DIVISIONAL COURT

(Mr D J Houston)

HOWARD v LAWSON & OTHERS

(Application SLC 92/11 – Order of 20 November 2012)

CROFTS – FAIR RENT – PART OF CROFT – SHARES IN COMMON GRAZING –STOCKING CAPACITY – SOUMING NOT DETERMINATIVE – ALLOCATION OF ANNUAL PER HEAD RATE FOR SEASONAL USE – CROFT HOUSE SITE – HOUSE PROVIDED BY LANDLORD – RESPONSIBILITIES OF LANDLORD AND CROFTER – ASSESSMENT BASED ON RENT (SCOTLAND) ACT 1984 COMPARABLES – CROFTERS (SCOTLAND) ACT 1993 Sec 6

The landlord of an estate applied to have fair rents fixed for various crofting subjects, including a croft inclusive of its house site and common grazing rights, two individual house sites and three common grazings. In assessing separate rents for different elements of a crofting tenancy, the Court relied on section 6(4) of the 1993 Act which provides for determination of a fair rent “for a croft or for any part of a croft”.

As far as croft land and common grazings was concerned, the principles established in Sutherland v Sutherland and Others 1997 SLCR 144 were followed. Faced with limited evidence, the Court relied on its own inspection of the subjects and experience in other cases. It established what it considered to be a realistic stocking capacity for each grazings, having regard to the nature and potential of the land provided by the landlord. The soumings for the grazings were not challenged, but the Court found that the grazings would be unable to support the historical souming on a year round basis, and might be unable to do so in the grazing season alone.

In assessing the fair rent for a croft house provided by the landlord, the Court concentrated on the rental value of the building itself, rent for the site being negligible. In the absence of any precedents setting out the methodology for determining fair rents for croft houses, the Court undertook a detailed analysis of the factors it considered relevant, including the respective responsibilities and interests of landlord and tenant. Because the house was “thirled” to the croft, the rent for it could only be determined in accordance with the 1993 Act, but the Court accepted the proposition that rents for similar non-croft houses assessed under the Rent (Scotland) Act 1984 sec 48(2) were fixed on the basis of a neutral market with no scarcity and that accordingly comparison with such assessments was apt.

HELD that (1) in assessing the stocking capacity of a common grazings for rental purposes, the Court is not bound to use the soumings as set out in the most up to date grazings regulations; (2) the fair rent should not be set at a lower level in circumstances where a crofter does not utilise the land to its full potential, or where the crofter has allowed the land to deteriorate; (3) where common grazings have come to be used independently of formerly associated in-bye land, the proper approach to determining stocking capacity is to assess the summer carrying capacity of the grazings on its own; (4) when fair rent is determined on a per head basis, the rate to be applied for the summer period only falls to be assessed as a proportion of the full year rate; (5) where a landlord has provided fixed equipment, such as a dwelling-house, the rent should not be set at a lower level as a consequence of deterioration of the fabric brought about by any failure of the crofter to properly maintain it; (6) comparison with similar houses in the locality whose rent has been fixed under the Housing (Scotland) Act 1984 is an appropriate method of eliminating open market influence on rent, but such comparables require to be further adjusted to take account of the peculiarities of crofting tenure.

The Note attached to the Court’s order is as follows:

Note:

Statutory Material

Crofters (Scotland) Act 1993 as amended (the 1993 Act)
Rent (Scotland) Act 1994
Housing (Scotland) Act 1988

Cases

Sutherland v Sutherland and Others 1997 SLCR 144
Mackay v Trustees of the Fourth Duke of Sutherland 1970 SLCR (App) 97
Mackay v Trustees of the Fourth Duke of Sutherland and Others 1970 SLCR (App) 140

Background

[1] This is one of five applications by the landlord of Colonsay Estate to have fair rents fixed for various crofting subjects. They were heard together in Colonsay Village Hall on 30 July 2012. At the commencement of the hearing it was agreed that because it was anticipated that there would be significant overlap in the evidence between the five cases, it was appropriate that, in effect, they be heard together. To such extent as they required to be heard individually and in order to make best use of parties’ time we heard evidence and submission relating to the three common grazings first, then the house sites and finally the one case involving tenanted croft land.

[2] The above Order is specific to this case, but because all the cases were in fact heard together and elements of all cases overlapped, we have considered it appropriate simply to narrate details of the hearing and inspection, together with our discussion and decision for all cases in one comprehensive Note. Accordingly some parts of this Note may not have direct relevance to this particular application.

Evidence and Submission

[3] The Court allowed Mr Chris Addison-Scott to represent the landlord applicant, the Honourable Alex Howard, and also Mr Donald McNeill and Mr John Bridges to represent the shareholders in South (otherwise Lower) Kilchattan grazings and Uragaig grazings respectively. In addition, Mr Trevor Patrick represented Mr Duncan McDougall and Mr Archie MacConnell in respect of their house sites. It may be said at the outset that, subsequent to the hearing and inspection, Mr MacConnell and the landlord applicant reached a settlement extra-judicially in relation to the fair rent for Mr MacConnell’s house site. Minutes of Agreement were lodged and we issued an Order dismissing that application, SLC 95/11, on 27 August 2012. This Note accordingly only narrates matters relevant to the remaining four applications.

Donald Alexander Euan Howard (51)

[4] Mr Howard gave evidence that he had inherited the estate from his father and had been running it since 1992, having lived and worked on Colonsay since then. Previously his career had been as a helicopter pilot in the Navy followed by a short spell as a merchant banker. His evidence in chief was read by him from a prepared statement which was in the following terms:-

“Some years ago, I asked Chris to undertake a review of the crofting holdings that the estate still has an interest in. I did not know and it became apparent that neither did some of the crofters know, who had what in terms of land holdings and soumings. I would particularly like to stress to this court today that this application is principally about establishing these facts as a basis for moving forwards in the future. We initially asked the Land Court to establish the appropriate rental levels and I have spoken with individual crofters explaining that this was our intention. In the event, the Land Court has asked us to “open the batting” with what we think the fair rents should be. I did not particularly want it to be this way as it was inevitable that it would be misinterpreted by many as the Estate simply trying to increase its rent role opportunistically. However Chris Addison Scott has much experience in both agricultural and crofting leases and will set out how we have arrived at the new proposed rents.

As has already been stated, there are now new crofts being established on the island with a new landlord. It seems to me that, if at all possible, there should be a consistent approach to establishing fair rent for all crofters on Colonsay.

Much of the information that we have compiled has been possible because of the assistance given to us by various crofters on the island. The map we now have of the island will be helpful for the future and will of course be updated. I am grateful to those that have contributed and hope that this Hearing can be seen as a way of finalising much of this work without becoming contentious and indeed personal.

As a general point, as a member of the Colonsay Community, I firmly believe that crofting has a significant role to play in the modern community but that there are various anomalies that many members of this community are not aware of. Hopefully this hearing will help in addressing this issue.

My family has owned the Estate for 108 years. In that time, a significant amount of investment has been made on the island by the family. In particular, the provision of improved housing for crofters. This is of course at odds with the original intention of crofting law but was seen as appropriate at the time. Much of the discussion that will ensue regarding the remaining croft houses owned by the estate results from this situation.

I sincerely hope that the Land Court will be able to reasonably address the issues and set us all on the right track for the future.”

[5] Under cross-examination, Mr Howard told us that during his time as landlord the estate had invested in the crofts in a small way. The more significant investments had been before his time. He was not aware, in terms of the crofting legislation, that there were any obligations on a crofting landlord to invest in the crofts. It was for the crofters to develop the land and have the security of tenure that went with a crofting tenancy.

Christopher Barr Addison-Scott (53)

[6] Mr Addison-Scott gave evidence that he was a partner in the firm of CKD Galbraith and a Member of the Royal Institution of Chartered Surveyors. He was land agent for the Isle of Colonsay Estate and was presenting the case on behalf of the Estate and also giving evidence as an expert in assessment of rent. Mr Howard was the proprietor of the Estate and landlord of various subjects, including those with which the present applications were concerned. The intention was to present the Estate’s case jointly with Mr Howard. Mr Addison-Scott had also prepared a written statement which he read and which was the basis of his evidence. It was as follows:-

“The Estate has been largely in the ownership of Mr Howard since 1982 and 1985. The croft rents have not been formally reviewed since Mr Howard inherited the subjects, other than on the occasion of a croft sale. It is understood that the last formal review was undertaken by this Court in the mid 1970’s, some 37 years’ ago. Since then the Land Court has visited the island on a non rent matter in the 1980’s.

Since the last review the crofting estate on Colonsay has changed significantly. The majority of crofts have been acquired by the crofters and much of the common grazings has been apportioned to the occupiers and acquired. There are now also two crofting landlords on the island. In addition to the applicants the Colonsay Community Development Company (CCDC) now own various crofts, the details of which have been provided as evidence.

The crofts owned by CCDC have recently been let on the open market with applicants offering a Fair Rent and paying a premium to secure occupation. The land ranges from improved to unimproved and is bare land.

The Estate has undertaken these reviews with a view to establishing the facts concerning the crofting areas in respect of occupation, areas, souming and shares. In that regard the exercise to date has succeeded. The estate has established this information relative to all the common grazings and crofts. Although the Crofters Commission records do seem to be out of date and not all together helpful we believe that we have now established the facts.

In approaching this rent review we have applied to the Land Court as the final ‘arbiter’ to establish and confirm the facts and apply a fair rent. The estate has not approached this exercise with any intention other than to achieve this goal.

Under crofting legislation the Land Court has to arrive at a fair rent which is a rent that the crofter, working the holding himself or his family and with hired labour, as required, with reasonable skill, can make out of the holding. The main point is to find what a fair division between the landlord and the crofter of the annual net profits of a particular holding taking into account fixed equipment and the provider of that equipment and the land quality.

Under the law the Land Court is required on a referral to it to determine what the fair rent payable should be, having heard the parties to the case. This is the process in which we are now engaged.

