Are tenant farmers, let down by bad law, also snagged in politics?

The current situation faced by tenant farmers in Scotland could hardly be more serious. It requires immediate attention yet there is no government plan to address it.

The situation was brought to our attention by Bob Chicken, Labour candidate for Kintyre and the Islands, who came across the issue very recently while campaigning on Islay.

At this late stage in the campaign he was frustrated that he had little time to look seriously at the situation and suggested that we night be interested in it – because we are known to have concerns about the devaluing of the roles of farming and farmers; and because we have a concern about the increasing exposure of bad law.

Mr Chicken has also brought the matter to the attention of Labour colleagues at Holyrood – which we will come to later.

A legally unable situation

The situation in question began under a Labour-led coalition at Holyrood with the passing into law in 2003 of the Agricultural Holdings Act, which had been intended by the Scottish Parliament to offer tenant farmers protection greater than they had had under the previous 1991 Act.

At the heart of the matter is the nature of the rent reviews to which tenant farmers are subject. Ambitious farm agents have a track record of using rent reviews to hike up rents that tenant farmers would find hard to sustain, leaving them with some pretty bald options:

• pay up;
• go to court – an oddly uncertain and intimidatingly expensive option that, at the moment can, in many areas, be shown to make the pursuit of justice open only to the rich;
• leave the farm – the only option to those, the majority, who do not have the resources either to seek legal adjudication or to grit their teeth and pay.

This has already been the case with Mr Andrew Riddell of Peaston Farm near Tranent at Ormiston in East Lothian, who, when the Land Court gave him security of tenure in 2010, saw his landlord’s appeal upheld at the Court of Session by Lord Gil on 15th March 2012.

This ruling enforced the notice to quit that had been served on Mr Riddell by his wealthy landlord, Mr Alistair Salvesen. Mr Riddell’s family have been tenants at Peaston farm for 110 years. Mr Salvesen bought it in 1998. Mr Riddell will now have to leave the farm which will be reclaimed by Mr Salvesen.

At issue are the factors that may be taken into account in calculating fair rents.

The menu, which seems to have something of the pic ‘n’ mix about it, is bewilderingly wide – made wider by the 2003 Act, complex and open to dispute through varying interpretation.

Matters argued to be relevant in rent assessment include market values (including those of immediately proximate farms), economic conditions,scarcity, marriage value and the difference between the sitting tenant market and the open market. These and other factors were intended to be included in the 2003 Act but unfortunately its drafting does not appear to facilitate the intentions of the then Scottish Parliament.

Lord Gill has upheld two appeals by landlords against Land Court decisions in favour of tenants (the other was in the case of Moonzie Farm, with the Gill ruling issued on 9th February 2012). The tenant in this case now faces potentially ruinous costs, yet all he was doing was defending his position in extremis.

In making these two rulings, Lord Gill has been savagely critical of the drafting of the 2003 Act, describing it as ‘inept’ and effectively deciding that he has no option other than to set it aside and rule on the basis of the earlier 1991 Act.

This evaluation of the ineptitude of the 2003 Act seems to be accepted by the Scottish Tenant Farmers Association (STFA), who nevertheless point to the clear intention of the Scottish Parliament in passing that into law.

As we understand it, there are specific stages in legal scrutiny – like Judicial Review – where the intention of the law makers carries weight.

But bad law is bad law and the 2003 Act appears to fall pretty unequivocally into that category.

The problem with the Single Farm Payment (SFP)

A major issue in the current situation is whether the controversial Single Farm Payment (SFP), made under the farm subsidies contained in the European Union’s Common Agricultural Policy, should count as trading income of the farm in question for the purpose of assessing rent.

The Land Court in the Salvesen v Riddell case decided that the SFP should largely be disregarded. It was to be seen as income belonging to the tenant, therefore not derived from the earnings of the farm and therefore not part of the rental calculation.  This decision was the subject of the landlord’s appeal, upheld by Lord Gill on 15th March 2012.

This is tricky one – due to the illogical process of administration of this subsidy by the European Commission.

The value of the SFP – and we are talking about very substantial sums of money – is determined on the basis of the farm – but the subsidy is paid to the farmer and is not tied to the farm.

Agreed SFP subsidies are paid annually for a period of three years before review. During that time, should a farmer relinquish a tenancy or sell a farm on which an SFP is paid, the farmer personally retains that subsidy for the remaining years of the agreement.

This leaves the incoming tenant or owner – often a new entrant to the industry, with a farm whose operation is intended to be subsidised but denied access to that subsidy because it is in fact the legal property of the previous tenant or owner.

Of course this is a deeply damaging situation for the farming industry – but it also fuels the current legal problems in assessing farm rents.

From one perspective – because it is the nature of the farm that determines the award and the amount of the SFP, it can be seen, as Lord Gill appears to have done, as legitimately to be considered amongst the earnings of the farm, which help to determine the rent.

Yet, as the Land Court decided in the same case (Salvasen v Riddell) – because the SFP subsidy is not tied to the farm but to the farmer who may take it with him if he moves away, it is legitimate to see the SFP as income belonging to the tenant.

In this interpretation it would not be not seen as earnings of the farm and therefore would not contribute to the calculation of rent.

This is a legal stalemate bequeathed by an indefensible muddle by Brussels.

But something has to break that stalemate.

We suggest that the deciding factor must be the the hard fact of where the money actually goes.

