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Rural & Agriculture

It’s long been a matter of common knowledge that the value of farmland far outweighs its productive capacity. However, certain commentators have been suggesting for some time now that the inflation seen in recent years in respect of the value of agricultural land is slackening.

In these uncertain times, more evidence is emerging post BREXIT strongly suggesting not only that inflation is at an end but in fact that land values are expected to drop over the next year.

The Land Reform (Scotland) Act 2016 was passed by the Scottish Parliament on the 17th March 2016. As most readers will be aware, the new Act contains many changes to the law of agricultural tenancies. These changes arise from the recommendations of the Agricultural Holdings Legislation Review Group to improve relationships between agricultural landlords and tenants and to increase the supply of let land. Many criticised the introduction of agricultural tenancy legislation into the Land Reform Bill which was originally meant to relate to wider land reform issues. The criticism centred on the fact that it would have been better if the recommendations had been introduced in a “standalone” Act drafted with sufficient time to give detailed thought to what are quite complex legislative changes and which would have received more detailed scrutiny.

I am occasionally asked whether or not giving a lease to someone for equestrian purposes creates an agricultural tenancy and I thought that it would be worthwhile explaining the legal position. Many landlords are concerned about granting a lease for these purposes thinking that it will give the tenant security of tenure and some equestrian tenants believe that they have an agricultural lease with all of the rights which that carries with it.

Most farmers are aware that in recent years the price of agricultural land has been far higher than one would expect if the value was directly related to the economic return which can be made from it. There have been many reasons for this of course, not least of all a shortage in the supply of land coming to the market as compared to previous years. However, other factors which have driven high values include the significant tax benefits which investing in agricultural land brings, including the potential to obtain relief on the value of the land at 100% for Inheritance Tax purposes.

Chambers UK 2018

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