An important case which is relevant to the review process before is Sutherland Estates v. Sutherland and Others (RN SLC/50/97). In this case the Court was asked to determine a fair rent for common grazings. The findings of the case are fundamental in assessing a fair rent and recognise the practicalities and difficulties applying the fair rent legislation. In Sutherland it was apparent the landlord had difficulty in obtaining individual information on each crofter, as we have here and the individual accounts for crofters were not available. The Court accepted this.

However, if necessary the Court can compel the obtaining of information. The Land Court is in a special position in that it can establish the facts of occupation and any special circumstances that can and may apply to the setting of the rent. For example in a case where land and buildings are sublet and not occupied by the crofter directly which is often the case should the ‘profit rent’ be taken into account.

In suggesting the figures in this application the landlord has had to come to a view on what a fair rent should be without the benefit of seeing the individual crofters accounts or indeed understanding their individual businesses or even circumstances. As a starting point we have looked at what agricultural tenancies pay per sheep livestock unit on the island. This is of course not relevant as agricultural rents are based on the open market and comparable rents. However as a starting point agricultural rents are roughly £5/sheep on the island and the local area. In the case before the Court the crofting land is unimproved and so we have taken 50% of the agricultural rent to discount the market rent of agricultural holdings.

Of significantly more importance, in the absence of detailed knowledge of individual crofters circumstances, we believe that lettings by CCDC should be taken into account.

The landlord has provided evidence of these rents which in summary are: Croft 2 Baile Lochdrach 3.97 acres £200pa (£50/acre), Croft 3 Baile Lochdrach 13.09 acres - £200pa (£15.27/acre), 1 Uragaig 12.20 acres - £250 (£20.49/acre) The average rent payable is therefore £28/acre.

In the case of these crofts there does not appear to be a souming and the right to buy does not exist. On this basis the common grazings would be £6300 (£572 per share or £30.58/ewe for South Kilchattan, £5264 (£28/ewe) for Upper Kilchattan and £4116 (£457/share or £19/ewe).

Obviously these figures make no sense in the present case although we feel that if these rents are good for the CCDC (which is a Scottish Government funded organisation) then why are they not good enough for a private landlord?

In all cases we have taken £2.50/ewe which is considerably less than the recent new crofting lets would appear to be indicated above.

However in the case referred to above, Sutherland Estates (1997) the rent for the Common Grazings set was £1.25 per ewe (page 163). In this important case from 15 years ago the Court recognised that a profits method of calculation was only a check on the comparative method (page 162) and that in practice it is necessary to adopt a comparative approach when assessing a croft rent. In this case it related to common grazings. In addition the Court (as a practical Court) decided to draw on crofting rents in all crofting areas and keep consistency across all the crofting counties, including the islands.

The value of £1.25 per ewe today adding inflation is £1.85. The profitability of farming since then has increased notably and taking that factor into account that £2.50 is an appropriate fair rent.

Turning now to the croft houses. It is accepted that the landlord owns three croft houses. Although this is unusual it is not unprecedented. The houses are all slightly different and have been improved to different standards by the crofters and in some cases hardly at all. Only one is occupied by the crofter themselves.

In assessing a fair rent due regard must be taken of the level of improvements carried out by the crofter. In the case of Colnatarun there is a high level of improvement. This is not disputed for the purpose of this review. Having said that, improvements and repairs must not get confused. Many of the so called improvements are in fact repairs (the crofters responsibility) and not improvements although it is accepted that some improvement can occur when a repair is carried out. Not to be confused the Crofter at Colnatarun has provided a picture of the old croft house owned by the crofter and not the landlord’s current provision. In this case we have used Scruiten and Kilchattan Croft as ‘base’ houses to assess rent. In both cases the crofters have done very little to improve the houses. In the case of the former house the landlord provided an electricity supply and it was been rewired in 1987, a new roof and double glazing also being provided.

The landlord pays insurance premiums in respect of the houses for comprehensive cover, as follows: Colnatarun £110 (insured value £205,727), Scruiten £88 (£164,337) and Kilchattan Croft £75 (£140,860). These are replacement values for modern materials.

As a useful comparable the landlord has several regulated tenancies on the island. Evidence of these fair rents has been exhibited. The fair rents set in these instances range from £2200 to £2700. In all cases the landlord is obliged to repair and renewal but the rents are based on a non-market rent basis and are roughly half a market value rent for similar properties. We consider that a discount of 75% plus on these rents to be fair and that the landlord can expect a rent in excess of the insurance premium. Surely the landlord can expect a rent considerably in excess of the amount payable in insurance premiums? If not then the outcome is far from fair.

Finally turning to Kilchattan Croft. This is the only croft being reviewed today. On the basis of the CCDC comparables the rent should be £237 pa plus an applied rental value for the house as described above. The land comprises mainly in-bye land. Although considerable emphasis has been placed on correspondence between the landlords legal agents and the crofters solicitors from 2009-2011 that a sale has been agreed. However the transaction has never been progressed. In agreeing to a figure of £80 the crofter must have considered the stocking or souming level. That has to be established as part of this exercise. The landlord cannot therefore be held to the figures suggested (£80 for the croft land) especially in light of the recent CCDC croft lets. It is clear also that the transaction should be looked at in the round, i.e. that the house rent also had to be agreed. It was previously proposed at £500 pa as evidenced in the correspondence.”

[7] Under cross-examination, Mr Addison-Scott told us that he was unsure as to what extent the CCDC crofts had been government funded. He was aware that they had received funding, but was unsure as to the source of those funds.

[8] The agricultural holding rents quoted were from four farms on Colonsay. One was a partnership tenancy with Mr Howard. Another was a full tenancy, but although that was of bare land, the tenant paid a section 13 rent. Mr Howard’s wife also had a 1991 Act tenancy with a post lease agreement. As well as agricultural tenancies where there was a close relationship with Mr Howard, there were others and their rents had been agreed in line with the figures which Mr Addison-Scott quoted. The rental values quoted were at a similar level to those on other islands. There was profitability in hill farming generally, but the key was in the subsidies – which had to be taken account of in determining the rent.

[9] As far as the profitability of farming was concerned, he thought there had been a general increase in stock values. He did not know what the price of prime lambs had been in 1976, but thought it might have been around £30. The price of fat lambs trickled down to set the store lamb price.

[10] In relation to croft houses, Mr Addison-Scott told us that there were not many regulated tenancies left now. Since 1984 landlords could convert them to modern tenancies. The Housing (Scotland) Act 1988 allowed for short assured tenancies. But the details of regulated rents as set out in Productions 8A, 8B and 8C of SLC 93/11 and SLC 96/11 were in the public domain. They had been set by the Rent Assessment Committee, which sets a fair rent as is required for a croft. A Rent Officer normal hears the case and tenant’s improvements are taken into account in setting a fair rent.

[11] It was accepted that croft house fair rents and regulated rents were different, but neither related to the market place. In his experience, regulated rents were set at around half of the market rate for a modern short assured tenancy.

[12] Another important difference between croft houses and regulated tenancies under the Housing (Scotland) Act 1988 was that landlords were responsible for repairs, renewals and insurance. Thus a discount had to be applied to take account of the crofter’s liability to undertake repairs and renewals. In the present cases, the landlord had in fact undertaken some work on one of the properties, although he was not required to do so. For croft houses, the landlord only had to pay for insurance of the property.

[13] It was clear that there had to be a substantial discount from the equivalent regulated tenancy. He had no ‘magic formula’ for this, but his view was that a 75% discount was reasonable considering what the croft house was worth, but allowing for the responsibility of the crofter to deal with repairs and renewals.

[14] In fixing a fair rent for a regulated tenancy, the Rent Officer looked at market rents and discounted them to set the fair rent. There were several other well known methods of calculating rent, including the profits based method and return on capital, but neither was used in fixing rents for regulated tenancies. There was now little correlation between capital values and rent. The legislation was designed to prevent rack renting.

[15] The house at Scruiten was of Doran pre-fabricated construction and was provided in the mid 1950s. There were several of the same type on the island. What could be seen today was what the landlord had provided. He had not inspected the house, although he had visited it and was aware, for instance, that the windows had been upgraded. That would fall to be regarded as a tenant’s improvement. He accepted that electrical provision in the 1950s would have been very basic, but he was not aware of what improvements may have been carried out since. He was prepared to accept that upgrading of the electrical system had been undertaken and also that oil-fired heating, a modern stove and an electric shower over the bath had been installed by the tenant – though it would have been preferable had the crofter provided detail of this at an earlier stage.

[16] As far as Mrs MacConnell’s house was concerned, the landlord had provided everything. Mr Addison-Scott understood that a new roof, double glazing and an upgraded electrical system had been provided for Dougie MacGillivray, the present tenant’s grandfather, in the mid 1980s. He also thought that central heating had been provided in around 2005 under a European Community grant scheme.

[17] Turning to the croft land, under reference to Productions 7A, 7B and 7C of SLC 96/11, the rents for the new crofts had averaged £28 per acre. In arriving at the proposed rent for Mrs MacConnell’s croft, the landlord was seeking a rent of £17 per acre and accordingly a rent of £145 for the croft land. The land above the road was the best.

[18] Purchase negotiations for the croft had been going on for some time, with some terms agreed but not all. Mrs MacConnell agreed a rent for the land of £80 so she must have thought of that as a starting point because of the CCDC rents. The landlord’s position was that the rent for the croft land should be £145. This was based on £17 per acre, which was a discount on the CCDC rents. The Court should take them into account and £145 was a fair rent on that basis.

[19] Mr Addison-Scott was of the view that the rent of £80 originally proposed in negotiations was part of an overall deal. Further evidence had now been gathered and in any event the proposed rent of £80 had never been charged.

[20] As far as the CCDC rents were concerned, the legislation allowed for rents to be arrived at by negotiation and the evidence of those rents was still relevant. It was not necessarily the case that the negotiated rents had been inflated to secure the tenancy. It was not correct to say that that they were not fair rents under the legislation.

[21] Under questioning from the Court, Mr Addison-Scott said he knew little about the system of management of any of the grazings. Quite often the shares were sub-let. He would expect the grazings to be stocked as dictated by their soumings, which the estate had accepted as being realistic for present purposes. He did not know when the soumings had last been reviewed. Often they had been set historically, but no-one appeared to doubt them. He thought that the grazings were stocked with Blackface ewes producing store lambs.

