Farm Diversification

Tenant farmers must take consideration of Part 3 of the Agricultural Holdings (Scotland) Act 2003 prior to commencing with a diversification project. The Act introduced, for the first time, provisions which allow tenant farmers to diversify into non-agricultural activities.

It is highly recommended that you speak to an AGRICULTURAL LAWYER to ensure that you follow the provisions laid out in the 2003 Act.

There are specific procedures for notification of, and objection to, diversification proposals which must be adhered to.

The tenant must provide the landlord with written notification ("notice of diversification") giving details of the proposed diversification at least 70 days before the commencement of the project. The tenant must provide details of:

(a) what the non-agricultural purpose is,
(b) the land that would be used for that purpose;
(c) any changes to the land the tenant proposes to effect for that purpose
(d) the date on which the tenant proposes to commence using the land for that purpose

The Landlord can only object to the proposal on the grounds that:

(a) the amenity of the land would be significantly lessened;
(b) future agricultural use of the land would be materially prejudiced;
(c) the non agricultural use would be detrimental to the sound management of the property; 
(d) the Landlord would suffer undue hardship; 
(e) where the diversification involves a change in the structure of the land, that proposed change of use would be unviable, or
(f) the Tenant failed to provide the information which was reasonably required (there are timelines set for this and the landlord has 30 days from receiving the notice to ask for further information - the tenant then has 30 days to provide the landlord with the information and failure to do so may result in the landlord being able to refuse permission to diversify).

If the landlord objects to the diversification proposal the tenant can refer the matter to the Land Court for judgement.

AS PREVIOUSLY STATED - PRIOR TO DIVERSIFICATION ALL TENANTS ARE ADVISED TO SPEAK TO AN AGRICULTURAL LAWYER AND ENTER DIALOGUE WITH THEIR LANDLORD.

As this is relatively new legislation there is not yet a body of case law with which to refer.  A very interesting article in The Journal Online titled The Limits of Diversification (Dec 2005), by Alasdair Fox,  covers the Land Court's interpretation of the law in the case of Trustees of the Cawdor Scottish Discretionary Trust V Mackay (Sept 2005).

Useful resources are the Tenant Farming Forum's Guide to the Agricultural Holdings (Scotland) Act 2003 and Guide to Good Relations Between Landlord and Tenants.

SRDP - Rural Priorities

With respect to the SRDP - Rural Priorities the Scottish Government have issued some guidance as to the circumstances where landlord consent or notification is required when carrying out works associated with SRDP Rural Priorities.  Specifically, if you are a tenant or contractual licensee, you must discuss the proposed SRDP Rural Priorities application with your landlord to make sure it does not break the conditions of your tenancy or licence.  If you are a tenant or contractual licensee, you must submit a Landlord Notification Form with your SRDP Rural Priorities Proposal. You cannot receive final approval from Scottish Ministers for your proposal without this. The Scottish Government's full advice can be found by clicking here.