Felly, toolwch, wrth gofio i fwy, arno fy gwyllt y gwenylau 21r yn siarad o'r ysgol yn cymaint yn ymni, rydw i'n hoffio y gallwn eithaf ein borell bryd. Felly, gyda'r hpolwch, hefyd, rydw i'n gallu'n gwneud wrth compes fydd yn wneud cymaint'r rydw i, yn cael ei gwasanaeth cyfaint. Rydw i'n cael mynd i chi, yn llwyda i'r cymaint, rydym ni'n gweithredu eich cyfaint yn y ddylch. yn i amser cymaddiant, rydw i'n gweithio i fynd i gwasanaeth lleon i ni i ddechrau. Wrth gwrs, rydw i'n gweithio i fynd i'r ganrif rywheith, oedd rydw i'n gweithio i fynd i wneud i fynd i fynd i fynd i fynd i'r canyddol i'r gweithio. Rydw i'n gweithreitio i fynd i fynd i gweithreitio i fynd i fynd i fynd i fynd i wych. Mae'r ystafell anod yna yn ystafell anodol 4, a chi'n gweithreitio i'r llwyngau ond petition PE01490 on control of wild goose numbers. Are we agreed? Thank you very much. Agenda item 2 is sport in legislation. This item today is for the committee to consider the following negative instrument, the Seed Fees Scotland Regulations 2014 SSI 2014-167. Members should note that no motion to annull has been received in relation to the instrument, and are referred members to the paper. Are there any comments? Jim Hew? Just a small point on consultation at the bottom of PH3. I note that the Government did consult with around 150-plus interested parties, but only one response, so that's obvious for men if you scoff in the belief. It's obviously quite concerning if stakeholders aren't engaging fully with issues that can obviously affect them quite dramatically. We note that. Are there any other comments that members wish to make? If so, is the committee agreed that it does not wish to make any recommendations in relation to this instrument? We agreed. Agenda item 3 is Scottish Government's Agriculture Holdings Legislation Review Group interim report. Third item today is for the committee to take evidence from stakeholders on the interim report produced by Scottish Government's Agricultural Holdings Legislation Review Group ahead of hearing from the Cabinet Secretary and the review group members on 20 August. I very much welcome this morning Mike Gascoigne, convener of the Rural Affairs Sub-Committee of the Lost Society of Scotland. Nigel Miller, president of the NFUS. David Johnson, chair of SL&E. Christopher Nicholson, chair of the Scottish Tenant Farmers Association. Martin Hall, the Scottish Agriculture Arbiters and Vowiers, SAVA. Representing Tenant Farming Forum and former SAVA president. Andrew Wood, from RICS, from RICS. Good morning to you. There's no opening statement, so we're going to move straight to questions and answers. Once all the questions are finished, we'll see if there's any final points that stakeholders wish to make at that stage that we haven't covered. We're looking at the review on agricultural holdings with a view to having a vision for the tenant farming sector. We need to discuss probably how that vision can be delivered, which the Government says is a dynamic sector that gets the best from the land and the people farming it, provides opportunities for new entrants and forms part of a sustainable future for Scottish farming as a whole. What approach do you think is going to be necessary to achieve a vision like that without looking at any of the details that are bound to come up and questions that follow, but generally your vision? Anyone like to kick off? Yes, Martin Hall. That's all right. Do I press the button? No, you don't. I'll start off by saying, really, if this is going to work, we need to find a system that operates on a business footing. This is about farming businesses, really. That's primary. It's about people and it's about mutual respect. If we can get those three elements into the system, then we'll be a long way there. Okay. We clearly need an alternative paradigm than we have today, but we'll look at that in some details. Anyone else like to comment on the vision at the moment? Christopher. From STFA, we're very supportive of the vision of the review group as to what the future tenetist sector should look like. We support their approach, their evidence gathering, and support many of the solutions that they appear to be considering at the moment. One aspect we notice that their remit is to purely look at tenancies from the perspective of the teneted sector and the business model of tenancies. But to our mind, tenets have a much greater role in purely just the operation of their businesses and the land reform review group have made some recommendations as to the public interest argument for preserving the viability of teneted farming families. We feel that to have a proper and effective review of ag holdings, you have to take on board some of the land reform considerations. Our country has a history of addressing tenancy problems by addressing tenancy legislation. So going in at the bottom and addressing the problem from the bottom up, whereas other countries have addressed the problem by looking at the open market for land and controls and regulations on the ownership and buying and selling of land and have put a balance into the system by having controls on land reform issues rather than looking at the tenancy legislation and where you have a balance in the land ownership, the tenancy sectors appear to work without as much regulation as ours. So the evidence suggests that to come to a successful answer with regard to the operation of tenancies, you need to look at both the teneted sector and the land issue in terms of land ownership and regulation on the land market. Are you saying that the business and working and the respect issues are all very well, but perhaps what the land reform review group is talking about would actually deal with aspects of the buying and selling of land as a whole, so therefore that should not be ignored in the outcomes of this group's deliberations? I think it's a unique opportunity now that we have land reform and tenancy reform as two parallel work streams for the two to link up and there are areas of overlap. I don't disagree with anything the review group have come up with in terms of it's very important that business models work for tenancies but there are other considerations that come into play and if we're looking at the viability of tenancies in the long term and the future of tenant farming families and their wider role in fragile rural communities, what appears to be a narrow definition in the remit of the ag holdings review group may be a limiting factor. However, I do feel that they are taking on board some of the issues that the land reform review group came up with. We may explore some of that a little later. Anyone else want to comment on the vision? I think just very briefly. Certainly we are supportive of what the review group have done and I think I've been hugely encouraged by the way they've gone about it, the sort of care they've taken in consulting and I think their overall vision is pretty much where we'd like it to be so it's probably quite an exciting sort of time to actually see that happen and we genuinely believe we're going to get something good out of this. I think that Chris is in some ways in the same place as we are. I don't think that regulating the sector is the only answer and certainly the tax environment that we're working in is pretty important. The subsidy environment that we're working in is pretty important and I think that the higher level of infrastructure that we use, whether it be the land court or arbitration or some other body is going to be absolutely critical in actually balancing the sort of inevitable issues that do occur in the minority cases. The other thing that's a real danger is that we focus very much on the 91 tendencies and we forget or we don't put enough effort into the future and I think that the review group are very alive to that but the reality is that vehicles like share farming, vehicles like some sort of long-term LDT or LDT to retirement which allows a tenant to actually renovate a run-down property and get some value back for that, for all that work. Now I know that that flexibility is there but we need to actually define that in a model which people have confidence in so that both the landowner and a tenant can actually have a lifetime or a significant period to actually invest in that and that must be to the benefit of everybody and the rural community. So some of it is actually working into the structures we have and creating models which are attractive for people. Thanks. Anyone else at this stage? David? I think that I broadly endorse what Nigel is putting forward. SLE, we very much welcome the review. We think the review has been carried out in a very inclusive, a very progressive way and is genuinely looking to find the solutions to the problems that are being identified. For us, the tendency sector is of vital importance, not just to maintain what is there but to grow it. We've got to have changes to CAP coming through in the next five years and after that it's going to be a diminishing subsidy. So we're going to need ever-increasing flexibility within farming for farming businesses to be able to diversify, restructure, grow and adapt to the changes we're going to have coming forward. They're difficult to quantify, though, but here's a unique opportunity to provide that but also at the same time to reinstill confidence in both the tenants and the landowners that what we have is something that's fit for the 21st century and will drive us forward for the next five, 10, 15, 20 years plus. It's very important that the balance is struck so that the pendulum is not favouring one side or the other and we've been very heartened by the way the review group has gone about addressing that and taking on board and looking forward to working with them into the future. Hi. Yes, indeed, Andrew. Thank you. Just reinforcing some of the points that we've made before, the RSS has been working with all the others here, closely with the review group and there's been a number of specific things that have come out as part of that process that I think are extremely valuable. We've been through a process of a number of years where with the tenant farming forum looking at all sorts of issues, but one of the key things that we've lacked is the data to back up the issues that have been discussed and in particular there's been a number of, you know, concerns that have been raised, but we've never really had the facts to look into those in any detail and one of the important things I think that will come out of the review group's data collection is the facts to look at these things in more detail. There are clearly some conflicting issues in terms of where the review group are going and where the land reform agenda is going because what we're after, I think everybody is after, is this vibrant, tenanted sector and that needs the confidence of people to invest in buying land to let and we just have to look at that very carefully because I think there is a conflicting issue there. Thank you. Okay. Let's move into some of the detail of the aspirations of the review group. Jim Humes is going to kick off. Thank you, convener. There are eight aspirations that the review group have come up with, so it'd be interesting to hear from the stakeholders whether they agree with these aspirations and how achievable they think they are. I will have to go over them, obviously, just to remind you. I'm sure you've maybe memorised them already, but such things as a range of flexible tenancy options to suit the different circumstances and an ability for people to move in, out, through and the tenanted sector as their businesses develop, that business investment in the tenanted sector would be equivalent to that in the owner-occupied sector. Barriers to entries can be addressed, especially for those regarding new entrants so that people can farm successfully. Rent levels would reflect commercial returns from a well-managed farm business. The supply of tenanted land would be broadly compatible with the demand at the rent levels. Risk would be shared more between tenants and owners to encourage innovation, et cetera. Finally, the underlying culture will be looking forward and based on shared endeavour, mutual respect, and I think that a trust would be something that has been mentioned already. That's the eight there. Do you want to ask any specific one at the moment? Well, I think that one would be rent levels, which has been one that has been more typical at the moment, so we could start off with rent levels, but feel free to pick any of those. From Eslie's point of view, they're all spot-on. They're all achievable, and they're exactly what is required to generate the confidence to bring more people into the market, letting land bring more people to rent land. You talk about the rent measures in there. Rents have got to be fair and sustainable for both sides. You can't have a rent that's going to be too much for the productive holding of the capacity to produce, otherwise it's unsustainable. At the same time, you've got to have a realistic and fair rent that landlords are receiving to