[22] He did not know the basis upon which the rents for the Uragaig crofts had been set, but was aware that they had been advertised for let and presumed that there had then been a selection process.

[23] There were many environmental designations on the island, but he was not aware of any specific restrictions imposed as to how the land was to be worked.

[24] Mr Howard supported the system of crofting tenure. The CCDC lets proved that there was a demand for crofting. The size of the estate had shrunk since 1976 as crofters had bought their croft land and apportionments and subsequently developed the land. It was difficult to predict the future economics and it was particularly difficult when looking at small pieces of land worked part-time by crofters with another job. There was subsidy support through LFASS and SFP as well as environmental payments. Without that support, the economics would not look good. But it was the case here that there had been no rent reviews for many years.

[25] Mrs MacConnell’s croft was about 7½ acres and was not worked as a standalone croft at the moment. It could perhaps carry ten ewes and 2 to 3 cows depending on inputs and it had to be remembered that there were common grazings associated with this croft. It was also accepted that the only provision of fixed equipment by the landlord was the croft house.

Donald Malcolm McNeill (58)

[26] Mr McNeill gave evidence that he was grazings clerk of South Kilchattan Common Grazings and was speaking on behalf of all the shareholders. He had been a tenant of his own croft since 1979. His wife now owned the croft, so he was only tenant of the estate in respect of the common grazings.

[27] The crofters were anxious to sort matters out, but very disappointed to find that the estate had gone straight to the Land Court. He had been asked to attend a meeting, but there had been no indication that there would be a Land Court application.

[28] In 1979 the grazings had been in a different state to that which they were now in. The comparison with agricultural tenancies was not valid. Generally the crofters got the areas of land that the farmers did not want – so it was inherently poorer.

[29] There had been a heath fire last year and that had revealed the inadequacies of the fences – which were in a state whereby the stock could wander through them. It was effectively only the scrub which had been keeping the sheep on the grazing.

[30] Under reference to Production 2, the estate had worked out a souming equivalent of 6 sheep per cow. Even if it was taken at 5 sheep per cow, that would give a total souming of 188 sheep on 272 acres or about 1.44 acres per sheep. His own experience had been as tenant of Garvard at Kilchoan where he had run 400 ewes on 1200 acres of better land – some of which was old arable and included machair with two hills – both better than the grazings at Kilchattan. It was ludicrous to assume 188 sheep could be run on these grazings – they would be on the neighbouring farm in five minutes.....or dead. He thought that the soumings had originally been set in about 1946.

[31] He doubted that profitability had increased. Sheep had to be fed. Freight charges were somewhere around £80 per tonne. The cost of animal medicines had also increased since 1979, as had the cost of shipping lambs to the mainland. It was much more difficult to join up with other farms to share transport.

[32] There used to be an element of co-operation between the landlord and the crofters – for instance sharing a dipper through the croft grant scheme. Similarly there used to be a machinery group. Neither was any longer in operation. The estate’s investment in the crofts was small. Overall, the crofters had concluded that a fair rent was around 70p to £1 per sheep.

[33] Under cross-examination, Mr McNeill confirmed that the condition of the land now was worse than it had been in 1979. He accepted that maintenance of the land and equipment was the responsibility of the crofter. What mattered was what the land was worth at this point in time. There was no encouragement for the crofters to invest. There had been no successful eradication of bracken and so that had resulted in the deterioration of the grazing, some of which was under an SSSI designation.

[34] Asked why the soumings set in the 1940s, if correct then, were no longer appropriate as a base figure now, Mr McNeill took the view that the soumings had been set at their present rate when all the farms had been free of bracken. The best grazing pastures on the island were being crept over by bracken. The area now available for grazing was half the size which it once was. However, Mr McNeill accepted that the crofters were not expecting the landlord to make investments other than sharing in the cost of mending fencing. He did not think that the landlord should suffer because of any element of poor practice by the crofters – but the area for grazing had been reduced for all – and all were guilty of allowing the deterioration.

[35] In response to questions from the Court, Mr McNeill thought that the grazings would possibly have been capable of carrying 150 Blackface ewes in 1979. They would have been crossed with Border Leicester or Cheviot tups and the lambs sold store. The current capacity would be not more than 100 ewes for the full year.

[36] The figure of 70p to £1 per sheep had really been just a starting point for negotiation – it had been based on some informal advice. Basically the shareholders had halved the rent per ewe because the stocking rate had halved.

[37] The stocking rate in 1979 had been 10 cows and 70 ewes. In 2012 it was 7 cows and 56 sheep – and probably not even that, since the cows would need to be wintered at home.

[38] There was an SSSI along the loch side which affected the ability of the crofters to spray bracken. That was where the best grazings on the hill were and it seemed that there was little which could be done about it. Mr McNeill accepted that it was not really fair that the landlord’s rent should be reduced because of deterioration in the condition of the grazings and a consequent reduction in stock carrying capacity, but in effect everyone was losing. Bracken could be controlled by mechanical means and different stocking levels – but that was not possible on South Kilchattan.

Duncan McDougall

[39] Mr McDougall, who was the sole shareholder in the North (otherwise Upper) Kilchattan Common Grazings, declined to give evidence himself, but adopted the evidence of Donald McNeill insofar as relevant to that grazings.

John Bridges (84)

[40] Mr Bridges gave evidence that he was clerk to Uragaig Common Grazings and was representing all the crofters there. He had first come to Colonsay in 1971 on holiday. He had retired at the age of 70, having previously worked as a director of a Lloyds underwriting agency. He was new to crofting and had very little experience of it, but prior to 1970, he had owned tenanted farms in Aberdeenshire, though he had not farmed them himself.

[41] Confirmation of the current shareholdings in Uragaig grazings had only been received on 28 March 2012. Virtually all of his own in-bye land was designated as an SSSI, as was some of the Uragaig grazings. Under reference to the map, Production 1, most of the north-most third of the grazings was so designated. Any change in agricultural practice on the designated area required consent.

[42] All the crofters agreed that an increase in the rent for the grazings was justified and they had attempted to reach an agreement with the landlord. They had offered £10 per share but this had been declined. Subsequently, in a telephone conversation with the Crofting Commission, he had indicated that £10 had been offered and was told that that was a fair rent. Overall, the witness thought that 50p per sheep would be fair and that would mean a rent of £12 per share.

[43] The souming was 36 cattle and no sheep – but he was unaware of the history or basis of that. 12 cattle would be much more appropriate and that was equivalent to 60 sheep. Only two of the crofters presently had stock on the ground, although one other shareholder was planning to introduce Highland cattle.

[44] There had been a recent problem whereby a fire had been accidentally started and it had destroyed fences on two crofts and part of the common grazings, such that they were no longer stock-proof. Any rent increase should be deferred until the fences had been repaired. What appeared to be estate sheep had already broken through on to the best part of the grazings unaffected by the fire.

[45] Under cross-examination and questioning by the Court, Mr Bridges told us that he did not presently live on the island full time. He would normally do so for some nine or ten months in the year, but his wife had required hospital treatment on the mainland recently.

[46] On the areas of the grazing which were subject to the SSSI designation, consent had been obtained to treat ragwort. There were, however, no payments made to the crofters in respect of the land which was subject to the designation.

[47] He did not know what the basis of the present souming was. There had once been twenty cows on it, but that had been too many because there had not been sufficient grazing for them.

[48] The witness was not sure of freight charges or arrangements between the mainland and the island, but he understood that hay brought over to the island in the last two or three years had cost £4 a bale with £4 freight charge on top of that. Sheep nuts cost around £7.50 for a 25 kg bag.

Trevor Patrick (67)

[49] Mr Patrick gave evidence that he was a retired Chartered Surveyor and lived on the island, having married a local girl. He had been a quantity and building surveyor with experience of commercial and domestic rent reviews. He accepted that the approach to renting croft houses was not the same and in particular did not have regard to the open market. He did not think that croft rents could be related to regulated tenancy rents. Nor did he consider comparison with the rents of other estate tenants to be appropriate. Because he lived on the island, he knew that he required to take an independent view when giving advice. In the present case, he was representing Duncan McDougall. [It may be noted that at the hearing he was also representing Mr Archie MacConnell in the application SLC 95/11, but as indicated earlier, settlement was reached in that case and we have excluded evidential material which related only to that application]

[50] Everyone accepted that a rent review was overdue, but equally it was contended that the rents proposed by the landlord were excessive because they were based on the reports and valuations lodged with the Court. Other expert agents had indicated lower comparable rents. He did not think that the landlord had fully recognised the extent of tenant upgrades and improvements.

[51] It was important to understand the proper basis of rent determination. He was not aware of the basis for rent in the original leases. Indeed he understood that there were no written leases. In the absence of a lease, he accepted that the houses were let on a full repairing basis. There was no record of the original rents. But what was important was to get at what the landlord originally let to the tenant.

[52] Under cross-examination, he emphasised that it was important to have regard to what the landlord had provided. The structure of the two houses involved was quite different – one being a Doran type building and the other brick-built. To the proposition that the Court should rent a perfectly habitable Doran house, he expressed the view that a Doran house built in the 1950s might only be expected to last a further ten to fifteen years.

[53] Although he had no experience in crofting, he was of the view that the normal principles of renting were relevant and that in the process of arriving at a fair rent for a croft house those principles were still to be adopted. He understood that the crofter was entirely responsible for repairs.

[54] Mr Patrick accepted that he was not an expert on croft house rents. He agreed that it could not be regarded as fair that a landlord should pay an insurance premium of £100 and only receive a rent of £50. However it was important to establish what improvements had been carried out by the tenant and to ensure that rent was not applied to them.

Mrs Flora MacConnell (51)

[55] Mrs MacConnell gave evidence that she lived on the mainland and worked as a civil servant with Job Centre Plus in Glasgow. She had no experience of crofting. She had inherited the croft in 2007 from her grandfather, Mr McGillivray. The croft was presently worked by members of her family and her uncle Ian lived in the house. He had lived there with her late grandfather.

