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Country Matters October 2012

Welcome

This edition of Country Matters provides a broad spectrum of articles on some of the different matters we address on a daily basis within the Agriculture and Estates team at Brodies. We have an agricultural case law update, an article on the new tenancy deposit schemes and an article on the recently passed Land Registration (Scotland) Act 2012. The latter article was contributed by Ellen Eunson, who joined Brodies earlier this year in our Aberdeen office. Ellen will work closely with Clive Phillips, who is also based in our Aberdeen office. Some of you may have been approached by SSE wayleaves officers in relation to the east coast electricity cable upgrade. Landowners and occupiers should be aware that there is scope for negotiation with utility companies when being pressed to sign servitude or wayleave agreements. We have recently set up a specialist team at Brodies who can advise on the whole range of utilities issues for landowners in relation to electricity, telecoms, gas and water pipes and cables on their land. Our team brings together specialists in agriculture, planning, compulsory purchase and property litigation. The utilities team are hosting a seminar at Forfar Mart on Thursday 18 October so if you would like to attend, please come along (details on how to sign up on page 4). Should you have any queries regarding any of the matters raised in this edition of Country Matters, or indeed any other rural or agricultural property issue, please get in touch.

Odell Milne, Partner

Tenancy deposit schemes Three tenancy deposit schemes (TDS) became operational on 2 July 2011 following approval of their providers under the Tenancy Deposit Schemes (Scotland) Regulations 2011. This launch date triggered a three month period until the duties under the Regulations become effective. From 2 October 2012, deposits taken in connection with most new private sector residential tenancies must be lodged with a TDS within 30 working days of the start date, to be held for the duration of the tenancy. The Regulations apply to all landlords obliged to register under the Antisocial Behaviour etc. (Scotland) Act 2004 and therefore apply to deposits held under all assured and regulated tenancies. The landlord must also provide the tenant with information including the deposit amount, details of, and how to contact, the TDS, and the circumstances in which the deposit may be retained by the landlord, with reference to the lease. Leases should specify for what reasons any part of a deposit may be retained by the landlord. Deposits held in respect of existing tenancies must be transferred to a TDS within specific timeframes, which vary depending on when the deposit was taken, in accordance with the table below. Technically, the first date on which deposits become payable in respect of any existing tenancy is 2 October 2012, although we understand the TDS are already accepting transfers of deposits. Date Deposit Received

Last date to pay deposit to scheme/provide information to Tenant

Prior to 7 March 2011

15 May 2013

Prior to 7 March 2011 but tenancy renewed between 2 October 2012 and 1 April 2013

Within 30 working days of such renewal

Between 7 March 2011 and 1 October 2012

13 November 2012

On or after 2 October 2012

Within 30 working days of start of tenancy

Every deposit held in respect of existing tenancies will have to be paid to a TDS by 15 May 2013. This is the final date for compliance - landlords should consider moving deposits as soon as they are able, to avoid facing penalties. Failure to comply with the Regulations can result in a penalty of up to three times the deposit amount being awarded to the tenant. The tenant, therefore, has a vested interest in ensuring their landlord has complied with their duties – and notifying the relevant persons if not. At lease end, the landlord applies for return of the deposit, specifying what sums they consider should be returned to each party and the TDS then seeks the tenant's agreement. The TDS must provide access to a free dispute resolution service to resolve disagreements as to proportions of deposit to be returned to each party. A landlord must use this service if their tenant wishes to, although it will remain open to tenants to go to court to seek repayment of a deposit. There will be no costs to either landlords or tenants for using a TDS.

Fiona Scott, Brodies LLP


Country Matters October 2012

Core Paths As highlighted in our last edition of Country Matters, the Scottish Government is undertaking a consultation on amendments to the Land Reform (Scotland) Act 2003 which would enable local authorities temporarily to close Core paths. However no report has been issued by the Scottish Government in relation to the consultation. We shall update following issue of the report.

Bob Forman, Brodies LLP

Agricultural Case Law Update Since the last edition of Country Matters, the Scottish Courts have given their decisions on the latest instalments of two high profile agricultural cases. In the first, the Court of Session overturned a decision made in the Land Court in June 2010 following a dispute between the landlord, Richard Morrison-Low, and the executors of the late tenant, Thomas Paterson, over the rent of Moonzie Farm, Fife. The central issue is how Single Farm Payment (SFP) is to be treated when determining rent. The original decision, which took the view that SFP was not part of the farm's earnings and should not be taken into account when determining the farm's rent, was overturned by Lord Gill on the basis that historic subsidies were a material factor when determining previous rents. However, the treatment of SFP was not the only matter dealt with by Lord Gill in his judgement, who also provided a preferential process for determining open market farm rent, namely: (a) lettings of comparable 1991 Act holdings, (b) appropriately adjusted rent of open market Limited Duration Tenancies and Short Limited Duration Tenancies, (c) rents of comparable holdings agreed with sitting tenants, and (d) a farm budget. The last being the method used by the Land Court in the original case. Lord Gill also clarified that marriage value could legitimately be taken into account when determining the open market rent and that other factors such as security of tenure, the right to enforce obligations in relation to fixed equipment and the potential for succession and right to buy should be looked at ‘in the round’ when determining a realistic farm rent. The case was returned to the Land Court, where it was decided in April that a rent of ÂŁ31,462 was appropriate following the guidance of the Court of Session. The second well documented case, Salvesen v. Riddell, decided in the Court of Session in March, related to the contentious termination of limited partnerships as far back as 3 February 2003.