encourage them to let. Part of the review process is going to be looking at section 13 and how it will be amended all to new ideas to maintain that level of negotiation between the parties. We've sat down, as you're probably all aware, STFA, NFUS and SLE, and come up with this interim measure to look at rent levels with CPI as a guideline to give a sense check where we are. We find that progressive. We find that hopefully helpful for the industry and allow some calmness to return to where we are now and give a chance for the review to group to have a good look at the mechanism involved in assessing rents going forward. Obviously, we have made progress in the last few weeks with the help of Andrew Thinness to come up with an interim measure before any recommended legislation from this review process can be implemented. So that's quite a leap forward. We see the real problem with the rent test is the primacy given to the open market test, which adds complexity and uncertainty. There's no clear, transparent way of making the adjustments and disregards that are required. We feel that any rent test that incorporates the open market test as a formal part of the test is going to be lengthy and confrontational. It's recognised that it may not result in viable long-term rents. So our preference is in accordance with the vision of the review group that rents should reflect the agricultural learnings capacity of the holding, and that would ensure that rents remain viable. The other area of conflict with rents is ascertaining what improvements have been provided by the tenant and what improvements have been provided by the landlord, and there's a huge difference in that provision between different tenants. The underlying principle of agricultural rents is that the landlord receives rent only for what he has provided, and that is a core principle that we must not lose sight of. Nigel? Probably this is quite a comprehensive list, and I think that all of us would aspire to them all. I think that a lot of them are deliverable. I suspect that the supply and demand one is a particularly difficult one. The reality, the thought that we're going to actually suddenly change to a world where there are a lot of opportunities for tented land is not going to happen fast. Given the expansiony nature of farm businesses and the economic pressures on them, it's going to be a difficult one to drive. I suspect that if we're really serious about that, we're going to have to look more at share farming, which I've talked about before, and use that as a way in. We've also got to look at some of these larger farm businesses that now focus on the arable sector within their portfolio, their assets there, which could be spun off as a subsidiary business or a tented business, either a livestock pigs dairy with some of the steady infrastructure they have and using some of their by-products. We've got to be a lot smarter. We've got to create these new opportunities rather than doing what we did before. We've got to actually look at ways of a more diverse use of the rural economy. I think that we've also got to be a bit more imaginary. Government's got a real role in this and we've got to be a pillar too. The reality is that we're all hooked into new entrants. The new entrant package we've got looks pretty good, or I think it potentially is very good, but we're going to restrict it to a very small number of individuals who are just entering the industry. All those individuals will not be able to take up those opportunities because they don't have the matching funding to do it. We've got to actually look at second stage developers going from a very temporary holding on to their next holding, an LDT or something like that. We need to support them then. There's nothing in what we've introduced in pillar 2 just now that does that. For serious about people really getting established in the business, in the industry, and getting a flow through, there's got to be intervention at various stages to open that up, as well as vehicles that they can use. On the rent determination, I'm greatly heartened by what's been achieved in the past few days and I appreciate the effort that everybody else has put into it. The reality is that it's a quick fix for your particular gap that we're facing before the review actually moves rent determination on maybe to a different stage, but the principle is actually quite attractive. What I would say is that the CPI looks as if it's a reasonable baseline. In reality, I suspect that there may be better ways, or more sophisticated ways, of looking at the profitability of our industry without actually going to the CPI. I'm not sure that it is, initially, the right index, but the principle is quite a clever one, but it is a sense test or a viability test to make sure that we don't stray out of a reasonable area of rent determination. The key role of how you determine rents is still a problematic issue, and I think that's something we'll probably come back to in this evidence session. We've got to come up with another question. I thought somebody was wanting to come in. There's two other members of the committee who want to have a subsequent one. I'll come back again. Just on risk sharing and investment sharing, there are two similar things. In the past, there have been different partnership agreements that have perhaps done that. Have those been successful and what instruments could be used in the future to increase risk sharing and, therefore, better investment in tenancies? The key mechanism that's used for risk sharing outwith traditional tenancies at the moment is contract farming or partnership farming that can be structured in different ways. In those, you're effectively looking at a commercial deal between two individuals. The rent and the terms of that reflect the investment, and in most of those instances, the rent isn't a fixed amount of money and both sides are sharing in the end result from year to year. You would have the profit of the farm and the farmer who's doing the bulk of the work would get paid for his day-to-day operations and then when the profit is divided at the end of the year according to a formula that would have been agreed at the outset. Those types of processes exist. I think where the review group are coming from is really looking at investment in fixed equipment. There are some specific issues about that. There's some history with all agricultural holdings issues where some of the arrangements that were made to do with fixed equipment weren't possibly equitable or appropriate, but the key thing from the tenant sector is that they get a return on that investment and generally they wouldn't go and build a new grain store or a cattle court if there wasn't going to be a return against it. Equally, when they come to the end of the tenant and say that there is some reflection and compensation for that investment because there's still value in it that would be passed on to somebody else, the issue from a landlord's point of view in terms of encouraging investment, if you're going to put up a cattle court that costs £100,000, you need to make sure that the rent is going to reflect that investment and that you're going to get some return yourself against the money that you're putting into the farm. Therefore, that's where the investment and the rent review process gets fairly intertwined because you have to make sure to encourage that investment that the rent review process is going to fairly take into account the money going into the capital funds going into the holding. Thank you. Dave Thomson, then Nigel Dawn with questions. Focuss in on the rent reviews, the rent situation. It's my understanding that the market test was done away with in England in 1984. Gentleman's shaking his head there, Andrew Wood. That's what I have in my notes here. You can maybe correct me on that. If that's not the case, then we can't say that there will be some evidence to the effect of that over time. But what I would like to know is why the market test then is seen as a preferable method of fixing rent rather than looking at the earnings capacity of the holding. Obviously, this is a very complex thing and we'll probably pick up on things like assignation and all the rest of it later on, but they all do sort of link in together because the point that Andrew Wood just made about a landlord investing £100,000 wants to get the return on the rent. If, for instance, I'm straying into a point that I want to pick up in more detail later, 91 tenants were assignable, that would deal with the problem because the tenant themselves would be able to raise the cash that they can't do at the moment to build that baron or whatever. The value of the farm, the productivity of the farm would increase and if you had a method of assessing rent based on what was being produced, the earnings capacity, then that would take care of all of that. I just wonder if the members of the panel would explain to me why they feel that the current market test is the best way to do it and why a test based on earnings capacity isn't if that's their view? As far as I'm aware, I'm not a legal expert in this in any shape or form, but the English model does have an open market element within it, but it also has linked the productive capacity of the holding and it gives equal weighting to both measures as a way of providing, if you like, a check and balance of how to assess the rent. I think there is a strong argument for bringing in that measure into legislation in Scotland along with the open market to have different ways of doing it and provide, if you like, a sense check. I mean, in reality, when you're doing the rent reviews, more often than not, you do that sort of productive capability of the holdings anyway to do the sense check. It's an unofficial way of doing it. My understanding at the moment is that legislation doesn't allow the trying court to not deem to be relevant. So that is, for us, perfectly sensible to start to bring that in. We would be reluctant to see the open market done away with because it provides another measure of seeing whether rents are fair and reasonable. I think you are certainly members or ten members are very determined that we will prioritise or get better balance in rent determination as far as an economic test goes or the capability of the actual holding. Therefore, how you balance that with an open market evidence is the crucial factor. I think that the attraction of the English model I suppose is that it's tried and tested and it's been through the court. Therefore, I think that all organisations that STFA and ourselves and SLE have looked at that are something that might break us out of the threat of court action and give us a model to work on. I don't think that it's perfect. That's the reality. If you look at rentals in some parts of England, they're actually quite high. They're also driven by quite volatile markets. I think that there are issues about how we use budgets or how we use the earnings capacity of a holding to drive a rental process. Certainly, there would have to be a defined budgetary process and there would have to be an averaging of costs and outputs to ensure that we take those spikes out. The principle is right. I don't think that it's the whole answer. I suspect that after that you've got to go to some sort of sense test or as well. I think that in some parts of Scotland we have rents that are probably out of kilter with other regions. That's the reality. Maybe they should be out of kilter. There will be regional differences. I think that there are also some rents that have been a review process neglected. If we try to move those to come in line with the market, we create an unacceptable pressure on that business. We've got to look at a new rental review system or we've got to have a phased process over six, seven, eight years to allow people to adapt to that. Once we have confidence in the system let's have a phasing process when we get there and then hopefully then it's more like an index that you're rolling on every three years. That's a a taller to deliver that. I think that all those are components. We need confidence in the system and to get that we need a budgetary system that is robust and takes spikes out. We need some sort of balance in it probably with the market. Go to a sense test and if there are big deviations from the norm we need to have a phased change over to the new system. Martin and then Christopher. Thank you. I think that most practitioners in the real world when we're out there negotiating rents we'd undertake both methods we'd look at the market and we'd also look at the viability as well. The courts in the last two decisions have moved away from that and directed us towards using markets as the primacy but most landlords or tenants want a sustainable rent they recognise that and I think it's quite important to bring that balance back. I agree that south of the border the practice is looking at the market and the budget in equal measure and giving them equal weighting. I was involved in the publication of the practitioner's guide last