[56] She had decided that she wanted to buy the croft and started negotiations in 2008. In 2009 a rent of £80 per year was proposed as a basis for calculating the purchase price. Although that was more than she was already paying, she had agreed to it as a basis for purchase. It had been her solicitors who had suggested the £80 on the understanding that there would be negotiation over the rent for the grazing and the house. She could not understand where the new and much higher proposed rent of £145 had come from.

[57] The estate had delayed in dealing with the purchase and there had been three frustrating years. That had made it difficult to make decisions and everything had to be put on hold. She intended to return to the island and maybe work the land herself, but could not make long term decisions until the purchase had gone through. In the meantime she was happy that her relations work the croft.

[58] She derived no income from the croft, with the land simply being used by a relative for grazing.

[59] Under cross-examination Mrs MacConnell told us that she was unsure what stock were actually on the croft or what its stocking capacity was. In her view the landlord’s suggested stocking of 2 or 3 cows and 10 sheep was inflated. The rent of £80 had been agreed with her solicitor on the basis of his advice to her. She appeared to accept that the landlord’s proposed stocking was equivalent to 20 sheep and that £80 would be equivalent to £4 per ewe. However, she currently paid £61.50 for the croft, house and share in the grazing and had no income from that.

Closing Submissions

[60] As is quite often the case in our hearings, evidence and submission tended to be presented together, rather than in distinct tranches. Accordingly closing submissions, as such, were limited to brief summaries of parties’ respective cases.

For applicant

[61] Mr Addison-Scott was of the view that the Court had heard a considerable volume of useful evidence and that had been one of the reasons for engaging in the rent review. However, as regards the stocking rates for the various grazings, the Court had to work with the soumings which had been set. That was the basis upon which the land had originally been rented and, he presumed, agreed. If the land had deteriorated since the original soumings had been set, then that had been the crofters’ responsibility. No-one had challenged the soumings as such prior to the hearing – they seemed to have been factually accepted. In a sense they bore resemblance to consideration of a hefted sheep-stock.

[62] It made no difference that the grazings had been separated from the in-bye crofts. The Court was bound to fix the rent according to the soumings. Even if the Court was to come to the view that the land could not now, and never could have carried that level of stock, the rent had to be based on the soumings which had been set.

[63] It was accepted that rents for agricultural holdings were different from croft rents. The former were based on the open market and on comparables. But the landlord had presented evidence to support the levels of revised crofting rents which he sought. The evidence relating to the rents of the new crofts at Uragaig was relevant because they had been agreed and so should influence the Court’s decision. It indicated that considerably higher levels were appropriate.

[64] The case of Sutherland was relevant. There, the Court considered that rents should be looked at nationally. The Land Court was in a position to do that. There should be a wide interpretation of ‘district’. The Court had the advantage of seeing crofts across the country, thereby making its assessment easier.

[65] There was little by way of comparative evidence for the rents of croft houses. In that situation, what he had tried to do was to take a logical approach as he saw it, but he stood to be corrected. It seemed to him that a crofter should pay a fair rent for the expensive and valuable fixed equipment which the landlord had provided.

For respondents

[66] Mr McNeill did not agree with Mr Addison-Scott’s approach. When the rents had been established in the 1980s, there had been no mention of stock numbers as being the basis. It had only been recently that the soumings had been used. It was wrong to say that rentals were to be based on soumings and in any event no basis had been given for the levels of rents per ewe which were now sought.

[67] As far as the CCDC crofts were concerned, the rents had been suggested by the directors of the company. He had no idea as to where their ‘magic figures’ had come from. It may be that the tenants would come to the Land Court to have fair rents fixed.

Inspection

[68] A fairly comprehensive inspection of all the relevant subjects was undertaken on Tuesday 31 July. For the inspection of the croft houses, we were accompanied by the respective crofting tenants, Mr Howard and Mr Addison-Scott. However, by agreement of parties, the inspection of the three common grazings and the one in-bye croft was unaccompanied.

South (Lower) Kilchattan Common Grazings (SLC 92/11)

[69] We have satisfied ourselves that the area depicted on the map, Production 1, and inspected by us, extends to 87.78 hectares (217 acres) or thereby.

[70] There is a relatively small part of this grazing at a lower level (circa 30 – 40 metres above sea level) on the south and west side of Loch Fada. A considerable proportion of that area appears to be lying wet, which we presume to have resulted from difficulties in achieving efficient drainage due to the water levels in the loch. That detracts significantly from its grazing value. There are also some small areas of useful grazing along the bottom edges of the craggy slopes leading up to the main higher grazing – particularly at the north west corner, generally to the south east of Seaview. We noted some bracken encroachment.

[71] The upper area generally lies at between 90 and 120 metres above sea level, but rises to 135 metres on Carn Mor. Throughout it is a mosaic of rock outcrop, heather, heath and hill grass / herb covered harder areas and knolls and wetter (including some raised) bog areas – the proportions of each varying across the whole grazing. To such extent as there is heather cover, it is in reasonable condition for grazing purposes. Although there were some patches of bracken, they were not extensive – albeit that they most likely marred some of the more useful parts of the grazing.

[72] There was evidence of the extensive fire which was spoken of in evidence, but it does appear that the herbage is recovering – and it may be that from a grazing viewpoint it will be of higher nutritional value than it would otherwise have been.

[73] Access to many parts of the grazing other than on foot or with a quad bike would not be easy. Although the upper area can be described as exposed, some shelter is available due to the undulating nature of the land. It can also be said that the aspect is such that significant parts of the grazing have a westerly and southerly exposure.

[74] Overall, we formed the view that the grazings would be best managed for agricultural purposes through sheep grazing, but with some cattle.

North (Upper) Kilchattan Grazing (SLC 93/11)

[75] We have satisfied ourselves that the area depicted on the map, Production 1, and inspected by us, extends to 78.58 hectares (194 acres) or thereby.

[76] The area of grazing rises from the public road at around 30 metres above sea level to around 100 metres at the highest points. A significant proportion of the subjects is south or south west facing. In those areas, although there is quite extensive bracken and some gorse cover, there is little by way of rock outcrop.

[77] We noted that an area at the south west had been fenced off – broadly with the northern and eastern boundary following a ditch, the southern boundary following the public road and the eastern boundary adjoining the dyke / fences next to the church, school and adjacent properties. Although significant parts of that enclosure are wet, it may be capable of being used for winter forage production when conditions permit.

[78] Further north and generally extending to about 300 metres to the east of the western boundary of the grazing, there are areas that we suspect have been cultivated at some time in the past. Taken as a whole, a roughly triangular shaped area having its east point at the manse, its south west point at the church / school and its north point some 500 metres due north of the south west corner of the grazings is relatively good quality hill grazing.

[79] Along the northern part of the subjects, there is a higher proportion of less useful knolls and gullies / low lying areas of bog with variable cover of somewhat leggy heather and hill grasses and small areas of bracken. Some of the area is back-lying, with a colder northerly and easterly exposure.

[80] We also noted that there were extensive areas of back-lying but useful heather grazing generally to the east of the highest point on the grazing and to the west of the eastern boundary – to the west of Ballarulin. The south east corner of the grazing, above and to the east of the Manse, is steep in places and has quite extensive bracken and gorse cover.

[81] We noted that the whole grazing appeared to be enclosed by relatively well maintained dykes and fences. The topography is such that shelter from most wind directions can be found. Access to the grazings can be readily taken from the public road and most parts could be reached relatively easily on foot or using a quad bike.

[82] In terms of optimising the agricultural productivity of the grazings, we consider that they would be best managed by mixed grazing of cattle and sheep.

Uragaig Common Grazings (SLC 94/11)

[83] According to the map, Production 1, this grazing extends to a total of 59.46 hectares (147 acres) or thereby. We have satisfied ourselves that this reflects the area of the land in question.

[84] The grazings effectively comprise two parts – firstly an extensive upper area at the south east with Beinnan an Sgoltaire at around 125 metres above sea level lying at the south west and the crags at the north at around 80 metres; and secondly a lower lying area below the crags and rising from the inlet at Port nam Fliuchan to the base of the crags at around 30 metres, but rising at its north west corner on the coast-line to around 50 metres or so.

[85] The western boundary of the upper area is the east shore of Loch an Sgoltaire which sits at around 60 metres above sea level. We immediately noted the recently burned areas on the west facing east banks of the loch and generally to the north east of that along and to the south of the crags which, in effect, form the northern boundary of the upper area.

[86] There are already some signs of recovery of the herbage. It became clear that virtually the whole of the upper area had been affected by the fire which we heard about in evidence. It is plain that at the present time the area would not be able to support much grazing by livestock. That also made it more difficult to assess the potential of the land, although we were assisted in that by viewing the herbage on the few unburned patches and adjacent areas – for instance at the north west of the loch.

[87] There are some significant patches of bracken across much of the upper area – although a good proportion of them is reasonably accessible from a control viewpoint. We could also see that some of the burnt heather had been leggy and in the medium term the grazing quality of the heather may well be improved. At various points, there is encroachment of birch, willow and other scrub which is suggestive of low stocking in the past.

[88] Parts of the fence along the crags were no longer stock-proof – although it is not obvious that the fence would have been stock-proof even prior to the fire.

[89] The nature of the plant cover over the majority of the upper area is similar, with the main variation being in aspect. It is all undulating with a mosaic of some rock outcrops and extensive areas of damp bog, the drier areas of which would normally, we think, have a good cover of heather, upland grasses and herbs. As far as aspect is concerned, only a relatively small proportion faces south and a significant area faces east and north. The whole area is quite exposed, with limited shelter. We took access through the lower area and up the track which leads to the north end of the loch. It is suitable for vehicles with low ground pressure tyres.

[90] The lower area can perhaps be divided into three parts – namely (i) a relatively flat area of damp grassland and heath lying mainly at the east of the area at between 30 and 40 metres above sea level; (ii) slopes rising up from (i) and from either side of the low lying area to the east of the bay at Port nam Fliuchan; and (iii) the low lying area to the east of the Port nam Fliuchan inlet, together with an elevated, but exposed, area of grassland at the north west. Most of the lower area can be relatively easily accessed from the adjacent in-bye land.

