Regulations were laid before the Scottish Parliament yesterday which will bring the provisions of the Land Reform (Scotland) Act 2016 relating to Modern Limited Duration Tenancies (MLDTs) into force on 30 November 2017. The regulations can be found here.
From 30 November 2017, MLDTS will replace Limited Duration Tenancies (LDTs) and it will no longer be possible to create new LDTs.
The regulations contain savings provisions which mean that:
- LDTs which exist before 30 November 2017 will continue as LDTs after 30 November 2017.
- A landlord and tenant can convert a secure tenancy to an LDT after 30 November 2017 where they reach agreement prior to 30 November 2017 under section 2 of the Agricultural Holdings (Scotland) Act 2003.
New entrants
The key feature of MLDTs is the minimum duration of 10 years. However, an MLDT may contain a break clause where the tenant is a new entrant (ie the parties would need to agree to include a break clause). The break is exercisable after 5 years (subject to the requirement to give notice) but can only be exercised by the landlord if the tenant is not using the land in accordance with the rules of good husbandry or is breaching a term of the lease (whereas the tenant can exercise a break without giving reason).
A further set of regulations were laid before Parliament which set out the definition of "new entrant" for the purposes of MLDTs.
The regulations contain the following list of factors which, if applicable at any point within the 5 years prior to the MLDT being entered into, mean that the tenant is NOT a new entrant:
- The person is a tenant under an LDT; or
- The person is a tenant under another MLDT; or
- The person is a tenant under a secure 1991 Act tenancy; or
- The person is a small landholder; or
- The person is a crofter; or
- The person has been a tenant under an SLDT for 3 years or more within the preceding 5 year period; or
- The person owns more than 3 hectares of land in aggregate.
This means that a person will be a new entrant unless one of the above exclusions apply.
The tenant will also be disqualified from being a new entrant if they have control of a legal entity which meets any of the above criteria. The regulations contain detailed provisions about what is meant by "control".
The regulations also make provision for MLDTs which are granted jointly or in common. If the majority of the joint tenants or tenants in common are excluded from being a new entrant, the tenants will together not qualify as new entrants.
The term "new entrant" is also relevant to the new relinquishment and assignation procedure which is introduced by the 2016 Act (but is not yet in force). The procedure allows a secure tenant to offer to sell the tenancy to the landlord or, if the landlord does not accept the offer, assign the tenancy on the open market to a new entrant or an individual wishing to progress in farming. At this stage, it is not known whether the same definition of "new entrant" will be used for relinquishment and assignation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.