Rural succession: What to do in the event of a farmer’s death

Inheritance for farming families has been a particularly hot topic since the tax changes announced in the October Budget last year, which led to widespread concern among the sector. However – aside from tax implications – did you know that there are extremely short timescales within which farming tenancies must be transferred following the farmer’s death, otherwise those tenancies can be lost altogether? Are you aware of what steps need to be taken to protect that tenancy?

A beneficiary of an agricultural tenancy, for example, only has 21 days from the date of death of the farmer to notify the landlord in writing that they want to take on the tenancy and failure to do so will mean that they lose the right to claim the tenancy. While there can be extenuating circumstances, ignorance of the correct procedures to be followed – or just generally, and understandably, being subsumed by grief and the myriad of other “sadmin” tasks that the family has to take care of at that time (including arranging the funeral itself) – are sadly not one of them.

We wanted to highlight these short timescales in this article to serve as a reminder for those farmers who are tenants of land in Scotland.

What type of tenancy?

There are slightly different rules depending on what type of tenancy the farmer had, so that needs to be established first. For those who have an agricultural tenancy (either a secure tenancy governed by the Agricultural Holdings (Scotland) Act 1991 or one of the fixed duration tenancies regulated by the Agricultural Holdings (Scotland) Act 2003), they are largely treated the same way in terms of succession. Crofters and smallholders have slightly different procedures. There are also differences depending on whether the farmer had a valid will and made a valid bequest in that will, or whether their estate falls to be governed by the rules of intestate succession. Again, this needs to be assessed.

Agricultural tenancies

For agricultural tenancies, if there has been a valid bequest in a valid will (and there’s no restriction in the lease itself preventing its transfer), the beneficiary will have just 21 days from the date of the tenant’s death to notify the landlord of the bequest in writing. It’s therefore important that the proposed beneficiary is aware of this timescale so that they can comply. The landlord then has one month from notification of the bequest to either accept the new tenant or issue a written counter-notice objecting, and there are different grounds for objection depending on whether the beneficiary is a “near relative” or “non-near relative” as defined in the legislation. For “near relatives” the grounds for objection are more limited (essentially relating to the poor character or lack of farming experience of the beneficiary) and the onus is on the landlord to apply to the Land Court on the back of that counter-notice and convince the Court that their objection should stand. For “non-near relatives” the objection can be on any reasonable grounds but the onus is on the beneficiary to take positive action and appeal the landlord’s counter-notice in the Land Court, the beneficiary having to convince the Court that there are no reasonable grounds to prevent them succeeding to the tenancy.

Where there is no will or the bequest has failed, the Executor must obtain Confirmation (including the tenancy as a specific item on the Inventory to the Confirmation) and transfer it within one year of the tenant’s death or the date the Land Court determined that the original bequest was null and void. The beneficiary must then notify the landlord of the acquisition in writing within 21 days of the transfer to them. Again, the landlord can object with different procedures applying depending on whether the beneficiary is a “near” or “non-near” relative. In the case of a 2003 Act tenancy, the landlord can also serve notice indicating that they want to buy back the late tenant’s interest in the tenancy themselves, which they can do provided the terms are no less favourable than at present.

Crofts and smallholdings

For crofters, if there is a valid bequest in a valid will to a member of the crofter’s family, the beneficiary will have 12 months from the date of the crofter’s death to notify the landlord and the Crofting Commission of the bequest. There can be complications if the tenancy has been bequeathed to more than one individual which will require a division of the croft to be approved by the Commission before the transfer can be actioned and may result in the bequest failing so, if this is something you want to do, we recommend taking advice at an earlier stage.

In cases of intestacy, or failed bequests, the Executor has 24 months from the date of the crofter’s death to obtain Confirmation (making sure the croft tenancy and any grazing shares are listed on the Inventory to Confirmation), transfer the tenancy and give notice of the transfer to the landlord and Commission. If it has not been transferred by that date then the landlord can give notice to the Executor terminating the tenancy and it will come to an end. The procedure for smallholdings is similar but with different timescales.

Why choose Anderson Strathern?

At Anderson Strathern we deal with all types of agricultural tenancies, crofts and smallholdings and can help you navigate through the complicated process if you are trying to deal with an executry estate following a tenant’s death.

We can also help farmers, crofters and smallholders at the point of their estate planning, ensuring these individuals are clear about what assets they have, their succession options and what steps need to be taken immediately on death to ensure their wishes can be achieved. In turn, their families can be made fully aware of the position in advance so that they are ready to deal with short timescales and don’t risk losing the tenancy. If we can take one positive from the inheritance tax changes that brought about the widespread press coverage, perhaps it’s that it has prompted many families to start having discussions about succession at an earlier stage, helping spread awareness and ensuring that individual wishes can be adhered to, which can only be a good thing particularly given the short timescales involved after the farmer has died.

How we can help

If you have questions about any of the issues raised in this article, please contact Julia Kidd (julia.kidd@andersonstrathern.co.uk) or a member of our Rural team.