[91] The flat area at (i) is generally damp but with some drier knolls and the herbage is a mosaic of heather, heath and bog grasses and herbs – with a minor influx of bracken. The slopes of area (ii) are steep in parts, but provide some useful harder grazing, much of it grass, but with some heather, albeit that a proportion has a northerly exposure. The inlet area of (iii) has a proportion of useful grazing and the north western area also provides an expanse of grassland on a plateau, which, though exposed, is valuable grazing.

Croft Land (SLC 96/11)

[92] We are satisfied that the croft land extends to some 3.59 hectares (8.87 acres), although the effective extent of the site of the dwelling-house is around 0.12 hectares – leaving the land to be worked at around 3.47 hectares or 8.6 acres.

[93] The in-bye land of the croft is gently sloping, mostly south facing and sitting at between 30 and 40 metres above sea level. It comprises three enclosures, two above the B8086 public road and one below. The lower field extends to approximately 0.51 hectares or 1.26 acres. The north western half of the field appears to be reasonably productive grassland, but along the south boundary and particularly towards the south east it is clear that drainage is either impeded or blocked and so the utility of that area is adversely affected.

[94] The field immediately above the road extends to around 1.50 hectares of 3.71 acres. It has a good aspect and supports a good sole of reasonably productive grasses. It has almost certainly been drained in the past, but it is clear that the functioning of the drains is such that some damp patches and clumps of soft rush can be seen. The inadequacy of the drainage becomes more prevalent in the northern quarter.

[95] The north-most field extends to around 1.46 hectares or 3.61 acres. It is a bit more undulating than the other two and there is an occasional outcrop of rock. It has a slightly more easterly aspect, but not to such an extent as will materially affect its productive capacity. Generally it appears to have a good sole of relatively productive grasses, although there is some heath at the north. Apart from a low lying wet patch around one third of the way up, probably again due to defective drains, the field is reasonably hard.

[96] The drier areas of the field below the road and a good proportion of the two upper fields are suitable for winter forage production. Parts would also be suitable for cereal cropping, although this is unlikely to be undertaken in modern times. There is good access from the public road to the fields which straddle it and to both upper fields from a track up the east side leading to Gortain.

Croft Houses (SLC 93/11 and 96/11)

[97] We did not carry out a detailed inspection of either of the two houses. The inspection was simply intended to gauge the capacity and suitability of them and to see for ourselves any key points which had been raised in evidence.

[98] Mr McDougall’s house comprises a four bedroom bungalow, extending, we estimate, to around 130 m2 gross internal area. We noted, in accordance with the evidence, that it had central heating and double glazing. The house generally was a little unkempt and would benefit from some internal redecoration and minor maintenance, but we had no reason to believe that it was in any way unsound.

[99] Mrs MacConnell’s house comprises a three bedroom bungalow, extending, we estimate to around 90 m2 gross internal area. It was notably unkempt both externally and internally. Externally significant work of maintenance is required to the roof, rainwater goods and the external timber fascias are in need of painting. Internally, extensive redecoration is needed. That said, however, providing that the maintenance is carried out timeously, we have no reason to believe that the main fabric of the house has deteriorated to such extent that significant renewals or replacement is now required.

[100] We think that both houses are essentially adequate for modern crofting purposes in terms of their capacity and design.

Discussion

[101] Although, in the final analysis, we were not presented with a great deal of evidence at the hearing and would have preferred more, we found all the witnesses to be both credible and reliable.

[102] It is, we think, worth pointing out that our primary function in all of these cases is to determine a fair rent for the subjects involved. Parties, and in particular the landlord, made it clear that they viewed the exercise of updating rents in a broader way. It was said that it had clarified and informed both the estate and the crofters in relation to such matters as occupancy, boundaries and shareholdings. No doubt that is true and to be welcomed, but we think it right to point out that, in strict terms, the only formal issue which we are determining is the fair rent. We have proceeded on the basis of the agreement of parties in relation to various aspects of the subjects to be rented. It may be that such agreement reflects the true legal position, but it is not the case that we are making any formal declaration on anything other than the rent itself.

[103] Much has been written about the methodology to be used in the determination of fair rents for crofting subjects over the years, but the most recent Full Court case was that referred to by Mr Addison-Scott – namely Sutherland v Sutherland. There is no need for us to rehearse the principles set out in that case here, it being sufficient to say that as far as croft land and common grazings are concerned, the Court will normally assess the stocking and cropping capacity of the land and apply a rate to that which reflects the rates set in crofting cases across the crofting counties of the mainland and islands. The rate used in any particular case will take account of relevant features of the particular crofting subjects under review. In other words, in terms of section 6(4) of the1993 Act, we “shall take into consideration all the circumstances of the case, of the croft and of the district”.

[104] As was discussed in Sutherland, the underlying basis for determining a fair rent for land under crofting tenure in the earlier cases was founded on a fair division of the net profits of the working of the holding as between the landlord and the tenant. The Court recognised, however that “the scale of operations on individual crofts is such that attempts to carry out assessment on a profit basis are very frequently unrealistic if not impossible in practice”.

[105] What was emphasised in that case was that the Court is obliged to assess the rent “unhampered by any element of competition” and is “not attempting to find a notional open market rent”. It came to the view (at p162) that “it is in practice necessary to adopt a comparative approach when assessing croft rents; to base this on assessment of the stocking and cropping capacity of the land; and to fix a fair rent by applying a rate to reflect the circumstances of the individual croft and any particular factors affecting profitability”.

[106] It has been made clear on many occasions that we are not to have regard to market rents for other agricultural subjects, or indeed to rents achieved for crofts which have been, in effect, exposed to competitive tender or otherwise negotiated. A fair rent can perhaps be described as a rent which might expect to be achieved where there was a completely balanced market – an equality of supply and demand. It is very much a hypothetical scenario. However, even in a balanced market, it might reasonably be expected that the level of rent established would reflect the present and anticipated prospects for profitability from the working of the land. Thus, while we are not to equate croft rents with market or negotiated rents, we think we are entitled to take account of such rents to the extent – and only to the extent – that they can be shown to be reflective of the profitability of relevant enterprises.

[107] In our view, it is only through having evidence of trends in, for instance, the profitability of suckler cows and breeding ewes that we are able to adjust rents over time and at any point in time so that those levels can be used to inform the rate to be applied in cases such as the present one where there was little by way of relevant comparative evidence of croft rents to assist us in our task.

[108] When it came to our assessment of the stocking capacity of the subjects of the present cases, we did not find the evidence as to appropriate stocking rates particularly helpful and we have had to rely to a significant extent on our detailed inspection of the land and our experience of other cases to reach a concluded view as to what the land is capable of supporting by way of agricultural production.

[109] As will be seen in our discussion of the appropriate rent to be applied to the croft houses, it is obvious that the proper approach to them cannot be based on any assessment of profitability. As far as provision of fixed equipment, and in particular of croft houses, by a crofting landlord is concerned, we have found ourselves unable to derive any assistance from reported cases and or even recent cases in which rents for croft houses have been fixed by the Court. However, we are satisfied that we had sufficient material to enable us to reach a concluded view on the matter.

[110] We have determined the rents in the format which was sought by parties. In the cases where the crofters were already owner occupiers of their crofts, or tenants of another landlord in respect of their in-bye land, we have worked on the basis that the rent for the grazings shares falls due to the applicant. It can be noted that section 6(4) of the 1993 Act specifically provides for determination of a fair rent “for a croft or for any part of a croft”. Plainly that empowers us to fix separate rents for the different elements of a tenancy as we have been asked to do here.

[111] When all that remains in tenancy is either or both of a croft house site and a share in the common grazings, it is entirely apposite that we should be able to determine the rent applicable to those tenanted subjects. Parties appeared to be content to proceed on that basis and we heard no argument to the effect that, for instance, in the one case where the croft land, the house site and the share in grazings all remained in tenancy, the sum of the parts might in certain circumstance result in a different outcome to that derived from viewing the tenancy as an unum quid.

[112] That said, we have had some concerns when it came to our assessment of the appropriate stocking capacity and monetary rate to be applied to that capacity in respect of the croft land and the grazings shares. Traditionally in many crofting townships the grazing rights were seen as an integral part of the whole croft subjects and the stocking capacity of the in-bye land and of the grazing were to a significant extent dependent on each other. More importantly, as far as the present cases are concerned, we are of the view that the soumings for the three common grazings involved have been set at a time when they were associated directly with the in-bye crofts. This has implications for the both stocking capacity and the rate per head of stock to be applied.

Common Grazings (SLC 92/11, 93/11 and 94/11)

[113] The first stage in determining the rent for each grazing is to assess its productive ability – to establish what we consider to be an appropriate stocking rate.

[114] Accordingly we start by setting out – on the basis of the evidence and submissions we had, together with what we were able to assess from a fairly comprehensive inspection – what we consider to be the realistic capacity of each grazings.

[115] We have based our assessment on the clear agreement of parties that the landlord has not provided, nor contributed to, either improvement or provision of fixed equipment for any of the grazings. For the avoidance of doubt, it was agreed by parties that the only fixed equipment provided by the landlord in any of the cases is the croft houses. We are therefore assessing the rent for all of the land – in-bye and common grazings – as ‘bare land’ and as if it was in an unimproved state.

[116] That said it is important to remember that the rent is to be fixed having regard to the potential of the land. Under Schedule 2, paragraph 3 of the 1993 Act, the crofter is required either “to cultivate his croft” or “put it to some other purposeful use” or both “so that every part of the croft is cultivated or put to such use”. Under paragraph 4, he is to “provide such fixed equipment on his croft as may be necessary to enable him to cultivate the croft”. Whilst he will not be rented on such provision, in modern times when assessing crofting subjects for the purpose of fixing a fair rent, we proceed on the basis of what can be made of the land by a reasonably competent crofter who might well be expected to invest in improvements. He can make such investments in the knowledge that he will be compensated for suitable improvements at the end of the tenancy.

