I have had some enquiries recently from clients, both landlords and tenants, looking for advice about when an agricultural tenancy can be brought to an end because the landlord needs the farm for a non-agricultural use.
There has also been a recent English case about this. The rules south of the border are similar although not identical to those that exist in Scotland.
In the English case, Herefordshire District Council v Bayliss, the Council served a notice to quit on one of its farming tenants on the basis that it was about to obtain planning permission over the whole of the tenanted subjects for a non-agricultural use. However, the landlord hadn’t actually obtained planning permission when the notice to quit was served.
In England and Wales, a tenancy can be brought to an end when a landlord has planning permission over the whole of the farm for a non-agricultural purpose. That is also the position in Scotland. However, in the English case the landlord had simply relied on an ordinary notice to quit on the basis that they would be obtaining planning permission in the future. The notice to quit was found to be unenforceable.
Had the Land Court in Scotland heard the case, the result would have been the same.
However, if planning permission has been obtained over the whole of a let farm, a landlord is able to serve a notice to quit against which there is no defence.
What happens if the planning permission extends over part of the farm only? The law in Scotland distinguishes between traditional tenancies and fixed duration tenancies.
In a secure traditional tenancy, unless the landlord has a specific clause in the Lease allowing them to resume areas of ground out of the tenancy, then the landlord will not be able to resume ground that has planning permission without doing a deal with the tenant.
Even if the landlord does have such a clause in the lease, if the effect of removing the ground from the tenancy would be materially prejudicial to the viability of the remainder of the farm the Land Court will not allow the resumption to take place.
Once again, a landlord would be required to reach agreement with the tenant, perhaps sharing in the development uplift, to allow the resumption to take place.
A different rule applies to short limited duration tenancies, limited duration tenancies and modern limited duration tenancies.
Under those tenancies, the position is more advantageous to the landlord. Subject to having planning permission for a non-agricultural use, the landlord is entitled to serve a year’s notice to recover all or any part of the farm subject to the planning permission. This is regardless of whether or not there is a clause in the lease allowing this to happen. It is also regardless of the effect on the remainder of the farm.
The law in this particular area is quite complex and landlords and tenants would be well advised to seek proper legal advice on their rights and obligations. Not to do so might prove to be a very expensive mistake.