Land reform – the effect of resumption changes on energy

The Land Reform (Scotland) Act 2025 covers a large number of topics, some of which have received plenty of attention in articles like this one, and some not as much. This article focuses on one of the underreported aspects of the Act – changes to rules around resumption of ground from agricultural tenancies – and what this could mean for prospective renewable energy developments which either are under option, or where terms are being negotiated.

Resumption is often confused with renunciation, as both legal processes have the same end result: control of land in tenancy is returned to the landowner. We use the term “resumption” when the landowner takes back the land unilaterally, pursuant to a clause in the lease or legislation which allows this. Often this makes little or no real difference to the tenant farmer, for example if one acre on the edge of a 1,000 acre farm is resumed for a housebuilding plot. “Renunciation”, on the other hand, is where the tenant voluntarily hands back the land on terms agreed with the landlord.

Up to now resumption has, perhaps surprisingly, been easier with traditional secure agricultural tenancies (if there is a written lease) than with modern, fixed term tenancies. While bringing the tenancy as a whole to an end is very difficult, it has long been possible to exercise a contractual right of resumption, provided it is for a non-agricultural purpose and the farm remains workable without the resumed land. The notice period for doing so is typically two to three months. The tenant is then entitled to a proportionate rent reduction, as well as a lump sum in compensation for “disturbance” (usually modest and not always claimed).

Written leases often contain a resumption clause, but many secure tenancies are unwritten. In those cases resumption is not possible.

How this works under modern tenancies

With modern tenancies under the “fixed duration” regime introduced in 2003, resumption is difficult, and not usually a practical option for renewables. The notice period is one year, and notice can only be given after planning permission has been granted, meaning significant delay to construction if the tenant doesn’t willingly give up the land earlier.

Resumption for renewable energy

Before the Land Reform Bill was put forward, developers might have signed options with landowners without bringing the agricultural tenant on board. While this would not usually be the first choice, it may in some cases have seemed easier to provide in the Option Agreement that the landlord will exercise its right of resumption shortly after receiving an Option Notice, taking back the land to be used for the development within around three months. If so this would usually be on the basis that the developer will pay the statutory compensation due to the tenant.

So what’s changing?

In short, tenants whose land is resumed will get more notice and more money. All agricultural resumptions will now require one year’s notice – an increase of fourfold or more in a typical case, and a blow to construction timetables.

Another head of compensation for tenants will be added – calculated as half the difference between the value of the landlord’s interest in the resumed land with vacant possession, and its value subject to the tenancy. That may be significant where development is about to happen.

The statutory procedure for calculating the compensation amount is complex, and a professional valuer must be appointed by the Tenant Farming Commissioner (a public official) in every case. The Act does not allow for the amount to simply be agreed between landlord and tenant, and the landlord must pay both the tenant’s and the Commissioner’s expenses for the valuation, adding to cost.

The extra costs of compensation and valuers’ expenses will not have been anticipated in option deals signed before the Land Reform Bill was published, and there may be disagreement over who will bear them.

The upshot is that any developers who have already done a deal with only the landlord, and were relying on the resumption process in place of an agreement with the agricultural tenant, may now have to revisit that decision and negotiate terms with a tenant whose commercial position is considerably strengthened by the new rules. It may need to be a renunciation after all.

When will the law change?

We don’t yet know. The Holyrood Parliament has now dissolved ahead of the election and a commencement date will need to be set by the next Scottish Government. Any developers about to step through to lease who may be affected will need to keep a close eye on updates, so as not to be caught out.

How we can help

If you have questions regarding The Land Reform (Scotland) Act 2025 or any other Rural Land and Business issue, please contact Tim Macdonald or a member of our team.