It stays with the person of the farmer and not with the physical entity of the farm, If a tenant farmer has an SFP, granted on the basis if the farm but paid to the farmer personally and that farmer relinquishes his tenancy say, fourteen months after the SFP was awarded. The SFP would continue to be paid to that farmer, wherever he was and whether or not he remained in farming.

Since the SFP is legally not tied to the farm on which it was granted, it ought not, ultimately, to be held to be farm earnings but rather be treated as the personal income of the farmer, distinct from the farm. Which it is.

An SFP taken with a departing farmer for the duration of its period of operation leaves the incoming farmer unable to apply for another SFP on that farm. And the SFP taken away as the personal income of the original farmer need not, we understand, even be spent in the agricultural domain.

The best source of advice on this is George Lyon, the former MSP for Argll and Bute and former President of NFU Scotland. When he became the Liberal Democrat nominee to the European Parliament, Mr Lyon relinquished his three tenancies of farms in Bute, opening them to new entrants to the profession while keeping the Single Farm Payments attaching to them. He is au fait at first hand with quite how this situation plays out.

And now?

Following the Gill rulings, tenant farmers have been left seriously vulnerable to predation by vigorously profit-driven land agents and landowners.

This is flatly the reverse of the intentions of the Scottish Parliament in passing the 2003 Agricultural Holdings Act – thwarted by the incompetence – or intent? – of those who drafted it.

As the Scottish Tenant Farmers Association says: ‘There are a good number (Ed: of tenant farmers) who have a notice to quit hanging over them and still to take effect.  There are others who are already in the legal process awaiting this decision, and these tenants will now find themselves in an impossible situation.’

The STFA then identifies the core action that must be taken, saying: ‘Of greater concern are the ramifications that these rulings may have on other parts of the 2003 Act that have not yet been tested in law.

‘It is incumbent on Government to help sort out this big mess and rectify any drafting mistakes made by the Parliament in 2003.

‘As a consequence of the concentrated pattern of land ownership Scotland has, of necessity, a highly regulated tenanted sector, but the law governing it must be clear and fit for purpose.’

Of course it must.

But what is the Scottish Government’s position?

On Islay, Bob Chicken has become aware of considerable concern among the tenants on the island’s estates.

They have written to the Cabinet Secretary for Rural Affairs, Richard Lochhead and to First Minister, Alex Salmond. To date we understand that they have not even had acknowledgements of their letters from either.

In what is clearly a crisis in law and for justice, this is strange silence.

Some amendments are currently being made to the 2003 Act and Bob Chicken has spoken to David Stewart, Labour Highlands and Islands MSP, who has taken a particular interest in the these amendments.

He spoke on the matter when Stage 1 of the amendments bill came before Holyrood on 28th March 2012 (the debate rewards reading).

Mr Stewart pressed Richard Lochhead hard on the Scottish Government’s intended action to correct the problems resulting from the Gill ruling.

It became clear that the Scottish Government line is that they will wait until after the Gill judgments have been appealed and won or lost as a result.

This is less than responsible government. Given the daunting costs involved in appeal and the drop in morale amongst tenant farmers – described by the STFA as ‘despondent’ – following the Gill rulings and following the widespread awareness of the inability of the 2003 Act to deliver the protection it was designed to provide, it is unlikely that there will be any appeal.

Even if there were, it could take many years to achieve a definitive result. The law grinds extremely slow.

This seems to show willful abandonment  of the lives of tenant farmers and their families to the loss of farm tenancies, often in the family for generations. Such preparedness  is the indefensible world view of the mighty who have lost touch with everyday reality, who can no longer envisage losing everything.

David Stewart, in explaining his determination to stick with this issue, says: ‘This was originally a Labour Government Bill designed to give better security of tenure to tenant farmers and to keep the rents fair. I want to see those rights re-established as soon as possible’. His sense of responsibility is very much to his credit.

When the original bill was mooted it caused a reaction by landlords who, trying to get in first,  issued an estimated 200 notices to quit.

There is now a real danger that this pattern of behaviour will be repeated on the basis of the Gill judgments.

Also consequent on the Gill rulings, it is possible that the next round of rent reviews will be set to open market rates and will include the Single Farm Payment as part of the valuation of the earnings of the farm.

If the 2003 Act is not changed, this may see more tenants with  no choice but to vacate their tenancies in favour of the highest bidder.

The Scottish Tenant Farmers Association (STFA) chairman, Angus McCall, has said: ‘… the mood among tenant farmers is now one of despondency. The law has failed them  and this judgement  is sending out the wrong message to wealthy and powerful landlords.’

Urgent action clearly needs to be taken to ensure that wealthy land owners understand that the Scottish Government is serious about protecting the rights of tenant farmers.

The Scottish Government’s lack of urgency in addressing this situation simply does not square with the cultural value the government claims to set upon crofters and farmers.

This stance has been true of successive Scottish governments, whose various focuses on land issues – from the game changing Land Reform Act to the refocusing of the Crofting Commission – underline just how far this is a matter of cross party concern.

So why the casual attitude, the will to let it play itself out?

It is surely unthinkable that the Scottish Government would be playing politics with tenant farmers and delaying action on the legal situation in order to retain leverage over Labour in constant reminders of which regime passed the 2003 Agricultural Holdings Act.

What is not unthinkable is that with its eyes narrowed on the Autumn of 2012 and the objective of the Independence Referendum, the government may have taken its eyes off the ball.

Scotland’s tenant farmers badly need them to get their 20:20 vision back, along with their mojo for governing Scotland as it is at the moment.