[117] Thus, although the rent is based on the supply by the landlord of only bare land, if the potential of the land can only realised by investment in fixed equipment or land improvement, we are entitled to have regard to that potential. If it is in accord with modern accepted practice that additional fixed equipment or land improvement is desirable and appropriate – particularly application of lime and fertilisers, weed control, control of invasive plants, fencing, drains, livestock handling and shelter facilities for instance – then we will look at the productivity of the land with the added equipment or improvements, but take fully into account the ongoing costs to the crofter of his investment.

[118] Thus it may well be that our assessment of the stocking and cropping capacity in terms of numbers of livestock or area / yields of crops results in a higher figure than could be achieved from the bare land itself, but the rate per unit area or per head of stock will be adjusted to allow for all the additional costs of improvements undertaken by the crofter or his predecessors. That ensures that he is not charged any rent on what he himself has provided.

[119] Although the total stocking capacity and the area of land per head of stock (the stocking rate) of each of the three common grazings are different in each case, we are satisfied that in calculating what is a fair rent, it is appropriate to apply the same rate per head of stock to all of them. Whether they are to be stocked with cattle or sheep or both, we would anticipate that the nature of the livestock rearing enterprises appropriate to the locality would be the same for each grazing and the relevant profitability per head would be similar.

[120] In submission, Mr Addison-Scott maintained that we were bound to use the soumings as set out in the applications. We did look at the soumings contained in the most recent copies of each of the relevant grazings regulations which are held in the Court’s offices. They were dated between 1997 and 1999. Broadly speaking, they accord with those set out in the applications, although it is apparent on the basis of the broadly unchallenged details set out in the applications that there have been some changes, including, we presume, granting of apportionments since that time. In any event, whilst the ability of the land to carry the souming was challenged by the respondents, there was no challenge to the soumings as declared in the applications.

[121] Initially, Mr Addison-Scott had calculated “sheep equivalents” on the basis of one cow being equivalent to six sheep. This ratio was challenged at the hearing and he appeared to accept that a ratio of one to five was reasonable. That is the ratio which we normally use – although it does, of course, depend on the breed of livestock and the system of management. In passing, we note from the regulations for the two Kilchattan grazings that in regard to soumings at paragraph 13(1), it is stated that “one cow shall be equivalent to five sheep”. As far as we can see, the Uragaig regulations are silent on that matter – but that may have something to do with the fact that the souming is in terms of cattle numbers only. In any event we are satisfied that in our calculations for these cases a ratio of one cow to five sheep is appropriate.

[122] Although Mr Addison-Scott insisted that we must use for the stocking capacity element of our calculation the unchallenged soumings, we do not consider that there is any mandatory basis for us to take such an approach. As we see it, what the grazings regulations set out are the numbers of stock which a crofter is entitled to keep on the grazings. Whilst, as was argued for the landlord, we have no basis for doubting that care was not taken in assessing the soumings when they were last set, that is not the same thing as saying that the grazings can in fact carry that level year in year out. It is perhaps also worth making the point that it matters not – at least in relation to determination of rent – whether a shareholder does in fact utilise his rights of grazing.

[123] Further, having undertaken a comprehensive inspection of each grazing, we are entirely satisfied that even if we accept the soumings as set out in the application, they simply could not carry that level of stocking throughout the year on an ongoing basis. That was, in effect, the position taken by some of the respondents and we agree with them. We have no doubt that if all the shareholders in each of the grazings attempted to graze the ground with the levels of stock envisaged by the soumings for the full year the land would simply be incapable of sustaining that level. Indeed, as will be seen, we have come to the view that those levels of stocking are generally too high even for the grazing season on its own.

[124] We would point out, however, that although something was made of the impact of bracken encroachment on the stocking capacity of the grazings, we do not consider its effect to be particularly significant in relation to the fair rent for the grazings with which we are concerned here. In particular, we are of the view that even absent the bracken, the grazings would not be able to support the stocking levels as indicated by the soumings.

[125] Although we had no evidence on the matter, it seems to us that the soumings have been set at a time when the in-bye land and grazings were routinely worked together. In other words they were set in association with the in-bye land of the crofts. Although the assessment of stock carrying capacity is not a precise science, we are prepared to accept that the agreed souming levels may well have been technically correct. However, our acceptance of them is on the basis set out above. In effect, we consider that the soumings are not be regarded as what the land can carry for the whole year on its own, but what it can carry throughout the grazing season with support either from the in-bye land or possibly from purchased feed at critical times. That is not to say that stock is necessarily to be excluded from the grazings in the winter months, simply that the land would not be capable of carrying anything approaching the souming outwith the grazing season – even with supplementary feeding if that could realistically be provided on site.

[126] We have decided that the best approach is to assess the summer carrying capacity as if the grazings were not associated with any in-bye land. Indeed, other than in the case of SLC 96/11, we had no evidence relating to associated in-bye croft land or apportionments available to the respondent shareholders. In practice, of course, we would anticipate that the grazings would be stocked with suckler cows and breeding ewes and that they, particularly the cows, would largely be wintered on the croft land – or at least not on the grazings.

[127] If we are to use a uniform rate per head to apply to the stocking capacity of each of the grazings – and we think that is appropriate here – then, for the reasons set out above, we are satisfied that it is not appropriate simply to apply that rate directly to the soumings as set out in the application. We have had difficulty in accepting, particularly for the Uragaig grazings, that the land could readily carry the souming even for the summer months. No doubt we could use the soumings and adjust the rate to be applied to compensate for the additional feeding that would be required to support such a stocking. The outcome should be the same, but we do not consider it the correct approach here.

[128] We have therefore based the rents on our estimation of what the land could reasonably carry during the grazing season. In some years, it may be that a little supplementary feeding would be required early and late in the season, but that has been taken into account in our assessment of the rate to apply. Had we stuck rigidly to the souming figures, then we would have had to allow, in the rate set per head of stock, for the increased cost of fodder and supplementary feeding which would be required outside the main growing season. In effect we would have had to apply some further charge equivalent to the support which the in-bye land would normally have provided – and accordingly reduced the rate per head.

[129] The only case in which we have what we understand to be “a complete croft” is Kilchattan Croft, in the tenancy of Mrs MacConnell. As we have suggested above, it might be expected that the croft’s souming on the grazings would relate to the capacity of the in-bye with which the grazings was associated. We find that the stocking capacity for the croft land on its own, without the grazings, is equivalent to 26 ewes for the full year. The croft is said in the application to have a souming of 4 cows and 30 ewes, which we take to be the equivalent of 50 ewes on the basis of 1 cow to 5 ewes. But on the assumption that the crofter is able to send most or all of the stock to the grazings in the summer, we think that sufficient winter fodder and early / back-end grazing could be supplied from the in-bye such that an overall stocking of 4 cows and 30 ewes would be entirely realistic. Of course we are making the assumption that the present extent of the in-bye croft and of the associated share in the grazings is historically consistent, but it does offer some support to the approach we have found ourselves having to take in these cases.

[130] We now move on to consider the appropriate rate to apply to the stocking levels. Although Mr Addison-Scott submitted that a rate of £2.50 per ewe was appropriate, that figure had been based on a discount of 50% applied to rents being achieved on the island and locally on other non-croft holdings. As we have already commented, it is not appropriate for us to have regard to market and negotiated rents. However we are aware that croft rents per head of livestock are normally fixed by us at considerably lower levels than those achieved for other types of holding. As it happens, having regard to the evidence in these cases and the rates set in recent times for other crofts on other islands and on the mainland, we consider that an appropriate rate per breeding ewe in the circumstances here is in fact £2.50.

[131] However, that is the rate per ewe which we would expect to use based on the full cropping / stocking season – the rate for a full year. As outlined above, we have decided that the grazings should be rented on the basis of their summering capacity only. In our view the appropriate proportion of the year round rent of £2.50 per ewe can fairly be assessed at £1.20 for the grazing season and £1.30 for the winter period. As we have indicated earlier, we think that mixed stocking of sheep and cattle would make better use of the land. However, the rate applied for breeding cows would have been £6.00 in respect of the summer period, based on a year round rate of £12.50 and, accordingly, the outcome would have been the same.

[132] Although the respondents proffered rates up to £1 per ewe, no real basis was given as to why such a rate was considered appropriate. It seemed either to relate to an acceptable percentage increase from the present rate or even as a starting point for negotiations. We are satisfied that a rate of that sort of magnitude would not represent a fair rent having regard to the current prospects for the agricultural industry generally and in the circumstances of these cases.

[133] No doubt higher rates would be appropriate on parts of the mainland where the croft might be stocked with cross-bred ewes, but we are satisfied that the rate above is apt for a Blackface ewe rearing store lambs for sale on Colonsay. Although most of the land with which we are concerned in the present cases is relatively close to sea level, the land itself would not readily support larger ewes producing finished lambs. In addition, even on the basis of the limited evidence we had before us, there are significantly higher input costs, including transport, for livestock rearing enterprises on Colonsay when compared with less remote areas of the mainland.

South (otherwise Lower) Kilchattan (SLC 92/11)

[134] Having regard to the general discussion above and to our note of inspection, we consider that an appropriate summer stocking for the whole grazings of around 88 hectares (217 acres) can be fairly stated as 150 breeding ewes or equivalent. The souming, based on 5 sheep to 1 cow is 188 sheep. Our level suggests a summer stocking rate of around 1 ewe to 1.45 acres. Although there are some useful grazings on the lower parts, the extent of relatively productive ground on the upper area is limited. There are quite extensive areas of bare or sparsely populated rock outcrops.

[135] We have concluded above that an appropriate rate to apply per ewe is £1.20 and accordingly we fix the rent payable in respect of all the shares in the South Kilchattan grazing with effect from 28 November 2012 to be £180.

[136] We have noticed that there is a disparity between the shareholdings and the stock numbers associated with them. In other words the stocking per share is not consistent between the shareholders. Accordingly, we shall fix a rate based on the stock number entitlement rather than on an allocation of the 11 shares. Based on a total stocking of 150 sheep, the rate to be applied in proportion to the soumings is £0.96 per head and accordingly the rents due by each shareholder are:-

Shareholder Souming
cows ewes equiv
Mrs Annie Lawson 7 34 69 £66
Donald M McNeil 3 10 25 £24
Archie MacConnell 4 24 44 £42
Mrs F MacConnell 4 30 50 £48
Total 18 98 188 £180

NB We have rounded the rents to the nearest £1.

