No better time than now to put family tenancy in order

I remember my father sitting me down one evening after coming back from a sale, this was in the days when sales were as much a social event as a business one! In Oban, Corson’s Mart was much more sociable than most. He said to me, Peter, you need to decide whether you are going to take over the tenancy of the farm. I was eight. I no more knew whether I would go into farming than I knew what was for dinner next week. It wasn’t the last time he would ask me though, so it obviously was on his mind, and rightly so. Granted he jumped the gun a bit, but it should be on the mind of everyone who has a tenancy. As an industry we need to get away from the approach where things aren’t discussed openly, I recognise it is an emotive subject but in light of our most recent budget it’s never been more important to plan ahead.

If you have a tenancy, it is important to understand the rules around assignation and succession, this will allow you to make an informed decision as to how you want to pass the tenancy on. If the worst happens, it will be difficult to manage the farm without you and all the focus will be on the animals and crops which can lead to deadlines being missed and tenancies being lost. It is much better having the difficult conversations now rather than your family having to find out about the process when they are trying to cope with the loss of a loved one. This is relevant to both those with a tenancy to pass on and those who hope to take on a tenancy. I was always told that we had a secure tenancy but no more detail than that. It came as quite a surprise to me when I did finally take over the tenancy, some twenty odd years later, to find out that a 91 Act tenancy isn’t 100% secure as I had been led to believe. There are pitfalls and problems that can arise which need to be addressed in the correct manner.

The Tenant Farming Commissioner (TFC) has written a guide that outlines the ways in which an agricultural tenancy can be passed on to another person. It includes information on whether and how a tenancy might be assigned during a tenant’s lifetime; bequeathing a tenancy and transfer of a tenancy when someone fails to leave a Will. The guide is available on our website and summarises the legal basics. I would encourage anyone with an interest to read this guide, but it is always recommended that independent legal advice is taken.

Which route is chosen will depend on individual circumstances but, generally, making an assignation to a ‘near relative’ during the tenant’s lifetime is likely to be the most straightforward. For testate and intestate transfers there are some very firm time limits that must be adhered to and ignorance of them will not be accepted as a reason for missing them should the transfer be challenged in the Land Court. Failure to meet them may result in the tenancy being terminated. It is very important for the tenant to understand the process, the assignee or bequeathed should fully understand what needs to happen but also your chosen executors and legal representatives must fully understand the process. Don’t assume they understand the complexity of the rules. Some do, but unfortunately, many don’t. Make sure they understand the timescales involved, their responsibilities and potential liabilities.

Given the recent budget announcements, it is now equally important that, as well as understanding the legal processes that have to accompany a transfer, any additional tax implications will have to be considered. A tenancy, particularly a 91 Act secure tenancy, has a value and if that value is being passed on through inheritance there may be inheritance tax implications so as well as consulting a lawyer about passing on a tenancy, you should also consult your accountant or tax adviser.

If you have a tenancy speak to those around you about what you want to happen when you are gone, you might be surprised by who is interested in taking it on. Make a plan, and write a Will, nobody wants to, but we will all die, it’s one thing in life we can rely on! Nothing causes a family more problems than trying to untangle the mess of an estate without a Will, this is amplified where a tenancy is involved, and the additional time and cost can be significant. It’s important to understand that if the correct timescales aren’t met your tenancy could be lost along with an opportunity for the next generation.

I won’t go so far as to say it’s never too early as that wasn’t exactly my own experience but don’t put it off. The TFC operates a helpline to offer advice on any tenancy matter, if you have issues with any aspect of an agricultural tenancy, don’t ignore the problem, contact us today at the Helpline number below.

The Tenant Farming Helpline can be contacted by emailing tfc@landcommission.gov.scot or by phoning 01463 423300.