Tenants welcome progress on development of new rent test

Scottish Tenant Farmers Association

News Release

 30th January 2018


Tenants welcome progress on development of new rent test

The Scottish Tenant Farmers Association has welcomed the publication by the Scottish Government of its report ‘Testing of the Rent Review System’. The report models the new productive capacity rent test contained in the Land Reform Act (Scotland) 2016 and has been produced by Savills with input from agricultural solicitor Hamish Lean and land consultant Watson Bell.

Commenting on the publication of the report STFA Chairman Christopher Nicholson said; ‘STFA welcomes the progress being made towards implementing a new productive capacity rent test to replace the current flawed test based on the open market. We have been campaigning for over a decade for the replacement of the open market test which has become increasingly unworkable and has always acted against tenant’s interests due to the land market’s inherent imbalance in supply and demand.

‘The failures of the open market rent test have been amply demonstrated this year with rent demands from landlords seeking unjustifiable and unsustainable rent increases well in excess of inflation at a time when support payments are falling and commodity markets face uncertainty due to Brexit. The new productive capacity test should allow rents to follow farm incomes and profitability as has been the case in England and Wales for over 30 years since the replacement of their open market rent test in the 1980s.

‘This report shows that a rent test based on the physical output of the holding using only the land and fixed equipment provided by the landlord can be used to set a fair rent with transparent methodology. We believe that the report is heading in the right direction but there is still much work to do on the details and the success of the new rent test will be dependent on getting everything right.

‘With the new productive capacity test based on output using only the land and fixed equipment provided by the landlord, tenants must realise the importance of documenting all their tenant’s improvements so that they are excluded from the rent calculation. We would urge all tenants to make progress with the amnesty for improvements, it will be vital for future rent reviews in addition to ensuring fair play at way-go.

‘Many of the poor relationships between landlord and tenant stem from disputes encountered during rent reviews under the current open market rent test which has become beset with difficulties. The move to a more transparent and workable productive capacity rent test is an opportunity for a fresh start in the setting of fair rents which will benefit the tenanted sector as a whole and all stakeholders should ensure their members buy into this new test.’