LDT long continuations: avoid sleepwalking into a 10-year lease extension

LDT long continuations: avoid sleepwalking into a 10-year lease extension

November 2024 may be your last chance to review your farm lease for 10 years.

Following the agricultural tenancy reforms of 2003, many landlords and tenants in Scotland signed “limited duration tenancies” (LDTs), most commonly with an initial term of 15 years. These replaced secure agricultural tenancies as the primary lease type for long-term lets.

In Scottish leasing law, a lease does not simply end when the expiry date arrives, unless one of the parties takes action to end it. While most leases run on for a year at a time, so an opportunity to terminate comes around annually once they have passed their original term, LDTs are different.

How long do LDTs run?

The first two times an LDT overruns, legislation says a further three years are added. The third time, 10 more years are added, with no way to end it sooner if both parties do not agree.

As an example, take an LDT granted just after the law reforms, starting on 28 November 2003. Most of these “first edition” LDTs will have been 15-year leases – the legal minimum duration at the time. So the expiry date is 27 November 2018. Two three-year extensions (“short continuations”) take us to 27 November 2024. Any further overrun will create a 10-year “long continuation” until 27 November 2034.

For tenants, that may be well past their planned retirement from farming. For landlords, it may get in the way of other plans, e.g. for selling the farm, or using part of the land for development or tree planting.

What can I do?

The answer depends on whether you are a landlord or a tenant.

Landlords: You can serve a notice to quit at any time in the three years before the long continuation starts. This brings the lease to an end two years after the notice is served (even if that is not a lease anniversary). In our example, the last day for serving notice would be 27 November 2024.

The notice procedure is tricky to get exactly right, so doing this without legal assistance is not recommended. Ask a legal expert for assistance as soon as possible.

Most of the time, a landlord needs to serve two legal notices to end an LDT, but when a long continuation is coming up, only one notice is needed.

Tenants: You can serve a notice ending the tenancy between one and two years ahead of an expiry date. So if a long continuation is due to start on 28 May 2025, there is just enough time (as at the date of publication). Again, we highly recommend seeking legal assistance as soon as possible if you’re looking to serve notice to your landlord soon.

In our example, the tenant would already be too late to serve notice, but your landlord may well be willing to discuss termination by agreement. Alternatively, you might be able to assign the tenancy to another person, although the landlord has a right of first refusal.

Rent reviews: If a long continuation does begin, you can still ask for the rent to be reviewed. Either the landlord or the tenant can do this. Rent reviews usually need to be at least three years apart, but the lease may make different provision.

Top takeaways

  • Think ahead. Tenants: how long do you want to be farming? Will a younger family member take over your business when you retire? Landlords: is a change of land use on the horizon? Does land with development or planting potential need to be kept out of any tenancy extension, or let for a shorter term than the rest?
  • Manage expectations. Letting the other party know your long-term ambitions can make for an easier relationship based on open dialogue.
  • Diarise key dates. When you have your head down in the day-to-day, it’s easy not to notice deadlines creeping up on you. The legislation doesn’t allow leeway – a formal notice given too late isn’t worth the paper it’s written on.
  • Don’t leave it to the last minute to get in touch. Leave enough time for your legal adviser to prepare a notice, look into any complications that may come up, and serve it by post. Letters may take a few days to arrive, and last-minute methods of service (e.g. Sheriff Officers) are expensive.

If you are a landlord or a tenant seeking to end an LDT, get in touch with Tim Macdonald or your regular Anderson Strathern contact.

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