Linglie Farm

Closes 18 Jul 2024

Opened 22 May 2024

Overview

Disposal of Linglie Farm Cottages and Small field

Under the Community Empowerment (Scotland) Act 2015, the Local Authority is required to consult with the local community when there is a proposal to dispose of Common Good property. Selkirk Common Good fund are proposing to transfer ownership of the two small cottages at Linglie farm and the 0.82 acre field to the rear of the cottages to the current farm tenant.

The tenant at Linglie farm wishes to retire and end the tenancy of the farm.  Under the Agricultural Holdings (Scotland) Act 1991 a tenant is entitled to a payment at the end of a tenancy, referred to as a relinquishment payment. These legal provisions were introduced recently with the aim of helping existing tenants wishing to retire or quit the tenancy to do so and to help provide new opportunities for new entrants to enter the profession.

The relinquishment payment due to the tenant is calculated based on a valuation methodology laid out in the Agricultural Holdings (Scotland) Act 1991.

In summary, the payment due to the tenant as outlined in the legislation is: _

  • 50% of the difference between the value of the holding with vacant possession (excluding any value attributed to tenant’s improvements) and the value of the holding with the tenant in occupation (discounting any potential successors to the tenancy); plus
  •  the amount of compensation due to the tenant for tenant’s improvements minus the amount of compensation due to the landlord for dilapidations.

Advice has been sought from specialist external consultants, who have advised on the relinquishment payment that would be due to the tenant under the legislation. Following this negotiation has been undertaken with the tenant and agreement reached on a relinquishment settlement. The two small farm cottages and the 0.82 acre field to the rear of the cottages will be transferred to the tenant as part of the relinquishment payment. The total value of the agreed relinquishment settlement is less than the cash settlement advised by the specialist external consultants and achieves a favourable outcome for both parties.

Under the legislation if the landlord did not agree to proceed with the relinquishment payment to the tenant, the tenant would be entitled to sell the current tenancy and the tenancy would be assigned to the purchaser of the tenancy. As landlord, the Common Good would only be able to object to the assignation on the following grounds:

  • The person does not meet the new entrant or progressing farmer definitions.
  • The person would not have the ability to pay the rent.
  • The person does not have the necessary skills or experience to manage and maintain the land in accordance with the rules of good husbandry.

The current tenancy dates from the 1930’s and is a secure tenancy which includes succession rights allowing relatives of the tenant to take on the tenancy. These succession rights would pass on to the new tenant if the tenancy was assigned.

Detailed analysis and consideration of the two options, (i) making the relinquishment payment to the tenant or (ii) allowing the tenant to sell and assign the tenancy, has been undertaken. This has included financial analysis of each option which has shown that proceeding with the relinquishment payment including the transfer of the cottages and field provides the best return to the Selkirk Common Good fund. The advantages and disadvantages of each option are outlined in the tables below.

The tenant has a legal right to request a relinquishment. Analysis shows that the relinquishment of the tenancy would be beneficial to both the landlord and the tenant in the long term.

 

Relinquish Tenancy and Transfer Cottages and Field to Tenant

Advantages

Disadvantages

End the secure tenancy with associated succession rights

Ability for Common Good to achieve a higher rental income from the property with a new tenancy

More flexible tenancy terms with a new tenancy (e.g. the Common Good will have more rights to resume land and buildings compared with the current tenancy)

Removes requirement for the Common Good to refurbish and upgrade the cottages

 

Relinquishment payment reduces the size of Common Good property 

 

 

 

Tenant Sells Tenancy and Tenancy is Assigned

Advantages

Disadvantages

No capital payment to the current tenant

 

Current secure tenancy continues

New tenant will have succession rights so the tenancy can be assigned by them to an eligible successor e.g. child or spouse

Capital investment is likely to be required by the Common Good as the new tenant is likely to request that the landlord undertakes work which would be the landlord’s responsibility under the current lease

 

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