year and I've just put a slight word of caution in that budgets can introduce depending on which time you take can introduce a large degree of variance and that's really down to the volatility of commodities and so looking at the Moonsie case we did when we were writing this over a six year period the variance on that rent could be anything from 8,000 rent up to 84,000 depending on which moment in time you looked at that rent. There's a balanced approach I would agree with Nigel but you need to be aware that there's big variances out there purely at the budget approach. Christopher Nicholson and Andrew Wood in this section then we'll move on to another question. The English now have almost 30 years experience of their rent test and I accept what Martin is saying that if you go purely on budgets there can be an element of volatility but the other part of the English rent test which is a comparison the formal part of the test which is comparison with agreed rent allows some of that volatility to be ironed out but one of the benefits of the overall outcome of the English test is that during periods of agricultural downturn that we saw post 1997 rents went down whereas in Scotland rents didn't go down so the English test has been shown to follow the fortunes of farming better and going back to volatility historic statistics like farm business income are volatile but rents are set looking forward and there isn't as much volatility in the forward prices for example the forward price a week two, three years in advance in recent years has always been around about the 140, 150 mark pounds a ton but as soon as you get close to harvest you get the volatility so if you look forward and use sitting tenant comparables on agreed rents is that everybody needs equal access to that information and it would be hugely helpful if Scotland had a database of rents and details of holdings to allow that process to happen clearly at rent review time unless Mike Cascoyne wanted to come in at this point but I'll have Andrew Wood The stakeholder I represent has as its policy that it should not make known its feelings about government proposals or government policy that is for government what we are in the business are doing is organising hopefully an engendring good law and then to the government policy and then to the good law and until there is a bill in front of us we are rather on the sideline but I'm happy to try and add to the debate as we go along I just thought I would ask anyway but Andrew Wood very briefly we already have a very complex process and informally people do look at budgets and productivity throughout the industry so we should be very careful of introducing that and how that is structured in a formal way because of some of the points that have been made before because various people will buy their fertilizer at different times of year sell their crop at different times of year so huge volatility in terms of agreeing how that process should be looked at and the English system is not without its faults my firm work throughout England and so we've got first hand experience of the difficulties people have in agreeing the budgetary side of it so we do need to look at that quite carefully because it isn't a panacea the second thing that we just need to be slightly careful about that they when you come to re-let a farm you are going to be in the hands of the market you're going to be tendering it on an open market basis and people will put their rents in on that basis if we've introduced a system that at the first rent review results in a completely different test in terms of how the rent is judged we could create a system that is a further barrier to letting of land so we just have to be slightly careful about that in terms of what happens after a farm is let from the first time when it is going to be an open market test because it will be tendered in the market and people will as the very nature of it be competing to get that land you know when the first review comes along what happens then if you're moving away from the market test thank you Nigel Thorne Jamie McGregor Is this for my question or is this for the supplementary just on the question of David Thompson's question with great respect he talked about earnings capacity being a measure which could be used I think this has been very difficult because obviously earnings capacity on any unit would depend on how efficiently that's run and the individuals who run it and also you know how much they put into the land so I don't know how you would you know how on earth you would measure earnings capacity between farms that would really be the point I'm making Yes, all farmers farm to different standards and abilities but in the context of a rent test you're not considering the individual farmer you're considering the hypothetical farmer who is in essence your Mr Average from the SAC farm business handbook and there's plenty of statistics whether it's from John Nix, the government or the SAC handbook that can tell you what hypothetical farmer should be making from that particular type of farm in that area on that land so you're not considering when the individual farmer's bought his fertilizer, you're considering what the hypothetical farmer would do in that situation and I think with the statistical information we have from research and government that's easily achievable David Johnson I brought simply what Chris is saying there however there is a risk that by using that method when you go into the farm effectively what you're doing is assessing the way that that person is farming that farm and having a critique of it and that could run the risk of creating a degree of tension between landlord and tenant if landlord says you're farming in a way that I think should be done differently tenant says no this is fine so it's not the panacea there are problems within there but I think it's a method that needs to be looked at okay we're trying to keep this tight but Nigel Miller and then Dave Thompson wants to come back with a supplementary at this point and I want to come in afterwards sorry with time very short really just to agree with Chris that you're using these stats like SAC and NICS you can't actually do budgets you've got to average them as well there will be issues about it but it's certainly something we should be thinking and looking at Dave Thompson, thank you convener just very briefly it was just something Andrew Wood said when he was answering there I just wonder when he was talking about the first rent review compared to the rent that was dealt with when the purchase was made what's the evidence from England that that is a problem because they've had 30 years of system we're talking about so it should be pretty clear as to whether the first rent review does create a different figure it can do but remember in England they still do take account of the market as part of the test so you're not moving purely to a budgetary system the budget and the market are looked at in balance so it would even out sort of peaks and troughs clearly if you had a very high rent and then you had a period of catastrophic prices then there is potential for quite a large rent review at the first review but that is an unusual set of circumstances so the mixed aspect of the English system is what gives a wee bit more balance just to clarify the English system the earnings capacity part of the test only applies to secure tenancies the 1986 act tenancies and the news types of tenancies the rent test is essentially freedom of contract open market and it seems that we're in this north of the border system looking at freeing up the new style tenancies but making adjustments to improve the resilience of the old style tenancies OK, I'd like to come at this in a slightly different way supply of tenanted land will be broadly compatible with demand at particular rent levels and I'd like to relate this to the 223% increase in the cost of farmland in the last 10 years as reported by Knight Frank quoted in the press and journal on the 30th of June a figure which confirms the on-going situation there I'm wondering if that saleable value of land on the market has a huge impact on the ability of landlords and tenants to reach mutually agreed approaches I'd like to explore this approaches to rent levels and so on so is the saleable land price which seems to me to be completely separate from the economic value of that land something which is dogging the process of making rents at a level that is actually going to meet the economic circumstances Martin Hall If I could come in there I feel quite strongly because I've seen it reported in the press that there are some relationship between rents and capital values and that certainly is not the case the market, the land market if it's arable land 7000 as you're absolutely correct in what you say there's no resemblance to the earning capacity of that land there are many other factors at play in determining what the market will pay for land but there's no relationship whatsoever to the value and the rental value of agricultural land Nigel Miller I guess I agree with that but I think your view of the world when I have something with this because we seem to have got detached from reality in many ways I guess that that isn't helpful for the industry really the reality is that we're almost caught in advice because a lot of farmers' borrowings have the value of their land so if we interfere with that a lot of farms may get into trouble but to me there is probably a tax issue if there is major investment coming into farm land because of the favourable tax environment that you can find there then you should be hooking that into how they use the land and if investors are buying land at that very high level and then letting it out it would be very good if there are not and it's all in hand or it's contract farming which sometimes contract farming groups aren't as balanced as we'd like them to be to be honest maybe that isn't so good so I think that if people are going to get a tax shelter in there there must be some sort of linkage about how you use that land and hopefully that would mean that outside investment would actually open up opportunities rather than close them down Well indeed and it's this issue and then looking for a return and it seems to me that if a landlord has bought land at a very high price you know that that is going to drive the whole market in renting and so on and we see from the statistics the loss of land that there has been for renting over the peace and the statistics are quite clear it's not all gone into shorter tenancies that have been removed from farming in Scotland when we are looking for the outcome of having more local production therefore there's something very far wrong with a system that can allow the open market sale and buying of land in the way that it has if it's actually going to lead to less land actually being available to people to use for the fundamental purpose that we're supporting from a government European Union I think that's part of the challenge of yourselves and of the group is to create the right environment that it's attractive for those that are investing in land to want to let it and that's about it's about confidence it's about creating sufficient flexibility that those buying land feel confident to want to enter into letting arrangements and partnership between owners and tenants are seriously affected by these outside factors factors related to the saleable value of land and the way in which investment is seen by some people as a means to get the return through probably selling it on personally I don't see that in the real world that that affects the relationship this mutual respect arrangement mutual respect is either been developed over time between two parties or it's because they're entering into new arrangements and therefore coming at it at the same time with their eyes open rather than carrying perhaps baggage from previous times Graham Day wants to ask I don't want to go off a tangent but I want to raise something in the context of talking about mutual respect and partnership between owners and tenants if that aspiration is to be achieved isn't the spirit and the nature of the conduct of rent reviews as important a component as the system itself and if we're to accept that to be the case don't we need to look at who's pursuing the negotiations on behalf of the land owners that are all round to have the locally based factors conducting the negotiations rather than bringing in hard hitters from outside and I think that when people have to rub along with each other after the dust has settled on a rent review aren't we going to see the negotiations conducted in a more cordial common sense way if it's an individual who's put a part of the fabric of an estate or works with the tenants regularly on someone who's brought in from outside you will have far greater experience than I do in this area but certainly the instances I hear of where there has been a lot of resentment generated by a rent review it has tended more to be when an outsider has come in to