-proofing your business that you absolutely can do now and this includes the agreement with your landlord of the list of your improvements under the Tenants’ Improvements Amnesty. The clock is ticking – you only have until 12th June 2020 to do this.
The amnesty is a one-off opportunity to clarify, and have agreed for the record, the improvements which the tenant carried out and which in future will be discounted from the ‘productive capacity’ test for rent review, and on which compensation will be payable at waygo. No money changes hands now.
Historically the process required to qualify an improvement for compensation was complex and often wasn’t followed. The amnesty gives the opportunity to rectify this, even where the correct notice wasn’t given or process followed. Many tenants won’t be thinking of giving up their lease but should still make taking up the amnesty a priority because in the future the rent calculation will be based on the productive capacity of the farm with the equipment provided by the landlord, and it will be important to be able to discount the value that the tenant’s improvements bring.
If the landlord originally provided 180 acres of largely undrained land and a byre for 30 cows and in the intervening period the tenant has drained the farm and built a modern dairy setup, then when the new rent calculation provisions kick in, the rent for the farm will be calculated based on there being 180 acres of undrained land + byre. The modern dairy buildings, which are the tenant’s improvements, will be ‘black patched’ or ignored – but only if either (a) the correct formal processes for giving notice/seeking consent were followed at the time or (b) the Tenants’ Improvements Amnesty is used now, before 12 June 2020.
What type of improvements are covered? The list is extensive but includes agricultural buildings, drainage, fencing, works to the farmhouse, slurry stores and silage pits. This is where it can be helpful to get some assistance as it’s easy to fail to spot things – but as a starting point it’s helpful to print off a few copies of a farm map and a steading map and go for a walk. Don’t forget the farmhouse: the installation of central heating, rewiring, double glazing etc is all potentially eligible.
Though there is a formal route which relies on serving of various legal notices, it is recommended that where possible the informal process is followed, and this reduces the expense and stress for all concerned. In the informal process the tenant identifies the full list of improvements they want to register and sits down with the landlord to discuss them. It isn’t essential to have evidence but it is strongly recommended as this makes things considerably simpler for the landlord and will make the process swifter and more straightforward.
In theory you can do this yourself – there are various sources of help and advice but the best place to start is the Scottish Land Commission who have lots of information including comprehensive lists of eligible improvements and various templates here. Many tenants do look for some external help if only to have a fresh pair of eyes checking they’ve not overlooked something, which is no bad thing – it’s easy to miss things you look at every day. It’s also good for your solicitor to be kept in the loop too, whether you simply provide them with copies of the finalised signed agreement for their file, or involve them in preparing the agreement letter for signature.
When we leave the EU there are implications for the price for Scottish produce, particularly in the beef and sheep sectors. It could become vitally important to your business that any opportunity to minimise potential future rent is taken up. Whilst brexit makes planning a challenge, the potential benefit from the Tenants Improvements Amnesty is huge, the clock is ticking, and there’s nothing stopping you getting on and doing it!
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