North (Upper) Kilchattan (SLC 93/11)

[137] Having regard to the earlier general discussion and to our note of inspection, we consider that an appropriate summer stocking for the whole grazings of around 78 hectares (194 acres) can be fairly stated as 148 breeding ewes or equivalent. The souming, based on 5 sheep to 1 cow is 170 sheep. Our level suggests a summer stocking rate of 1 ewe to 1.32 acres. The grazing appears to us to have a good proportion of potentially productive land.

[138] We have concluded above that an appropriate rate to apply per ewe is £1.20 and accordingly we fix the rent payable in respect of the one shareholding in the North Kilchattan grazing with effect from 28 November 2012 to be £177.60, which we round to £178.00.

Uragaig (SLC 94/11)

[139] Although Mr Bridges submitted that any rent increase should be delayed until the fences had been repaired, we consider that to be a matter to be taken up with the landlord. Additionally, we accept that the grazing will take some time to recover from the effects of the fire, but we think that the rent is to be determined on the basis that there had not in fact been any damage caused by it. To such extent as the shareholders have been disadvantaged by the fire – and we have little doubt that they have in terms of availability of grazing and ability to control stock – that is something which, if they consider it necessary, they will have to take up in another forum. We know nothing of what or who caused the fire, but as far as any redress goes, that is something which does not fall within our jurisdiction.

[140] Having regard to the earlier general discussion and to our note of inspection, we consider that an appropriate summer stocking for the whole grazings of around 59 hectares (146 acres) can be fairly stated as 120 breeding ewes or equivalent. The souming, based on 5 sheep to 1 cow is 180 sheep. Our level suggests a summer stocking rate of around 1 ewe to 1.22 acres.

[141] Although the effects of the fire on the upper part of the grazing made it more difficult to asses the potential of the land, we can see that the totality of the Uragaig grazings offers some potentially useful mixed grazing. However, we simply cannot accept that the grazings – even before the fire or after it has recovered from it – could carry 180 ewes for the grazing season, far less for the whole year. As outlined earlier, we can only assume that when the soumings were fixed they were associated with crofts which were capable of supporting that level. In the present case, we have had to assess the stocking rate effectively on the assumption that there is likely to be support in winter for 120 ewes, but the rent ignores the contribution from that.

[142] We have concluded above that an appropriate rate to apply per ewe is £1.20 and accordingly we fix the rent payable in respect of all the shares in the Uragaig grazings with effect from 28 November 2012 to be £144.00. As the shares and soumings accord with each other, we allocate the rent for the total of 9 shares according to the shareholdings at a rate of £16.00per share.

Share Rent
John Bridges 2 £32
Daniel Hamilton 1 £16
Walter Williams 2 £32
Exrs of Donald McLeod 2 £32
William Dady 1 £16
Philip Jones 1 £16
Total 9 £144
Croft Land (SLC 96/11)

[143] On the basis of our inspection, we consider that the area of Kilchattan Croft which is available for agricultural use extends to some 3.47 hectares or 8.6 acres. Although traditionally much of this would have been described as ‘arable’ (as opposed to ‘outrun’), in modern times we would expect it to be used for livestock rearing – both for grazing and production of winter forage to sustain the stock.

[144] We assess the ground in terms of its potential to sustain production for the full year. The land has a favourable aspect and the drainage could be improved. Although we have no evidence as to the depth and nature of the soil, we are satisfied that it is capable of good grass production and a more than sufficient proportion of the land can readily be cut for winter forage.

[145] Although it may be that the croft could support slightly larger ewes, producing more forward store lambs, we have assessed the stocking capacity based on hill Blackface ewes as for the grazings. Our assessment of the stocking capacity is therefore 26 breeding ewes, although in practice we would expect the crofter to keep some cattle and rather less ewes. As outlined earlier, we consider that an appropriate full year rate for ewes is £2.50 and accordingly we fix the rent at £65.00.

Croft Houses (SLC 93/11 and 96/11)

[146] At the outset, it is important to bear in mind that the element of the croft which falls to be rented under this head is what is defined in the 1993 Act at section 12(4) as “the site of the dwelling-house” and in terms of the section, that includes “any building thereon” and an extent of garden ground appropriate for the reasonable enjoyment of the dwelling-house as a residence. As we will note later, the rent for the site itself is normally so low as to be considered negligible. Thus the focus of our deliberations is entirely on the building which has been provided by the landlord.

[147] We have already given a brief description of the two houses involved and there is little by way of dispute in relation to what it is that we are required to rent. Although there was perhaps a little doubt as to what improvements had been carried out and by whom, we are satisfied that, in the round, the two houses can be treated as being of very similar rental value as crofting subjects. That is certainly how the landlord viewed them and his position in that regard was not really challenged.

[148] It is important to stress that although we have noted certain failures in maintenance – particularly in regard to the Kilchattan Croft house, those failures have to be disregarded in our assessment of rent. The rent is fixed on the basis that the houses have not been allowed to dilapidate to the prejudice of the interest of the landlord : Schedule 2, paragraph 5(a) of the 1993 Act. As was effectively agreed by parties, we think it correct to fix the rent on the basis that they are to be viewed as they have been provided, but in reasonable condition for their age. In other words, we are to assume that they have been properly maintained.

[149] Accordingly, we will ignore the improvements made to the Scruiten house – because the evidence was that Mr McDougall paid for those. Conversely, we must include in the rental for Mrs MacConnell’s house the improvements that have been undertaken by the landlord since the original construction. Taking a fairly broad approach, we think that the higher capacity of Mr McDougall’s house requires some adjustment to cater for what we think would be rather higher ongoing maintenance costs when compared with the lower capacity house at Kilchattan Croft, which, if in good condition would, we think, be less expensive to maintain.

[150] Having established what the subjects to be rented are, we now turn to the rather more difficult question of the appropriate method of determining fair rents for them.

[151] As far as renting of croft land is concerned, there has been an abundance of cases over the years which have set out the principles involved in determining a fair rent for bare croft land – where the land is viewed as being in an unimproved state and with no landlord’s provision of fixed equipment. That, essentially, is the normal position in the vast majority of cases coming before this court.

[152] There have been some cases where the landlord has provided certain items of fixed equipment of relevance to the agricultural productivity of the croft. This would include items such as barns, byres, fencing and drainage. Although the determination of croft rents in modern times as set out in Sutherland involves assessing the stocking capacity of the holding and applying an appropriate rate to that, the rate applied is ultimately founded on what the crofter can make from the croft. Adjusting the rent for a bare land croft to one which has been equipped or improved by the landlord rather than the tenant, though not necessarily a straightforward task, is one with which we are familiar and have no difficulty in undertaking. That is because those improvements – if suitable to the croft – directly impact on its profitability. In effect they save the crofter the capital and ongoing costs of supplying facilities of his own.

[153] We are not aware of any cases where the detailed methodology of determination of fair rents for crofts where the landlord has provided the croft house itself has been aired. Provision of a house, per se, does not directly impact on the earning capacity of the croft. But what it does clearly do – again subject to the proviso that it is suitable for the purpose – is to allow the crofting tenant to live on the croft. Crofters are obliged, under the crofting legislation, to be “ordinarily resident” on or within 32 kilometres of their croft. Under section 5 of the 1993 Act, the crofter can be removed from his croft if he breaches any of the statutory conditions of crofting tenure. Accordingly it is reasonable to work on the basis that where no house is provided with the tenancy, then the crofter either has to build his own house on the croft (or elsewhere) or rent suitable accommodation for himself and his family.

[154] We get no guidance from Section 6 of the 1993 Act. It provides for agreement between landlord and crofter or resort to the Scottish Land Court to determine “what is a fair rent to be paid by the crofter to the landlord for the croft or for any part of the croft”. The only guidance to the Court is that it “shall take into consideration all the circumstances of the case, of the croft, of the district, and in particular shall take into consideration any permanent or unexhausted improvements on the croft and suitable thereto which have been executed or paid for by the crofter or his predecessors in tenancy”. The latter consideration is clearly directed at ensuring that, when fixing the rent, the crofter is not rented on any improvements which he, or his predecessors in tenancy, have provided.

[155] It can also be noted that under Statutory Condition 4 in Schedule 2 to the 1993 Act, a crofter “shall provide such fixed equipment on his croft as may be necessary to enable him to cultivate the croft”. There is no obligation on a landlord to provide any fixed equipment. There is no obligation on a landlord to maintain, repair or replace fixed equipment. Under statutory condition 5, a crofter “shall not to the prejudice of the interest of the landlord, injure the croft by allowing dilapidation of the buildings”. It is our understanding that this condition is applicable not only to buildings supplied by the landlord, but also to those provided by the tenant. However, our direct concern in the present cases is with the landlord’s provision

[156] In terms of section 34, where a crofter gives up his croft or is removed from it, then the landlord is entitled to recover from him compensation for any deterioration of, or damage to, any fixed equipment provided by the landlord, where such damage has been committed, or such deterioration permitted, by the crofter. The compensation is effectively the cost at the date of the crofter’s waygo of making good any deterioration or damage. If parties fail to agree, then the compensation is to be fixed by this court.

[157] Whilst there is no obligation whatsoever on a crofting landlord to provide fixed equipment – or to maintain or replace it after it is so provided – it is clear that where suitable equipment has been provided as part of the subjects of let, then the landlord is entitled to a fair rent for it. He is entitled to a fair rent for a dwelling house which is appropriate to the croft of which it forms part. What is suitable or appropriate to the croft may be a matter for argument, but there has been no suggestion in the present cases that the houses provided are not entirely apt for their respective crofts.

[158] In passing it may be said that whilst we know that Mrs MacConnell’s croft is entirely tenanted, in the sense that it would appear that she rents her croft land, her croft house and her share in the common grazings from the Colonsay Estate, the same is not true of Mr MacDougall’s croft. We did not have any detail of it, but it appears that he is now the owner occupier of the croft land, whilst remaining tenant of the croft house site (with the house thereon) and also continues to pay rent to the Colonsay Estate for his sole share in the North Kilchattan grazings. We heard no argument as to whether acquisition by the crofter of all or part of his croft land might impact on the fair rent which would fall to be allocated to the subjects which remain in tenancy. Parties have taken the view that the house can be assessed separately. That is the approach which appears to have been taken in the past and in view of the nature of a dwelling house – as compared to agricultural improvements – we think it is probably a logical one.