Again, it was Lord Gill who presided over this case. This time he not only overturned the Land Court's original decision but also found the Scottish Parliament's drafting in breach of the Human Rights of the limited partner, Mr Salvesen. The brief facts of the case relate to the termination of limited partnerships at the time of the passage through Parliament of the Bill, which would later become the Agricultural Holdings (Scotland) Act 2003. During this time a number of limited partners took the decision, which was within their legal and contractual rights, to terminate their limited partnerships in order to start the double notice procedure, whereby they would regain vacant possession. However, the Scottish Parliament frowned upon such actions and in the final stages of the Bill introduced s72 of the 2003 Act, which not only nullified the benefit of the notices served between 16 September 2002 and 30 June 2003 but also penalised those limited partners by introducing a mechanism whereby the general partner could vest in the tenancy himself and ultimately serve a Notice of Intention to Buy under the 2003 Act. In his judgement, Lord Gill found the introduction of s72 to go beyond normal anti-avoidance measures by not only nullifying the benefit but also putting the limited partners in a worse position than if they had served the notices either before 16 September 2002 or after 30 June 2003. This case may not be as far reaching as Moonzie but for those who served termination notices between these dates it does bring some long-awaited relief. The Scottish Courts may be glad to see the back of these cases, which have generated a tremendous amount of press interest, but for how long remains the question? The Scottish Parliament has yet to say how it proposes to deal with the outfall from the Salvesen case and it is understood that the rent for Moonzie, as at December 2011, is under review.

Murray Soutar, Brodies LLP


Country Matters October 2012

The Land Registration etc. (Scotland) Act 2012 The Land Registration etc. (Scotland) Act was passed by the Scottish Parliament on 31 May 2012. The aim of this legislation is to modernise and improve the current system of land registration in Scotland, and to bring it into line with current legal practice and the expectations of modern society. The Act is lengthy and complex, so which provisions will affect rural landowners? When the current Land Register was introduced in 1979 one aim was gradually to replace the Sasine Register. Old fashioned title deeds have been superseded by computer generated Land Certificates which include Ordnance Survey map-based title plans. While this new system of registration has generally been viewed as successful and welcome, only just over half of all titles, and around one fifth of the country’s land mass, are on the Land Register. One of the aims of the Act is to finally close down the Sasine Register, by speeding up the transfer of Sasine titles on to the Land Register. Presently, registration in the Land Register is only compulsory when a property is sold and since many rural properties are transferred through generations of families without ever being sold, many have not yet made it on to the Land Register. The Act introduces a requirement that all properties that are transferred (whether or not money changes hands) are to be registered in the Land Register. There is also provision that the Keeper (the head of the Land Register) is to accept applications for voluntary registrations provided that she is satisfied that is it expedient to do so. Although at present the Keeper has absolute discretion over whether to accept voluntary registrations, very few are rejected so this provision may do little to increase the number of properties transferred on to the Land Register. The Act also allows the Keeper to induce registration of a property in the Land Register if she so decides. When a property is transferred from the Sasine Register to the Land Register for the first time, the Land Register must be provided with either a plan or written description sufficient to allow the Keeper to prepare a plan of the property based on the Ordnance Survey map. The Land Certificate, when it is issued, will include a map showing the extent of the property, and the owner will benefit from the Land Register's guarantee of good title. In some very old Sasine deeds properties are referred to simply by the

name of an estate or farm and it can very difficult for owners and lawyers to identify boundaries, which in turn can cause difficulties when it comes to a sale or in the event of a boundary dispute. The title plans that form part of Land Certificates can remove such uncertainties. Though the Act introduces new provisions for the Keeper to rectify Land Certificates that contain errors, the provisions for compensation mean that Land Registered titles are, in effect, guaranteed by the state. The costs to the Land Register of processing first registrations of estates have been rumoured to run into tens if not hundreds of thousands of pounds and the cynics amongst us may wonder if the Keeper will ever deem it expedient to carry out voluntary registrations of large farms and estates, never mind induce registration of such properties. Only time will tell how these provisions will be applied, but it seems unlikely that we will see a spate of voluntary or keeper-induced registrations. The Scottish Government has estimated that it will take 30 to 40 years before the Sasine Register is finally shut down. It remains to be seen whether there will be a rise in registration dues in due course to cover any additional work that the Land Register will have to carry out due to the introduction of this legislation. The Act has also introduced a requirement for the Land Register to keep a Cadastral Map of Scotland, showing all registered titles. While giving the public easy access to information on land ownership may be seen as beneficial to some, others may be uneasy with this concept. Nevertheless, for centuries there has been a requirement for anyone registering title to land in Scotland to disclose their identity. Other than a change in name, the introduction of the Cadastral Map will not alter significantly the current set-up. The Land Register can already be accessed on the internet and allows for map-based searching, though the Sasine Register may not be as user friendly as its modern day successor. As more and more titles make their way on to the Land Register and technology progresses it is likely that it will become easier for the lay person to identify the owners of land in Scotland. It is estimated that the first provisions of the Act will come into force in around two years' time.