conduct it rather than the person who's operating on the ground You want to take that? That's certainly true and it's becoming more and more of a fashion and common nowadays for outside agents from further away to come and conduct rent reviews even in on estates where there are resident factors the rent reviews are left to a third party from outside I agree completely that if everyone has to rub along afterwards then we develop more respect and the process becomes smoother the process is very important the TFF have developed guidelines to help that process to a certain extent it's difficult to persuade everyone to follow those guidelines if they were enshrined in a code that has a bit more teeth than it might work there is also appetite certainly amongst tenants to see the setting of rents taken out of the hands of landlords and tenants so that there is for example more like the French system whereby a local panel or a part of the section of the department of agriculture or rents adjudicator someone like that, a body like that it has the power to set rents or recommend rent changes according to the circumstances in a certain area and then David Johnson I don't think anybody could disagree with what you say really but that's the reality of the world we're in I guess that the guidance of rent determination and the practiser's guide and if that was mandatory maybe that would be a good thing so we're probably in the same place as Chris but I think that the basic point of having that on-going relationship is a key one making sure that both parties meet up regularly and therefore even if there isn't any change in rent there should be some sort of process within that process you should be looking at the holding and also having an inventory of improvements or changes in that holding to make sure that doesn't slip away because there's points of contention when that doesn't happen if you are going to use an outside agent there should be some designated point of contact even if it's a trust there should be some face that deals with that tenant year and year out as a contact and that doesn't happen on some trusts and I think that it sounds a bit frilly but the reality is I think that you've got to the heart of one of the big issues is that fracture of relationships which then goes badly wrong Yes to support Nigel I think in a lot of this the key to doing the rent reviews is that they've got to be done in a way that follows the guide and is mutually respectful in all parties they are complicated to do with the way legislation is framed and outside parties are brought in to bring a knowledge to doing the rent review without doubt caused friction which is why within the TFF this guide was created to follow there is an uptake in this guide it is to be taken up more and followed more but to limit the people who are doing it to local people is quite difficult you also have within this we lose sight of the fact that you have bigger states and smaller states so the bigger states have a resident factor and they can bring in outside people to help there's an awful lot of very small landowners who might have one or two tentative farms who don't have resident factors who don't have people they are the people in the point of contact who the tenants deal with directly but they simply do not have the knowledge to do these rent reviews so they do bring in outside people I fully support Nigel for that particular tenant to deal with so they know who they've got to go to whether it's the trust that applies to land held by the Scottish Government or the Forest Commission and all the rest of it they have the factoring team there revolves from time to time so you end up losing that relationship that you've built up it's not perfect but it's definitely there to be improved that would be interesting just at this point supplement to that you know to say between NFU, the SLE and the SDFA you've agreed this reasonableness test what's the response of Rex Andrew Wood we have no issue with it at all we like the law society there to follow the law and apply it as it's being drafted and created and the reasonableness test the difficulty I can see in a very very small number of cases and I think we're highlighting quite a few things here but we have no feel for the quantum of a lot of these things and actually there have been as Graham Day highlighted there's been one or two issues where things have been unpalatable and they are not being defended by the RICS and I think the way some of the business was done in those small number of cases was unsatisfactory we have a worldwide code of conduct we have continually encouraged people to come forward if they feel that that is being breached it has real teeth it puts people in very difficult circumstances and potentially ends their careers and I've brought some copies here if people want to see it later on it is a complex process and I think that the thing that was highlighted about the vast majority of people not having agents or full-time agents often because they the range of people that own tenanted farms is vast from small charities to individuals who may have one farm that their grandfather had right through to the largest states the reasonableness test we have no issue with the difficulty is that there will be concerns about how it's applied we don't know particularly as rent reviews only happen very infrequently in some instances that goes back to this relationship issue is that sometimes six or nine years elaps between rent reviews and therefore it's not something that people on either side of the table do regularly and that can cause difficulties so you know there is an issue there in terms of the frequency and the code of conduct and the code that came out from the TFF is very new it's only been in place for a year there will be rent reviews that may not be conducted in line with that code for some years with individuals so we just have to give that some time for take up and hopefully and I think there's a lot of pressure within the industry to make that work and see how it improves relations we'll move on to the right to buy now down to the nitty gritty in terms of the right to buy does the panel accept that there should be a right to buy for 1991 act tenancies and when the review talks of undertaking further work analysing the wider potential implications of such a development for the Scottish economy beyond the sector itself what factors ought to be taken into account in determining the public interest in this? Public interest right to buy who wants to pick off on that Nigel this is something we've obviously put members on you're right around the country and there is quite a regional variation between tenants on this view maybe reflecting the environment they're working in and we've obviously worked with our landowning members as well so we've probably seen both sides of the picture the reality is I think that those that are you'll see it as an imperative of those that feel that the system they're working under is totally dysfunctional and there's been no investment in the region they're working and I think that they've found that disparating not just for themselves but for the whole community and I think that if you actually I'm sure you yourself have experienced that and there is something that's got to be addressed there I think that where we are which is really where we were in our submission was that where we have got a system which is dysfunctional and obviously doesn't deliver some sort of intervention is required and we've suggested a duty to moving in with a compulsory purchase and then disposing of the farms or letting them accordingly afterwards to break the cycle and to be honest that would also both in our tenants and our landowners view flip over in instances where tenants didn't actually fulfil their basic obligations as well and so it is very much a targeted intervention and our view is that that hopefully is a driver to actually improve things and if it doesn't improve things then there is a real intervention to sort this and it means that those that do have good relationships and those that do actually do a good job of letting land are not actually compromised by it and that the atmosphere that we work in is hopefully positive in the future so it's a balance and I know we've got members that you are pretty critical of where we are I think it's to interventionist and I believe that an absolute right to buy a general absolute right to buy is the solution so this isn't a unanimous view by any means but I think it's a balance that the majority of our membership believe is probably about right STFA supportive of the approach that the review group have taken to a right to buy in looking at its role in land diversification and allowing further investment in farms in cases where it's clearly in the public interest there are possibly circumstances where you're not considering a whole farm right to buy but a right to buy of a certain section of a farm or a site of a diversification or development on the farm that would allow a tenant to a better use of bank finance to develop a farm shop or a wind turbine or whatever I know the review group are looking at other measures that may allow promote investment in the tenant sector by tenants such as asset nation of freedom of asset nation of leases but the ability of a tenant to invest is a key driver for the desire for a right to buy amongst tenants and the evidence of where tenants have bought their farms in the last 10, 20 years is that there is following the purchase of that farm there is a leap forward in terms of investment and quality of investment on that holding and by purchasing the farm the tenant is not having to pay for his past improvements so he's purchasing the farm at a discount to open market value but once he's purchased that farm value of those improvements past improvements are available to him to increase his boring power to make further improvements and that's a real flaw at the moment in the tenant's system in the business model that as a tenant you can't use your past improvements as collateral to fund future improvements and many people see right to buy is the only solution to that problem but I know the review group are working on terms of asset nation to look at that as well as a sort of overriding principle Sava believe that nothing will kill off the let land sector quicker than introducing a right to buy for two reasons it takes a whole chunk of land out of the let land sector and secondly it will undermine those that own land from ever wanting to let land again so it would certainly be a step change but it would in our view would kill off the let sector as we currently know it could I pick up on one of Christopher's points because it's a very valid point is about the borrowing capacity and the ability to invest because under our research that we've been doing whilst developing our paper here was that we've discovered that in Scotland is quite a different situation to what happened south of the border where tenants can borrow against their tenants improvements and their way go as part of their borrowing ability whereas in Scotland generally banks do not take that view and I think that needs to be perhaps looked into a bit further given that it's the same bank David Johnson The right to buy I'm surprised that we're not in favour of that it's coming about by issues and frustrations that have been developing over a very very long period of time which haven't been addressed satisfactorily and this has created this groundswell of frustration that is needing to be addressed and for us this is what the purpose of the review is is to iron out all of these points that people are having difficulty with find solutions to them so that we can then drive the industry forward with confidence that people have the confidence to let more land into the market Martin is absolutely right the way going is a problematic area at the moment there are tenants who have not served the correct notice who are not technically eligible to receive compensation when they leave the tenancy we as an organisation think that's wrong we think that as we propose within our evidence that there should be an amnesty and fundamentally that if tenants made a valid improvement to the holding they should receive fair compensation for that improvement and that would give the ability to borrow against that would have a great deal of traction on this security that is needed to fund the improvements Andrew Wood Mr Chairman I'm just picking up on a number of things that the right to buy that one of the points you raised earlier about people investing in land to let the introduction of the right to buy I mean I've sold more farms to tenants than most probably but it's a real barrier to investment because there is a perceived confidence issue in investors because of the right to buy so that's something that just needs to be considered the borrowing issue the banks actually in many instances whether you're an owner, occupier or a tenant are moving much more to look at your business finances your cash flow and your