Amnesty for Tenant’s Improvements
It is one of those well-known facts of agricultural law: at the end of a lease, a tenant is entitled to compensation for improvements they have made. Or are they? In reality, as with so much in connection with the law of agricultural tenancies, it is not as straightforward as it first seems.
Tenant’s improvements can only qualify for compensation if a certain procedure has been followed by the tenant. Typically, improvements such as farm buildings and fences need to have been notified to the landlord in advance of work commencing in order to qualify. If the notice wasn’t served, the improvement will not qualify for compensation. It is believed that a great number of improvements have been carried out without the correct procedure having been followed and that could leave many tenant farmers significantly out of pocket.
This risk has been recognised and, in a less well publicised part of the Land Reform (Scotland) Act 2016 (“2016 Act”), a procedure has been set out to try and address it.
Chapter 8 of the 2016 Act came into force on the 13th of June 2017 and provides for a 3 year amnesty period during which time tenants can address their unauthorised improvements and potentially bring them back into the frame for compensation at waygo.
The procedure involves serving a formal notice on the landlord specifying the previously unauthorised improvements. The landlord has the opportunity to object to the notice on certain grounds and if no agreement can be reached the matter will ultimately be decided by the Scottish Land Court. Naturally, in less contentious situations, it remains possible to simple agree a list with your landlord.
Improvements must meet certain criteria and in particular must be improvements for which compensation would have been available had the correct procedure been followed in the first place and must have been fully completed no later the 12th of June 2017. It is also important to note that not all improvements can be registered under the amnesty, so if a tenant is in any doubt, they should seek expert advice.
Registering improvements under the amnesty does not mean a tenant will receive any immediate payment from the landlord and nor does it automatically give rise to compensation at the end of the lease. The amnesty procedure is designed to allow tenants to identify and notify their landlords of any unauthorised improvements, allowing a claim to be made in respect of them at the end of the lease where otherwise they would be unable to do so. The compensation, if any, due will then be calculated in the usual manner.
In summary, the amnesty period is a very limited opportunity for tenants to ensure that their improvements are capable of qualifying for compensation at the end of the lease. Taking appropriate action during the amnesty period could be worth tens of thousands of pounds to some tenant farmers and the opportunity should not be missed.
If you would like more information about the amnesty, or if you believe you need to take advantage of the amnesty period, then please contact our Gary Webster who would be happy to assist.