LAND RESOURCES UPDATE JULY 2008

In this eNewsletter:



Land Resource Contacts



Alasdair Fox

Direct Dial:
0131 625 7227

Email:
alasdair.fox
@andersonstrathern.co.uk

Adele Nicol

Direct Dial:
0131 625 8013

Email:
adele.nicol
@andersonstrathern.co.uk




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Agricultural Holdings (Scotland) Act 2003
Diversification – Proceed with Caution


The Land Court has just issued a decision clarifying the extent to which a landlord has to assist a tenant who seeks to exercise his right to diversify under Section 39 of the Agricultural Holdings (Scotland) Act 2003.

Case background

A tenant wished to construct a micro hydro scheme. He served Notice of Diversification and, while objection was initially made by the landlord, this was withdrawn and no conditions were imposed. The tenant now requires the landlord to sign a wayleave in favour of Scottish Power so that electricity cables can be installed to connect the scheme to the grid.   The cables could be installed without the wayleave but at greater cost and the tenant would be responsible for their maintenance. The landlord did not sign the wayleave. The tenant applied to the Land Court to consider whether Part 3 of the 2003 Act imposes on landlords any obligation to positively co-operate with tenants to allow diversification schemes to proceed, by, in this case, granting a wayleave to Scottish Power.

Tenant’s Case and Court’s Response

The tenant argued that there are four grounds obliging the landlord to co-operate.

Ground 1
The 2003 Act inserts an implied term in the lease that the right to diversify carries with it any additional rights necessary for the diversification to succeed.

The Court rejected this and commented that, while the absence of such an implied term may make some diversification schemes impossible, it does not make the legislation unworkable.

Ground 2
The landlord, by refusing to co-operate, is derogating from his own grant in terms of the lease as it is amended by the Act (not only to allow diversification but to include the implied term set out at Ground 1).  

The Court found that this does not follow and that the tenant had (by operation of the statutory provisions) won the entitlement to diversify, but nothing more.

Ground 3
The 2003 Act imposes implied consent to the additional rights required. 

Having dismissed the first two arguments, the Court found the argument that there was implied consent to be artificial.  It also dismissed a suggestion that the landlord’s failure to object was tantamount to consent, particularly given limitation of the right to object to the narrow grounds set out in the Act.

Ground 4
It is implied by the statutory provisions that the landlord must co-operate with the tenant.

The Court held that the Act neither placed nor implied any positive obligations on the landlord and that, had Parliament intended to imply co-operation by the landlord, it would have included provisions accordingly.

Landlord’s Case

Quite simply, the 2003 Act does not include any provision that can be used to force the landlord to co-operate; essentially the Act does not support the tenant’s interpretation. A position with which the Court emphatically agreed.

Implications of the Decision

The Court’s finding that a landlord is not obliged to do anything positive to assist a diversification scheme may mean that some schemes cannot go ahead or be carried out in the most economic way without the landlord’s co-operation. The Court considered that compelling co-operation by a landlord in matters affecting his own property rights was a step too far. 

That a landlord does not exercise his right to object to diversification does not mean that he has consented to anything, merely that the landlord may have taken the view that objections would not stand up to scrutiny under the narrow terms of Section 40.  That there are such rights (however limited) does not mean the landlord has to assist the tenant.

This may be an omission from the 2003 Act, which Parliament will have to address. 

The implications for tenants are that they will have either to establish that the scheme and everything needed to make it workable are under their control or to obtain the landlord’s co-operation, by agreement.  This may cost money.  A tenant’s scheme may also need the consent of third parties, such as the owner of a private road or a lender, which are unlikely to be within the landlord’s control, irrespective of the landlord’s personal views.

Further information

For further guidance on issues raised in this ezine, please contact Alasdair Fox, Adele Nicol or your usual contact within our Land Resources Dept.



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Click here to unsubscribe from all future Anderson Strathern ezines. Copyright 2004-2007 Anderson Strathern LLP. All rights reserved.  Anderson Strathern LLP is a limited liability partnership registered in Scotland with Partnership No. SO301485. Registered office: 1 Rutland Court, Edinburgh EH3 8EY. 'Partner' denotes a member of, and all business is transacted for and on behalf of, Anderson Strathern LLP. A list of members' names is open to inspection at each of our offices.  This article represents the law and best advice at the date of publication but the law can change very quickly and you are advised to contact us for up to the minute advice.