ability to repay rather than purely the collateral that is set against that and there's quite a move with most of the banks that we're finding throughout the agricultural sector that it doesn't really matter how much collateral you've got they would like to know that there are some but what they're really looking at because they've been so heavily criticised quite rightly in some sectors for not looking at the ability of people to repay and the liquidity within the business so I think there's certainly an opportunity for further dialogue on that and the last thing really is to do with compensation at Wego I think everybody recognises there were some inappropriate deals done in the past I would stress that they were in the past and I mean the amnesty I think is a really good idea just in light of recent issues and the retrospective legislation I think we just need to be very careful how we treat that from a wider perspective I'm interested yes Nigel in a minute we're going to have to pin something down here page 27 in the full interim report points out that there are a thousand and six fewer holdings since 2007 254,291 hectares less in agricultural tenancies Martin Hall are you telling me that it's the right to buy that it's taken that land out of use? No, I'm not the I don't have the statistics in front of me but I imagine a large number of those holdings have been sold through voluntary negotiation with their tenants if that's the case that's obviously a statistic that would be very helpful for us if actually that land is in agriculture but it's actually been sold on so the amount of land which has been sold on and is in agriculture but less in tenancy and now in ownership it would be something that's central to our understanding of this particular problem, Andrew Wood Mr Chairman is one of the points I was making earlier about statistics and data because there is a significant proportion I would think that most of that land is still in agricultural production but I mean personally I know of a large number of farms that have been sold to tenants so it's come out of the tenanted sector Nigel Millar wanted to comment on this and then Dave Thompson wants another question I'm really just a gap in what I said obviously we didn't touch on the pre-emptive right and I think that you're just to be clear that we support the use of the pre-emptive right I think there is a consensus about that we believe that it probably should be automatic the fact that only just over 20% of tenants actually register something it seems quite strange to us and there are sort of tensions in that registration process that we believe you aren't helpful and that would be a fairly uncontroversial thing to do as far as the investment goes I think Chris's point is valid both for diversification I see increasingly tenants with multiple land holdings putting either a grain store or a dairy on a tenanted unit which is far beyond the capacity of that one holding and the reality that's a real nightmare for the landowner and for the tenant because the present way going would exclude its compensation I think that in both the diversification and in that case there may well be some sense in that being out of the agricultural tendency and put into some sort of business business let that then has value and can be sold to another party if necessary now in some units that might be helpful Dave Thomson Thanks convener I'd like to move on to the whole issue of assignation because I think that it may in fact deal with quite a number of the problems that we've been discussing today and we'll continue to discuss if the members of the panel would give me their views on whether they think giving the right to 91 tenants the right to assign their tenants say their lease or whatever would help to allow them to develop their holdings because obviously if they can assign then the value that they add to the holding would be taken into account in relation to what they would get from the person taking over the lease it would deal with issues to do with Wego because you know it would be built in in terms of the price that they would get so any improvements that the tenant made would be handed back to them once they assigned their lease to a third party because that would be built in to the value of the lease it would allow them as well I would imagine to better approach the banks for you know the collateral is there I mean we've had evidence on visits to farms that the tenants are having real problems in getting raising finance very go ahead farmers who cannot raise finance other than if they've got some other property they can put down as security that what they've done on their farm and their vision for the future just isn't enough for some of the banks to lend to them so I would like to get the views on assignation as a possible answer to a number of the issues that we're discussing to the whole area of establishing a stable and effective framework so fine that's possibly what a lot of people would want Christopher assignation is potentially a real game changer for the viability of secure tenants in terms of ensuring investment continues in the future with that investment all holdings eventually become unviable is the key to going forward and I think a lot of the holdings that have fallen out of the tenanted sector in recent years are holdings that have possibly become unviable through lack of investment and they're now being used as an addition to other holdings assignation can solve in principle assignation can solve many problems it can solve the investment problem because it allows at least to have value and when a tenant invests it increases the value of the lease and that lease could be held as security by a finance provider I accept that there are details that have to be ironed out but the principle is there and I think the review group are working on that in terms of WAGO for secure tenants it can cut out the uncertain and difficult process of WAGO because instead of going through the compensation for WAGO for tenants improvements a tenant without successors simply sells his lease and receives value that way and I think that would be a clearer, fairer and more certain way of receiving value for the tenant it also allows the landlord not to have to worry about future cash flow requirements for paying tenants out for their compensation and I think if you look in the very long term given that open assignation allows a tenant a better ability to invest you probably could remove as a trade-off some of the requirements of a landlord to provide fixed equipment and so there are benefits to both parties and one of the key benefits of assignation in terms of fluidity in the sector and bringing life back into the sector is that it allows a retiring tenant to pass on his tenancy if he hasn't got successors to an incoming new entrant and there are tenancies come in all shapes and sizes so some of them are suitable for a new entrant who's looking to farm part-time that if he builds up his business and is looking for a larger holding he could assign his existing holding to another new entrant and match himself up with a retiring tenant coming out of a bigger holding with no successors at the moment there's somewhere between 100 and 200 tenancies falling out of the system through lack of succession and even if just a small portion of those were assigned to new entrants you'd solve the new entrant problem and you wouldn't just solve the starter unit problem you would also allow them a ladder to progress beyond the starter units if we compare ourselves to the English situation the English have almost 3,000 starter units on county council holdings which we don't have but there is no no progression for them beyond that but freedom of assignation would allow progression beyond that stage into a secure tenancy which is the best vehicle we have to generate investment and ensure viability of those holdings in your view would it also reduce the pressure in terms of a desire to buy because would the assignation almost do for tenants a good part of what ownership would do so would it reduce that in many circumstances it would do that and looking at tenancies from a purely business perspective that would be the case there are always those stakeholders who are interested in further land reform outside sectors and right to bible always come into that debate but from the perspective of a tenant looking to invest then it possibly could go a long way to taking that pressure away although at the moment we are just looking at the principle and the details need to be ironed out thank you and Jamie McGregor wants to talk about where you go I think yes I did I will report on page 75 says that a range of economic, social and cultural issues underpin the current dissatisfaction and then it goes on to outline the number of important issues for consideration one of which is improvements, compensation and way go and we've already heard some talk about this from the panel so it obviously is an important point and I understand that it's about tenant farmers that dissatisfaction comes from tenant farmers are not getting efficient compensation but often the tenant farmers have not properly notified now what I really would like to know is that perhaps from SLE I notice they may mention this in their written evidence about this amnesty for people giving notification what it exactly means and if we can tell us just a bit more about how this would cope with this area of dissatisfaction on this already it comes down to what we've talked about these notices that have to be served to notify the landlord of an improvement that's been done and certainly in the past these notices quite often have not been served correctly or not done at all and as a result when a tenant wishes to leave the holding with no notice there's no legal framework to ask for the compensation we think that's fundamentally wrong if an improvement is valid to the holding then it should have a value irrespective of whether the notice is served or not now this also should apply to cases we think where the tenant did serve the notice and it's been time expired because you had write down agreements for 5, 10, 15 years but what is there is still relevant and pertinent to the holding and as such should have a value and should do fair reasonable compensation so that is a method we see to encourage the investment because we know that at the end of the day you will get the compensation that is due at the end of it So is the one year a sort of arbitrary figure? The amnesty Well I mean there is Nigel and NFUS's submission suggested that we could do it on a 3 year cycle because that would tie in with all the rent reviews and it would form part of a natural process for doing so so there's a lot of sense in what Nigel suggests with doing it over a period of the rent review period Does anyone else want to comment on that? Context, when after the last war the then Labour Government were considering how to stop Britain running out of food again the answer in Scotland was the 1948 act which introduced for the first time security of tenure and the concept set out in that bill which was enacted and then consolidated in 1949 was that the chips were all with the tenant The cost of the tenant was to comply with what now everyone agrees are futurling noynsome requirements to make notice in certain ways at certain times for certain purposes it is completely out of date and should be top of the bill for reorganisation That's where it comes from Christopher Just a couple of points Although Asignation could bypass the WAGO problem for secure tenants WAGO is still a fundamental issue will still be a fundamental issue for the limited duration tenants so it is a bit of legislation that needs to be sorted out and as tenants representative tenants we are very pleased by the progress that SLE and other stakeholders have made recognising that there should be an amnesty or moratorium and tenants be allowed to catch up with the registration of their improvements Going back to the serving of notices we must remember that there are a whole list of improvements in the legislation that require no notice particularly improvements to land like rock removal stone removal etc so there's actually no paper record of those improvements and it's probably fundamental to the relationships in the sector going forward that say at-rent reviews or somewhere there is a register that's updated regularly of a record of tenants improvements to avoid disputes at a later stage especially with the age of some of the tenancies now, the average tenancy is over 50 years old that's just going to get longer and we need good records because we're getting out of people's recent memories in terms of some of the improvements Thank you Nigel Moore Just to underline the importance of getting the way go right there's a focus now on Assygnation I think there's a real drive probably within membership but I think also with the review group to really look at that I'm not sure that Assygnation is necessarily the political fix that we all think it is the reality is that if