The new Land Reform Bill proposes a raft of changes affecting the ownership and letting of land in Scotland, but since its introduction in March 2024, press headlines have focused on the new rules regulating the management and transfer of ownership of "large landholdings".
Now that the dust has settled a little – are we any closer to assessing the likely impact?
What land will be affected?
As currently drafted, the rules on community engagement and land management will catch:
(1) landholdings on the mainland of more than 3000 hectares;
and
(2) landholdings on inhabited islands of more than 1,000 hectares,
where that comprises more than 25% of the island.
The rules on transfers of land will affect landholdings over 1,000 hectares. Changes to the existing community right to buy will also affect landholdings over 1,000 hectares.
As a result, "large landholding" will mean different things in different contexts.
The hectarage threshold can be met by a single area of land or by a number of geographically connected areas either (a) in the same ownership or (b) meeting the definition of "composite holdings" due to ownership through connected parties/associates.
Identifying composite landholdings is likely to be tricky. It will require consideration of the physical connection of different areas of land and the ownership connection i.e. owned through group companies or through different parties who may have controlling interests in the land. The Register of Controlling Interests in Land ("RCI") will be important as titles held by different people may be treated as being in single ownership if there is shared controlling ownership recorded in the RCI.
To put this in context, the Scottish Government estimates (based on analysis by the James Hutton Institute) that around 55% of Scotland may fall into 1,000 hectare-plus category of landholding – so the proposals will affect large parts of rural Scotland and those who manage it.
Enforcement and penalties?
Readers in the rural sector will be familiar with the concept of the Tenant Farming Commissioner ("TFC"), introduced by the last Land Reform Act in 2016. The new Bill proposes that there will be a new "Land and Communities" Commissioner ("LCC"). The LCC's role and powers will include the ability to issue fines if an investigation finds that a landowner has breached an obligation under the new rules. Much of the detail on this will follow in regulations at a future date, but feedback from member organisations has expressed concerns over an increase in tension as 'advisory' roles becoming more 'regulatory', and bodies such as the NFU are calling for a careful balance to be struck.
The current version of the Bill requires any LCC appointed to have expertise or experience in "land management and community empowerment" and automatically disqualifies any person who has owned a large landholding during the preceding year. However, Scottish Land & Estates have commented that there is also extremely wide scope to delegate powers to almost any other person, regardless of their skills, knowledge or impartiality and, as such, there have been calls for a legal requirement to be introduced in the Bill to take professional advice on decision making.
Community engagement and land management – what are the new obligations?
If enacted in its current form, all landowners caught by the rules will be required to:
- Produce a land management plan ("LMP");
- Engage with local communities on the development, review and revisal of the LMP at least every 5 years;
- Consider reasonable requests from communities to lease land or buildings;
- Support compliance with the "Scottish Land Rights and Responsibilities Statement", which the Scottish Ministers produce and review every 5 years.
The specific detail will follow in regulations, but an LMP will need to include details of the land itself, and its owner(s), along with the long-term vision and objectives for management of the land (including potential for future sale). Landowners will also have to demonstrate, through the LMP, compliance with existing regulatory obligations such as those in the Scottish Outdoor Access Code or the Deer Code and also how management of the land will contribute towards achieving net-zero emissions, adapt to climate change and sustain biodiversity.
The preparation and ongoing review of the LMP is being seen by some as 'overkill', with compliance likely to incur significant cost. This will add to and potentially duplicate existing compliance obligations on landowners and land managers, bearing in mind that they will also have to prepare a Whole Farm Plan to access future subsidy support under the newly passed Agriculture and Rural Communities (Scotland) Act.
Property transfers – will it still be possible to sell large landholdings on the open market?
Yes – but there will be considerable pre-sale red tape and delay if the rules are implemented in their current form.
Transfers or sales of large landholdings (in this context, those over 1,000 hectares) will be prohibited unless the Scottish Ministers have made a "Lotting Decision". In addition, transfers of more than 50 hectares, where they form part of a large landholding, will not be permitted without first obtaining a Lotting Decision. If a series of transactions are in contemplation where the total area will exceed 1,000 hectares, those transactions will also require a Lotting Decision.
Any transfers of title in breach of the prohibition will be of no effect and any transfer in breach of a Lotting Decision will, similarly, be of no effect.
What is a Lotting Decision?
A Lotting Decision will be taken by the Scottish Ministers on the application of the owner of a large landholding. It will state that either (a) no lotting is required or (b) lotting is required, in which case it must also specify the lots. Before taking their decision, the Scottish Ministers need to have requested a report from the LCC (the new Commissioner) and taken it into account.
In a Lotting Decision, the Scottish Ministers may order that the land is marketed in separate lots if "...the decision would be more likely to lead to [the land] being used (in whole or in part) in ways that might make a community more sustainable than would be the case if all of the land were transferred to the same person".
If lots are specified in a Lotting Decision, a landowner will not be permitted to sell separate lots to connected purchasers. This will prevent the sale of different lots to companies in the same group or other entities which have shared controlling interests. Again, the RCI will play an important role in how this will be interpreted and implemented.
There are limited exemptions to the rules which include transfers not for value (so family gifts will still be possible), sales to croft tenants and transfers on divorce/separation. There is also provision allowing the Scottish Ministers to dispense with the need for lotting if the owner needs to make a land transfer to alleviate financial hardship, or the time involved in waiting for a Lotting Decision could cause financial hardship.
Community rights to buy without prior registration
For those unfamiliar with community rights to buy in Scotland, the right to buy is contingent on the Scottish Ministers approving a community's application to register an interest in acquiring a particular area of land. If successful with their application, a community's interest is entered onto the Register of Community Interests in Land (known as the "RCIL", not to be confused with the "RCI" mentioned above). Registration in the RCIL gives the community a pre-emptive right to buy which is triggered if the landowner decides to sell the land i.e. the land cannot be sold without the community first being given the chance to buy under the terms of the legislation.
The Land Reform Bill proposes that all landowners of holdings upwards of 1,000 hectares must give notice of their intention to sell, even if there's no community interest registered in the RCIL. The process in the Bill is not straightforward as the notice of intention to transfer or sell is to be given to the Scottish Ministers, rather than the community directly, and it is the up to the Scottish Ministers to publicise the intended sale/transfer. Following publication by the Scottish Ministers, a community body will have 30 days to intimate their intention to register an interest in acquiring the land. If they do not, the Scottish Ministers will clear the landowner to sell the property.
If notice of intention to acquire the land is received in the 30-day period, the community body will be given another 40 days in which to make an application to register an interest in the RCIL. The process is broadly similar to the one that applies to the existing "late registration" process, which allows communities to try to expedite registration in the RCIL where land is on the market or action with a view to a sale is underway. That late registration process is unchanged and will still be available to eligible community bodies.
The difference the new provisions will make is that sales which may otherwise have proceeded privately, without wider public knowledge, will no longer be possible.
This is a broad overview of the new provisions in Part 1 of the Land Reform Bill.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.