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Speculation over right to buy of farm tenants

THERE is growing speculation that the current review of the Agricultural Holdings legislation will lead to tenants with traditional leases being granted the absolute-right-to-buy (ARTB) their farms from their landlords.

In a desperate bid to ward off that threat, Scottish Land & Estates (SL&E), which represents landowners across Scotland, recently proposed an "amnesty" for farm tenancy improvements. In essence, SL&E are proposing that improvements notified during a one-year amnesty period will be eligible to be treated as qualifying improvements if, as at the date of notification, the improvement is something that should be provided to maintain efficient production. The amount of compensation due at way-go (leaving the farm) will be the sum fairly representing the value of the improvement to an incoming tenant.

One of the problems with the current system is that many landlords are reluctant to invest in modern buildings on rented farms. Tenants have also been reluctant to invest their own money for fear of not being fairly compensated by their landlord when the lease is terminated.

Tenants' demands for fair compensation for their improvements have been resolutely resisted by SL&E and its predecessor organisations. Despite years of wrangling, this contentious issue was never resolved until "out of the blue" the SL&E proposals were made at the eleventh hour in the wake of the ministerial-led review. That was seen by tenants as a knee-jerk reaction from an organisation obviously feeling under pressure.

As the debate about land reform in Scotland has rumbled on, there has been a growing acceptance that land ownership needs to be more fairly distributed. One way to do that would be to grant tenants ARTB, a move that would lead to greater investment in modern buildings and infrastructure on farms. The amount of funding required by tenants to buy their farms and then modernise them is daunting, but specialist farm lender AMC is willing to make loans for the right proposals.

Dugald Hamilton, AMC Scottish regional manager, said: "With regard to the ARTB, AMC would view this as an ongoing business opportunity if it happens. Currently we do a large number of loans to tenant farmers who have purchased their farms from landlords and who fall within the criteria that we require.

"In normal circumstances, and where the business is viable, we are happy to lend up to 60% loan to value. However, as in any proposal, the business must be able to service the debt."

According to Mr Hamilton, AMC can offer a mix of loans from five to 30 years, with a number of options including variable and fixed-rate loans. "Another point is that all the loans we do are heritable, meaning that there can be continuity within the farming family."

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Agriculture

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