we go to Assygnation for value it won't be people that are second rung on the ladder or new entrants that get these holdings it'll be fat cats like me that get it because we've got the money and we've got the farms already we've got the marriage value we've got the capital behind us well maybe it haven't but and if you're a new entrant or you go to the ladder you're going to get squeezed out and so if you really think that this is going to be a useful tool you've actually got to limit the number of people or the limit the class of people that can bid for these assigned farms and that means that the tenant will not get the same value as he would do if it was in the open market that's the reality and therefore some sort of intervention for a Government is required and probably some sort of support through pillar 2 is required to oil those wheels to make it work and I think you know by all means if you want to see agricultural consolidated to larger larger businesses assignation for value makes perfect sense but if you want it to actually be more diverse then you've actually got to be more interventionist and I think you know the other issue is that you know if we're going to assign to your full tenancy how many landowners are going to stand by and let that happen without entering intervening and offering the tenant a big chunk of money to assign it back to the state to drop the tenancy the reality is flipping it over to an LDT for a lifetime tenancy or 25 years probably is a lot more equitable and makes sense so I think those are the nasty compromises in what seems to be a fantastic solution which solves all your problems and there's a number of people want to come in on this Christopher first I back support Nigel's comment that you do need restrictions on assignation if that's part of the policy that holdings shouldn't get become over large and we see it as a role of a commission or tenancy adjudicator in the future that's all I want to say David Johnson want to say something there Yes just to come in on the point of view of assignation it's got a complex one on the psychological message it sends out to the landowners who it would affect we know and we understand the security of tenure and how that affects it there's also the pattern where these tenancies started off on a limited term and they have altered into the long term secure tenancies that we have now if part of the review is to encourage new letting within the industry more people to come forward my worry here is that by a retrospective alteration of letting arrangement between the tenant and the landlord will send a message that your arrangements that you have at present or the new ones you're going to go into may be altered again at a later date into the future and so it starts to dramatically affect confidence which is not what we need to do we need more confidence within the system more stability the option that Nigel talked about rather than assigning a 91 act tenancy to another 91 act tenancy or if you like converting it to an LDT where we know we have a fixed term is an interesting one and I think one which SLE would look like to explore a bit more but it would be to an LDT of a fairly lengthy period probably 20-25 years I think it would also help to re-establish that area of the tenanted sector to create a vibrancy and a trading within the LDTs with regards to the value of it LDTs at the moment themselves are assignable for value so you can put them on the market and do so as far as I'm aware nobody within an LDT has ever secured borrowing from a bank to against the value of an LDT so I don't know how the banks are viewing that I don't know if anybody else has any experience of that and methodology so we need to be a little bit careful about it being the panacea that it might otherwise fear to be simply and there's more complex issues that need to be ironed out within it Nigel Don Thank you, convener. It seems to me that the conversation has suddenly got much more lively and we've suddenly got to the sharp end of some of the issues that you're grappling with I'm wondering therefore if I could just drag you back just a little bit given that we're kind of legislators at all this We've got a tenancies review which we're talking about We've got a land reform review which is ongoing on which you all know about I'm conscious that in 1925 the UK Parliament legislated right across the area of land and equities and trusts in order to try and clear the ground dreadful pun of the law of the UK on this I'm just wondering whether there are other areas and to some extent I'm looking at Mike as I'm saying this other areas, maybe taxation maybe to do with registration maybe trust law itself which we should be looking at at the same time as trying to get these very practical solutions to land use and land tenancies Has anybody thought about what else we should be doing at the same time? I should suggest that the act of 25 that you're referring to did not affect Scotland I'm not very sure in what context you've raised it Forgive me, I'm raising it in the context that it did an awful lot for English land but it actually settled the whole lot out and they did it in a one I'm wondering whether something appropriate should be done in Scotland at the same time As I understand it and my colleagues will tell you if I'm right or wrong the position in Scotland is that any entity may own land agricultural land in particular and may choose not to let it or not to let it I don't see that there is any interest in looking at the machinery for trusts or limited companies or LLPs or any other entities which has a bearing on what we're trying to do which is to sort out some of the ills of the tenanted sector Okay, so can I just to say that am I right in thinking that it's not obvious to yourself that there's anything else that we should to be doing at the same time there are no other legal barriers to the aspirations that we're talking about There's a tiny one but it's just worth mentioning in this context as the common law in Scotland has it at present it is the right of the landlord to choose who his tenant is and therefore an automatic right of assignation by the tenant will require an alteration to the Scots law Right, but that's for Parliament to do In general then to the rest of the panel do other stakeholders see other issues that are looking out there which we need to address at the same time or are you feeling that the things which we're trying to deal with at the moment in land reform and tenancy reform are actually capable of being done within the context of the two reviews we're currently talking about One of the factors that we've highlighted in our paper is it's not access to land but access to finance is a real barrier and that's something that's separate and not something we're here today to discuss in this whole discussion for tenants I'm not a legal person or a tax expert but to me obviously tax is something which is present, reserved but maybe after September won't be so maybe it's your job to sort it but the reality is that agricultural property relief inheritance law these are things which have business property relief have a big impact on making what makes sense and my view is that they should be designed so that they incentivise a vibrant rural community and incentivise best practice and therefore they should be available for those that deliver and they shouldn't be available for those that don't these are sort of pretty solid tools but I think you should be looking at those and obviously the land reform group have highlighted various examples but to me that they're an incentive to actually drive the behaviour you want and we all want so I think we should be using that way Really just to echo what Nigel said that taxation issues and cap are cross cutting issues that affect the tenanted sector for example earlier we mentioned there was mention of contract farming agreements well many of these contract farming agreements are really sham rental agreements designed to allow the land owner a fixed rental without risk for his land but enable him to have trading status for tax purposes so we actually have a fiscal system at the moment that is a disincentive to let land we also have some very generous tax breaks on land ownership for example 100% inheritance tax relief now is there a public interest argument that supports that tax relief on land that is simply let out on very short term leases there are many questions for taxation I know it's not a devolved power at the moment but it may well be in the future Thank you Mr Chairman just one point of sort of administration I'm a convener Sorry Apologies convener The RICS's paper and submission review group does not seem to be included in your pack and certainly in the papers I got I don't know if everybody else has got them but there is a point in there just about legislation creep and looking at the number of changes we've had in agricultural holdings legislation over a very short period of time and I think that again from a confidence issue is something we just need to be aware of The papers weren't probably sent to the clerks here so that's the reason why we don't have them so we'd be happy to accept it now as part of our reflection for the next panel Thank you very much indeed We've been talking about creating new inflexible frameworks to stimulate diverse other arrangements Angus MacDonald wants to take that forward and then Claudia Beamish Okay thank you convener if we could look briefly at other tenure arrangements and go on to small land holders acts The panel will be aware of the Cook Report of 2009 which reviewed routes into farming and highlighted a staged entry for new entrants as they gradually accumulate the experience and skills culminating in the Tennessee being the final stage Now various arrangements used in Scotland including incentivised employment contracts share farming equity arrangements and partnerships and contract farming and contract growing which has just been mentioned Can I ask the panel to comment on what other Tennessee arrangements would help meet the Scottish Government's vision for the agricultural tenant sector and what regulation if any is needed for the other arrangements that farmers use to share control of land We want to start Andrew Wood The RSS has taken a view for some time that the ability to have a freedom of contract type tenancy would be a good thing in terms of availability of land I think that we've got SLDTs and LDTs which are doing a pretty good job but they still have quite a few constraints attached to them and potentially certain contract farming and partnership arrangements which are quite complex to operate and quite expensive to operate would change into an open market type tenancy We've looked to this a bit and we've always looked for silver bullet and we've never really found one which is unfortunate but I think that there are real disincentives for landowners to let out part-time units and I think we want to break through that because the reality is that most people getting into the farming ladder are going to be part-time for various reasons, for capital reasons and they may well have to have another job If we're going to encourage that there must be some sort of incentive for the landowner to do it and all the flexibilities they probably need is around the housing side of it because a lot of these units the house is actually of more value in letting terms than the actual farm unit and it may be that some sort of proactive intervention on planning guidance would be helpful to allow another house to be built let out the farm house maybe as a separate private dwelling but have a reasonable house which is appropriate for a young family and with a small farm with it and that would be hopefully positive for both sides so that sort of flexible might open up new units I think the other area where we think there's scope is looking at some sort of LDT for renovation which means that you get a peppercorn rent some sort of security for the medium or long term but hopefully a decent wego package as well defined at the beginning and I think there are real incentives for some of the larger estates or some of the west where farming has sort of dropped off their priorities where they've actually got what land which was previously in agricultural holdings and is now being used very extensively for grazing and I think that if we look at land use there should be some sort of incentive there or some sort of pressure there to give young people a chance to get hold of that land and get some sort of step on the ladder the other sort of area which is worth looking at is temperate raisings which are very easy option for landowners and farmers and they're a very important part of the market for many farmers but the reality is that they're high rent and they're often low investment some places their investment is good but some cases it isn't and I think that if people are paying high rent especially in new entrants the lime status and the basic fertility is maintained and I think those sort of standards should be built into