LANDLORDS should take care when entering into rent negotiations with their tenants, according to the Scottish Tenant Farmers Association (SFTA).
There has been a sense of optimism in farming over the past year amid higher prices for cereals, livestock and milk. However, the SFTA claims that most of the higher returns have now been swallowed up by rapidly rising costs, especially for feed,
fuel and fertiliser. This, according to SFTA vice-chairman Brian Shaw of Dryfeholm Farm, near Lockerbie, is causing great uncertainty over future prospects in the industry.
Shaw, who is currently in the midst of a rent review, said: "I would advise any tenant farmer who is faced with a demand for a rent rise to insist that his factor produces facts and figures to substantiate his argument. It's up to him to put his case and I would be surprised if he could justify his demands in the current economic climate."
In common with its sister organisation in England, the STFA is reminding its members that a rent review notice served by a landlord can be acted upon by the tenant even if the landlord himself takes no action.
Angus McCall, the chairman of the STFA, said: "Once served, a rent review notice allows either party to call for a review of the rent and the process remains live until either the 12 month notice period is exhausted or the rent review notice is withdrawn, which requires the consent of both parties."
During the agricultural depression in the ten years to 2007, when matters improved, there was very little movement in rental values. Landlords generally recognised that tenants simply could not afford to pay more. Some landlords even went as far as agreeing reductions.
Late last year in the wake of the foot-and-mouth crisis, which resulted in a collapse of the sheep trade, some of the large estates, including Roxburghe and Buccleuch, gave their tenants an extra three months beyond the normal settlement date to pay their rents. This was greatly appreciated, especially by hill farmers.
McCall reckons his members should be prepared to consider all options. He said: "A tenant is able to use a notice served by a landlord to pursue a reduction in rent even if the landlord decides not to act.
This may well present tenants with an opportunity to get a high rent down to a more realistic level. Increased costs of production have made farming a high-risk business requiring tenants to plan forward and manage their risks. Rent is another cost which needs to be kept under control."
If a tenant and his landlord cannot reach a mutually satisfactory agreement either party has the option of going to arbitration, ultimately in the Scottish Land Court. This can be an expensive and lengthy process.
No disputes have been heard in the Land Court for some time, but the STFA is confident that in the event of future litigation a more pragmatic view will be taken. This, according to McCall, will do much to dispel the "hype" propagated by land agents and arrive at sensible rent levels.
He added: "Any rent agreement must first take account of the tenant's ability to farm the land profitably before looking at the extravagant rents achieved on the open market where the scarcity of land for let has distorted the market out of all proportion."
Roddy Jackson, factor of Roxburghe Estates in the Borders, said: "We have a large in-hand farming business involving both arable and hill units so we are well aware of the effects of rapidly rising costs right across the board and that will be taken into full consideration at any rent reviews for our tenants."
The full article contains 622 words and appears in The Scotsman newspaper.