Ellen Eunson, Brodies LLP

‘Shoot on sight’ direction for Muntjac Deer Muntjac Deer, a non-native species originating in China, recently were spotted in Dumfries & Galloway. Scottish Natural Heritage (SNH) responded quickly with a statement advising that this highly destructive animal, if spotted, should be shot on sight. The recent Wildlife and Natural Environment (Scotland) Act 2011 extended the scope of the legislative provisions designed to address the spread of species such as Muntjac Deer. In particular, it requires any occupier of land who becomes aware of the presence of Muntjac Deer to notify SNH without delay. Muntjac Deer can cause extensive damage to woodland, crops and other wildlife so SNH’s clear position on this issue is to be welcomed. It has been estimated that if Muntjac Deer were to establish themselves in Scotland they could cause up to £2m in crop and other damage per annum. A Code of Practice on how to deal with non-native and invasive species came into force on 2 July 2012 and can be found on the Scottish Government website: http://www.scotland.gov.uk/Resource/0039/00396355.pdf.

Lorna Ronald, Brodies LLP


Country Matters October 2012

Some Shocking News on Electricity Wayleaves financial compensation than would otherwise be offered. Alternatively, there may be an option of having the cables and apparatus re-routed to a less obtrusive location.

Some readers of Country Matters may already be aware of the proposed upgrade of the electricity transmission lines on the east coast of Scotland. Indeed, some of our readers may have received notices from Scottish and Southern Energy (SSE) informing them of the proposed upgrade. SSE, in conjunction with the Scottish Government, is undertaking a project to upgrade the east coast transmission line from an operating voltage of 275 kV to 400 kV. The existing line runs from Blackhillock, near Keith, to Blairingone.

Landowners approached by SSE may be asked to grant rights over the land, either under a Wayleave Agreement or a Deed of Servitude. The land over which the cables are to run may already be subject to Wayleave Agreements and Deeds of Servitude. However, wayleaves do not always 'run with the land' and may not be binding on successors in title. Therefore, if a previous owner entered into a Wayleave Agreement with SSE (or its predecessors) it does not necessarily entitle SSE to continue to exercise those rights over the land.

The extent of the project means that there will be a significant impact on a number of landowners along the line of the route. Any landowner contacted by SSE, or one of its agents, should speak to us or a land agent prior to reaching any agreement with SSE. We or your land agent can advise you as to your rights and may be able to negotiate a better deal than you are offered.

If this is a matter which is of concern or interest to you please get in touch with your usual Brodies contact and they will be able to advise you further. Brodies has a dedicated utilities team which specialises in advising landowners on such matters. Or come along to our evening utilities update - see below.

SSE has certain statutory rights to provide electricity and often these rights override the rights of landowners to the particular use of land. However, the statutory rights are not as comprehensive and straightforward as the electricity company may wish landowners to believe. Landowners have more scope for negotiation than one might imagine. Landowners may, for example, be entitled to ask for more

Andrew Ion, Brodies LLP

Events: Utilities update seminar: Evening seminar (5:30 - 8pm), Forfar Auction Mart on Thursday 18 October. Speakers will provide an update on utilities and the law for landowners and occupiers and will discuss the proposed upgrade of the east coast electricity transmission lines. Autumn mini-conference: Friday 16 November in our Edinburgh office, with keynote speaker Sarah-Jane Laing, Head of Policy at Scottish Land & Estates. The day will start at 9:30am ending at 1pm, with a light lunch. For more information or to register to attend either of these free events, please visit our website: www.brodies.com/seminars or contact Sinead Dorrian - sinead.dorrian@brodies.com or call 0131 656 0147.

Key Contacts

Odell Milne Partner

Alex Buchan Partner

Clive Phillips Partner

David Houldsworth Consultant

Murray Soutar Associate

Andrew Ion Senior Solicitor & Editor

Fiona Scott Senior Solicitor

Ellen Eunson Senior Solicitor

0131 656 0189 odell.milne@brodies.com

0131 656 0249 murray.soutar@brodies.com

Aberdeen

0131 656 3745 alex.buchan@brodies.com

0131 656 0268 andrew.ion@brodies.com

Edinburgh

01224 392 281 clive.phillips@brodies.com

0131 656 0214 fiona.scott@brodies.com

Glasgow

Brussels

0131 656 0172 david.houldsworth@brodies.com

01224 392 289 ellen.eunson@brodies.com

www.brodies.com

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