the short-lead market thank you David Johnson I think that the temperate raisings are not ideal they have a place in the market for helping out at various farmers but they are being used at the moment for stock gap while the reviews going on until we see where we end up the we have the SLDTs and the LDTs which broadly speaking we think are quite suitable vehicles but there are room for improvements within there to be able to have the full repairing leases that Nigel talks about offsetting low rents against a commitment to improve and the way goings at the end offers greater flexibility within that I think it's complicated to have the SLDTs and the LDTs in an ideal world we should be able to have one vehicle that will be able to cover both of those time frames but building the flexibility that allows the creativity out there to be drawn out of people and find arrangements that suit them that however is not for me straight freedom of contract freedom of contract almost implies that you sit down with blank piece of paper and come up with whatever agreement that suits you in the place I think there needs to be safeguards within that for the tenants and landlords that gives you a structured framework that you're working to but allows the flexibility within that and that would free up the market would send a very clear message out to landowners, to potential landowners to small farmers who may be thinking about retiring getting out that actually here's an attractive option to find another way for the farm to be productively used Mike Gascoing I start by saying I hesitate to say this I'm not going to hesitate to say this this sector of the law is hugely over managed there is enormous complications in the existing legislation to do with crofting, with small holdings and agricultural holdings and if in this process it could be made smaller better and less complicated for everyone concerned I think the law society would wish that to happen philosophy is fine it would be interesting to have reality and see how we would simplify things that's been suggested in crofting that the word simplify is easy but the actual process is very very time consuming there is the option of the Scottish law commission that could start again I suppose there is there are other parts that I would like to see being taken forward but first of all before Christopher Graham wanted a wee point I'll make him back to a point Nigel Millar where he's part of a different workstream of this committee we've been looking at the issue of rural housing I want to go back to what you talked about creating small units would it be useful if there was a presumed consent to build on the site of derelict properties and we have many of those in our farm land around the country you wouldn't have a guaranteed planning consent but a consent to build which would allow you in principle to have sites where you could construct houses to allow you to do that would it be a useful thing to do? I think it would this comes up time and time again this is a barrier and different local authorities in some regions it's less of a barrier but I think it is a genuine barrier and it's also one of the reasons why people are reluctant to retire because they don't have a home to go to or to hand on and they want to stay in their local community and they want to stay in their I suppose their spiritual home was having lived their all their lives so I think that those sort of flexibilities that's a nice smart solution really or a good set Angus wanted to come back a bit and then Claudia wanted to come in Firstly it was just to check if anyone else had who hasn't spoken on the freedom of contract if anyone else had any views Christopher We recognise that there is land that landlords are reluctant to let because of perceived fixed equipment obligations and provision of fixed equipment obligations for landlords so we feel that there is room to lessen some of those obligations that may allow longer term letting but the balance as Nigel mentioned is that in those situations the incoming tenant is going to have to provide the fixed equipment and we may need to make sure that his investments are protected at Wago at the other end of the the tenancy we also have lessons from England has now had FBTs for nearly 20 years which are approaching freedom of contract and we have an average seeing an average length of term for FBTs in England of only around four years now that's probably not the way forward for Scotland it's difficult to legislate for long term tenancies and get people to use them so really the only other tools available are fiscal measures to encourage long term letting but we would in the interests of Scottish agriculture these new tenancies that are coming on the market a fair proportion of them need to be long term to allow the necessary investment and security for tenants if I may convene can I move on to small land holdings with regard to small land holdings we know that the review group is considering the position of small land holdings small land holdings small land holders and small land holders acts we also know that land reform group recommended that small land holders should have the right to buy however we know that currently small land owners can only exercise the right to buy if they are within the areas where crofting tenure was extended in 2010 and then convert the land holding into a croft and we are informed that no small land holders have been successful in doing that to date so I would ask members to comment on whether you consider the statutory small land holdings have a part to play in future land tenure arrangements I think there are lessons and ideas within the small land holdings small land holders legislation that may enable new starter units to be set up whether you use the act or take ideas from it remains to be seen you mentioned the difficulties some small land holders are experiencing under the Crofting Reform Act 2010 which allows them to convert to crofting status to allow a crofting right to buy their problem is but the difficulty is doing the conversion and we support the land reform review group's recommendation that instead of going through the conversion process they simply have a right to buy if they qualify for it I think actually that was the 2007 act that led to that by anyway because I had an unfortunate part to play in that but attempting to try and solve a particular problem but as I said it's less than simple when you get down to the bit the general tone of what you say is correct yeah and who else has wanted to come in there nobody okay Mark freedom of contract aspect I don't have any experience of small land holdings but freedom of contract I think you know Starver's view is that there should be as little intervention of the law as possible so really supporting Mike Gascoein's point but just to pick up on what Christopher said about the average term of FBT south of the border I just wanted to clarify that for whole farms the average term is 10 years which is probably more reflective of what we're trying to achieve okay Claudia Beamish morning to you all I've listened with care to the information evidence that you've given us about the whole issue of the different types of tenancies and arrangements for the sharing of land in Scotland that my colleague Angus Roberson has led on and I'm interested that on the one hand Mike you're highlighting your perception of the need for simplification of crofting law which as a lay person I would certainly have some strong accord with but also that some David Johnson you're highlighting I think I hope I don't misquote you when you say that in terms of LDTs that there should be safeguards and possibly structured frameworks so I'm just wondering the degree to which people on the panel see to help the land reform review group the tenancy review group apologies going forward what sorts of regulation or protections for both sides should they possibly be looking at that they maybe aren't yet in these different forms of arrangements for the sharing of land Chris has touched on it was actually I was saying that LDTs are a good vehicle but within freedom of contract if you're going to bring in freedom of contract still has to be safeguards within that Chris has touched on that was a tenants do improvements within that there has to be a mechanism within there to compensate for the improvements that have been done the other thing which we haven't really touched on yet is arbitration some form of simple dispute resolution that all parties can go to without incurring the huge costs now which we're seeing when parties end up in the land court that is resulting in people being afraid to go to land court because of the fear of the costs involved in it and so you can end up with pressure on both sides to come to a result that isn't fairly or equitably done so within any changes I think Sarah put forward a model for a simple arbitration which could handle rent reviews it could handle diversification stuff like that you would still need the land court to legislate in points of law but if we could find a simple way of doing binding arbitration I think it would go a long long way to sorting out a lot of the address a lot of the problems we're seeing so that has to be in there within the new vehicle another question is that okay so could you want to move on to your next question sorry I'm not sure if somebody else wanted to add I added a little to what David has just said in that salver are also developing an independent expert approach as well so really an extension of our arbitration procedures at the moment we're certainly very supportive of both and I think your expert determination may well be the preferred choice of many tenants I think the whole flaw is that in many cases the fallback of arbitration as you go to the land court so you've always got that in the background and I think we need to have some sort of barrier which keeps people out of the land court frankly because that overhanging the arbitration process then it's not going to be taken up or have the power that it should have so I think that that's probably a legal issue I think the other thing which came back from salvers is that arbitration at the moment is very much confined to summation of rent in reality we see arbitration being useful in points of way go and possibly sorting out differences in view about diversification and things like that so we need to have arbitration opened up in a wider way and Andrew and then Mike I'm sorry I've been in practice long enough to remember when arbitration was the preferred route before the land court and the difficulty with arbitrations then was that they were often dealing with wider more complex issues rather than a single issue and the result was that people tended to turn up armed with a battery of lawyers I'm not sure if that's the right phrase but anyway they did come heavily represented and the issues then tended to be that the whole costs of the exercise spiralled and the panacea to that was actually to move to the simplified system of the land court and it clearly hasn't worked because these things when they get to dispute tend not to be about a single issue they tend to be about a myriad of issues that get dragged in and therefore the length of the dispute and the costs that go with that tend to get out of hand as we've recently seen I think that Sava should be commended in terms of the concept that there should be going back to the grassroots of dispute resolution where there is an ability to have a simplified but clearly single issue arbitration to avoid it getting out of control and it may be that between a landlord and tenant and it is often the case if there is a dispute that arises it's maybe not the rent that there's the big issue it could be some historical issue about something else therefore there has to be an ability to actually surprise those apart if there are going to be other issues then they have to be treated individually and therefore hopefully that would stop the thing getting out of control as it has and the costs that go with it Mike Gaskway Yes, I think everyone here today would probably agree that the move to the land court in 2003 hasn't proved to be the right job it should probably most people's summation be the last protocol when all that is at stake is the law and what the law says everything else should be kept as far away from the land court as possible and a system which allows for local low cost operations to sort out disagreements should be the target But as final courts of appeal are now reached in the direction of the supreme court in Europe how does the human rights element of making an arbitration and then having an appeal does it not just leave things as they are if the appeal is taken to the land court it can then be taken on from the land court The arbitration act of 2010 I think give you the answer there If it were an extended agricultural matter In the main sorted out by practical values people are far more arbiters with practical valuation experience and most of today's disputes are really matters that should be resolved by practical arbiter values rather than allowing a dispute to become an arms race in legal gamesmanship which it often happens and I think that's as much a reflection on the our legislation is based on a 1949 drafting when agriculture and tenancies were in a very different place than we are today and if the law was made more applicable and fit for modern purposes it would be clearer that we wouldn't have the legal gamesmanship involved Okay, I think that's pretty clear now Claudia, I want to come on to next question Thank you, convener There's been many interesting suggestions this morning I wonder if I could broaden the things out on behalf of the committee just at the moment and ask for any comments about ensuring a supportive wider crosscutting context for the workings of the sharing of land in Scotland We've had as I say a lot of suggestions this morning but to be real about this in the in the review itself and I quote from page 52 it says that the theme running through the report is the often poor relationship between landlords and tenants and in expectations and behaviours derived from centuries of cultural history Now perhaps this morning doesn't sort of indicate that kind of an atmosphere at all which is certainly positive but beyond the suggestions that have been made today are there things that the panel feel that they or think that they can put forward for consideration of the committee the review group which would help in what Martin Hall called the mutual respect which of course exists in many many circumstances between tenants and landlords we've heard about mediation or arbitration we've heard from and those are sort of the legal aspects I'm also very interested in if there are further issues within cat reform beyond I think Nigel Millar mentioned the possible second stage for after new entrance they may be blocked we've also heard about asignation in quite a positive way and then some of the dangers about it but I'm just wondering if there are other areas that really should be being considered to look forward for a vibrant tenanted sector in Scotland Nigel the things have been dropped in in all sorts of different discussions but I suspect that knowing who owns land and who your landowner is, whether it be whoever it is and having some sort of designated point of contact and some sort of continuity seems to be absolutely vital and I think that came a wee bit out of the land reform debate that at times that doesn't seem to be totally apparent frankly and it also means that if you are bringing in outside professional expertise there is a point of contact who should be there during that negotiation as well and I think that it may well be that if there is an office for tenancy or an adjudicator that advice and support is available through that office and if necessary, if somebody feels that they need some support then they can go there so there is some balance of expertise and available support and there is also a long-term point of contact I think that you making the practitioner's guide or the best practice or to me mandatory makes sense my own view is that possibly some sort of assurance scheme for behaviours as far as your professional school makes sense that we have that in other sectors and this is a particularly crucial one so why not here as well and I think that would also answer some of the land use issues and the long short termism that we have and things like that so let's look at that the other sort of areas that I think are important is really what we've just touched on is having that sort of immediate access to dispute resolution which is low cost or you know what the cost is before you go into it and then it's fast so that sort of package to me starts to give us a sector that looks a bit more sensible than where we are now and as far as the SRDP goes just to underline where we are on that I mean obviously nothing solid until it comes back from Europe but there is a really good package there which you might go to 70,000 for a new entrant and you get a good business plan and you can actually fuel that business plan you might even be able to buy a stock you can develop a business, fantastic but it may well be that it's limited to the first year or two that you're a new entrant well once that's gone you've lost it now that probably is too short for a start because many new entrants from the first year haven't got the capital or the confidence to actually have that business plan so maybe they need a little room but certainly you should be looking at the second and third stages should a similar package be available because that's the time when you're going to have to jack up for being a part timer with a job to a full timer and possibly with a family so you need that so that's something that could be looked at Christopher Nicholson on improving relationships and taking the heat out of some of the disputes is a future role for a tenancy commissioner a tenancy adjudicator who before a dispute escalates to the level of employing QCs the parties can sit around a table with an adjudicator and almost mediate to see where everyone's positions are and try and narrow differences and get the facts on the table at the moment that there is no forum or place to go to do that and you immediately if you can't resolve a dispute you immediately end up in the situation of legal fees How you would envisage those people being appointed or what this forum might be or is it something you can comment on? I think many stakeholders have recommended some form of tenancy commissioner or adjudicator also an outcome from the land reform review group recommendations about a lands commission it's important that you find people who are impartial maybe it's a role for professionals who are retired from their profession and have no commercial allegiance to one particular side or a mixture of individuals and when we were stakeholders here, organisations were setting up the joint initiative on rent determination to cover the interim period we were very aware that we had to create a panel that people would feel able to come to so rather than staff it with professionals we've said that it should be an office bearer for each of the organisations to make it look as though it's more approachable, have a simple application form to submit a complaint and have simple parameters that would allow you to submit a claim David Johnson To follow on Nigel and Chris it's when the review is completed we will be settling down and the ombudsman the adjudicator is going to be vital to ensuring that communication stays current and pertinent to what's going on and we keep on airing any problems that are having quickly rather than letting them develop to a point where they require more action so it's really for us it's a form of self-regulation, self-policing to make sure that we never get back to the distrust that's existed at the present and we can build better relationships going forward into the future so it's the tone and the way we conduct ourselves with mutual respect for all parties to try and understand exactly what their desires are and address their concerns In our debate on this point, arising out of the interim report we looked quite carefully at the possibility that something not to similar to the private rented housing panel could be a model if it goes, a model is needed but it works very well it's cheap, it's successful it's respected fine Nigel, yeah? I think we certainly looked to the panel a bit when we were in the last few days when we were looking at this sort of group or review group and I think that it is a model that's definitely worth looking at I guess that there probably should be two tiers in any sort of system so that face that goes direct to the tent or the landowner and is there you'll hopefully hold information in a data bank which is useful they might even hold a data bank which is a potential young entrance to allow them support and access to landowners and they also hopefully hold codes of practice which cover all points of operation and then they interface with people and they conciliate and whatever and you maybe need a professional judicator when things go wrong I think it needs to be backed up by an expert panel the reality is that we're in a dynamic world new issues arise and that I suppose face of the panel or the judicator I think has to be detached from legal systems and has to probably have quite a connection to the industry and support the industry and your ricks as well if there are particular issues to refer to them to actually get their advice to actually update codes or make submissions to the government but there is a tool for the judicator group and the support group to use when new problems arise so you need two tiers hopefully at slow cost and it's something obviously the government would be very keen to put money into I'm sure but if it's not then we should be keen to put money into frankly it's something we need okay, it would be even better if we'd subsidy convergence earlier to help all these new entrant farmers and so on but that's another argument for another day that we've already had that all right for you Claudia? just now fine, I think everybody's had their say on that, Cara Hilton point and thank you convener, just by way rounding things up I'd be interested to hear the panel's views on behalf of the committee on the way the process has gone today and how it's going to go going forward is there anything any further evidence that needs to be considered before the final report is published or any sort of improvements that could be made generally? okay yes, Christopher the answer is it's not really we're very supportive of the way the review group have carried out the process and they've been very thorough in taking evidence and the way forward now is to draft recommendations and then go round the countryside again having meetings trying to draw criticism or approval to those recommendations and I can't think of a better way of doing it okay, anyone else? that last point that Claudia brought up really about you and adjudicator and officer support a vision of this wonderful body but I think that none of us have actually we haven't drilled it down enough to the actual mechanics about how you structure it I'm sure the review group will have views about that but I think it would be helpful if we were a bit more specific about what this should do and how it should be structured and I think that's a challenge for us that we need to go back to review group with those issues to come up several times and I think that we need to try and see we can see the real positives out of it but there are some compromises that are there as well we've got to get some sort of balance to that I think those are the two that are most difficult and I think diversification as well that's another thing we haven't touched on today but I think that having a route through disputes where landowner isn't keen on a diversification when there is dispute so it's not totally solved and I think we've said that but you need some sort of dispute resolution there otherwise many farmers are going to be denied the opportunity to have a viable business I mean from the process so far we've been very supportive of we think it's been conducted in an exemplary fashion we found it to be engaging and inclusive so we see that going forward into the future we see the panel themselves drawing down into the key issues that they're wanting to highlight now and then coming back to us on an ongoing dialogue basis to explore the ideas, to see where they go and then to help shape the way it's going to form over the next four to five months they have in a sense almost led us in our thoughts I think they brought the industry closer together they've been a step on from TFF in a role that TFF never quite managed to do so we are very supportive and quite optimistic that what the outcome will be will be productive for a more vibrant tinnitus sector in Scotland Thank you very much I think that probably is a good place to end this particular session certainly the atmosphere is one of helpful and engaged activity which makes a change from some of our past discussions which have seemed like trench warfare and we really believe that that is a very good omen indeed and I'd like to thank the panel for all their contributions just now I have no doubt we'll be seeing you at some point when we have not just at the evidence but had the report later at Christmas they say well let's hope the present that we get at Christmas is going to be welcomed for as they say it's not just for Christmas it's for life if we can make a long term you know breakthrough here that would be very good for the whole of the agricultural sector in Scotland and we'd be very much welcoming bringing that about so thank you very much for that as we've agreed earlier we're going to end the public session now we're going to go into private next week's meeting committee we'll take evidence from stakeholders on the Government's designation of marine protected areas and we'll now clear the gallery and we will move the meeting into private