[159] As we have said, there is no suggestion that the houses provided in the present cases are anything but apt for their purpose as dwelling houses for the crofter and his family. Accordingly our task is to determine what is a fair rent for them with no need to adjust for over-capacity, particular amenity value or other special features. In principle, we do not have regard to open market rents when assessing fair rents for crofts. The foundation of our approach has traditionally been based on a fair division of the profits which the croft can generate. Clearly a dwelling house would not normally add to the profitability of a croft – although that is not always the case. For instance under paragraph 6 of Schedule 2 of the 1993 Act the possibility of sub-letting of a dwelling-house for holiday visitors is plainly envisaged. Our approach is based on the fact that the crofter and his family need a house. In the present cases, were it not for the landlord’s provision of suitable houses on the croft, the crofters would have to provide their own – either through building on the croft, purchasing a house nearby or renting.

[160] Crofting is often a part time operation and the house is generally used by the crofter and his family as a base for activities outwith the working of the croft. It is commonly the case that the crofter and members of his family have full or part-time employment and fit in the working of the croft with that. Whilst it can be said that only part of the house is being ‘used’ in connection with the croft, we are in no doubt that the landlord is entitled to a fair rent under and in terms of the 1993 Act for the whole house (or at least to such extent as it was provided by him).

[161] We think therefore that an appropriate way of viewing the matter is to consider what the crofter is saving by having the house provided. That, essentially, is little different to assessing what more a crofter can make from the land if the landlord – instead of the tenant – provides the barn or the hayshed or the fences. What distinguishes the tenancy of a croft house from the tenancy of a house not subject to the 1993 Act is that the crofter occupies the house as part and parcel of the crofting tenancy. That puts it in a unique category particularly in relation to various aspects of its provision, its upkeep, its replacement and, importantly, the basis of determination of rent for it.

[162] Although there is a dearth of cases in which the rent for a croft house has been the subject of dispute, it can be noted that in the unreported applications Strathclyde (Argyll & Bute) RN 21 and RN 22, Lord Strathcona appealed a decision of a Divisional Court on the matter of the fair rent fixed for crofts on Colonsay. The detail of these cases is not of relevance to the present case, but in the appeal hearing the estate factor sought to lead evidence of “the gross annual value and other data relating to non-croft houses on the estate”. The Full Court, chaired by Lord Birsay opined that the “evidence was directed to establishing alleged comparative values for the purpose of fixing fair rents for croft houses and crofts……Unequivocally, a croft house value is based on its suitability to the croft. It is thirled to the croft.”.

[163] In sustaining the appeal and fixing the croft rents, the Court did not set out any detailed analysis of the figures arrived at for those crofts which had houses provided by the landlord. However, we note that the rent for the houses was set out separately from that for the croft land and the shares in the grazing.

[164] Because the house is “thirled” to the croft, the rent for it, as a unit, must be determined in accordance with the provisions of the 1993 Act. If open markets were directly relevant, we think adjustment of comparables would be required to take account of the narrower range of potential tenants. That range would be limited to those who were prepared to become crofting tenants and take on, amongst other things, the burden of responsibility for the upkeep of the house. It may of course also be relevant to note that the crofting tenant has what is often described as an absolute right to acquire the site of the dwelling-house on the croft, including any buildings thereon which have been provided by the landlord. Accordingly, although he takes on a significant burden, he has a real interest in complying with his obligations.

[165] We think it obvious that in endeavouring to fix a fair rent for tenanted subjects it is a prerequisite that the relevant interests of the landlord and tenant are known. In these particular cases, where we have little guidance from the legislation or precedent cases, it is our view that in assessing a fair rent for the croft house we must attempt to analyse the relevant interests of parties in that house. We therefore look a little more closely at the benefits to and responsibilities of the landlord and tenant in provision of the house.

[166] Although it is clear that, in the present cases, the landlord’s predecessors have provided the houses some sixty or so years ago and there has been an ongoing relationship between the landlords and the crofters over that time, we are primarily enjoined to determine a rent which, in the absence of agreement otherwise, will be fixed for the next seven years. We do however think it is necessary to have in mind the longer term nature of the arrangement – if only to assist in a proper analysis of the relevant interests of parties.

[167] The houses are sited on what is defined as the “site of the croft house”. That is simply a specific part of the croft upon which the house is situated and which includes additional garden and amenity ground appropriate to the enjoyment of the house itself. In the present cases the sites extend to between 0.10 and 0.15 hectares or thereby. As far as rent for the site itself is concerned, then as a proportion of the rent for the whole croft land it is negligible and can be taken for present purposes to be nil. It may be noted, however, that when we come to consider comparative rents outwith crofting – and in particular regulated tenancies – the rent for the non-crofting subjects would normally include more than a negligible element of rent for the ground.

[168] In terms of paragraph 5(a) of Schedule 2 of the 1993 Act, the landlord is entitled to expect that the house will be properly maintained by the crofter such that there is no ‘dilapidation’ of the building. There is no obligation upon the landlord to carry out any repairs or maintenance, that responsibility falling squarely on the crofting tenant. If he fails in that regard, then he is ultimately liable to be removed from the croft. Although what constitutes repair and what constitutes replacement has been the subject of much debate in a whole range of property disputes, as far as a croft house is concerned, the crofter is duty bound to deal with all repairs.

[169] As and when significant elements of the house either become obsolete or cease to be capable of maintenance or repair through natural decay and fair wear and tear and the crofter then carries out any replacement or renewal, as long as that work is deemed to be suitable to the croft, it will fall to be regarded as an improvement, for which the crofter is entitled to compensation at waygo. See Mackay v Trustees of Fourth Duke of Sutherland 1970 SLCR (App) at 97 and 140. The basis of that compensation under Section 32 of the 1993 Act can broadly be said to be the amount which a landlord might expect to receive for the improvement from an incoming tenant were the croft offered for let in the open market.

[170] That has two implications in regard to the interests of landlord and tenant. Firstly the crofter is not obliged to pay rent on those improvements, because he is deemed to have provided them. Secondly, although he will normally carry them out and finance them, he is entitled to compensation at outgo for them and ultimately it is the landlord who is responsible for that compensation.

[171] It is important, therefore, in our consideration of the interests of the two parties to a crofting tenancy to clearly distinguish responsibility for maintenance and repair of buildings on the one hand and responsibility for their replacement on the other. As regards maintenance and repair, the landlord has no obligation whatsoever, whereas the crofter is bound to prevent the buildings becoming dilapidated and is liable to have his tenancy terminated for any failure in that regard. Further the landlord can seek compensation from the crofter in respect of any deterioration or damage which the crofter has allowed to occur. As regards replacement or renewal, whilst there is no explicit obligation on either party to carry it out, if replacement is undertaken, then the likelihood is that in practice it will be done at the crofter’s expense, albeit that the landlord is ultimately responsible for compensating the crofter for the replacement at the end of the tenancy.

[172] In other words, whilst it appears to be the case that the crofter, having done his best to maintain the building, is not specifically obliged to renew or replace it – or significant elements of it – when that becomes necessary, particularly in the case of the relatively modern dwelling-houses with which we are concerned here, it is likely that such renewal or replacement as was crucial to continued habitation would in fact be undertaken by the crofter.

[173] As a landlord has no obligation to provide any buildings or other fixed equipment, it follows that he has no ongoing obligation to ‘upgrade’ any house which he has provided in order to meet changing standards over time. If the electrical, heating or plumbing systems either require to be updated or the crofter seeks that to be brought about, that is a matter for him. The ‘upgrading’, provided it was deemed suitable, would fall to be regarded as an improvement for which the crofter would be entitled to compensation from the landlord at the end of the tenancy.

[174] The upshot of all of the above is that in our view, the ongoing burden on the tenant in respect of the upkeep of a croft house provided by his landlord is very significant indeed. We think that the rent in respect of it has not only to reflect the expected annual cost of that ongoing maintenance and repair, but also some element of the cost of financing replacements and improvements and depreciation of those improvements over time. Our reason for including depreciation is that, although the landlord is obliged to compensate the crofter for improvements which are suitable to the croft, that value is determined on the basis of what the improvement is worth to an incoming tenant as at the date of the termination of the tenancy. Clearly such value will depend, amongst other factors, on the lapse of time between provision of the replacement and the date of waygo, but the normal expectation would be for the improvement to be worth relatively less over time than its cost as at date of installation or construction. In other words the crofter would normally, we think, expect to get less back for his improvements at the end of his tenancy than he paid for them during the tenancy.

[175] Put another way, we think that the rent which a crofter pays should be assessed having regard to the expectation that he will need to make some provision for the potential funding of necessary or appropriate upgrading, improvement, replacement or renewal of the landlord’s fixed equipment – but in the knowledge that at ultimate outgo, he will be compensated for replacing or renewing that fixed equipment and, in effect, keeping it reasonably up to date. It should be said, however, that there is nothing to prevent the landlord from undertaking renewals and replacements. In some circumstances it may be appropriate for him to do so and he could expect the fair rent to take account of that.

[176] A further matter which we think requires to be borne in mind in assessing the interests of crofter and landlord – and accordingly rent – is that since 1976 the crofter has had what is commonly regarded as an absolute right to buy his croft house site. In the normal situation where the crofter or his predecessors in tenancy have erected the house, then the consideration for the site itself – in terms of the provisions of Section 15(2)(a) of the 1993 Act – is frequently fixed at around £100 to £150. In other words, the cost of acquisition of the site itself by the crofter is relatively nominal. Where the landlord has provided a house, then under Section 15(2)(b), in addition to the consideration for the site, the crofter is expected to pay one half of the proportion of the value of the site which is attributable to that house. That value falls to be determined on the basis of what the open market value of the site would be if it were sold by a willing seller with vacant possession, free of the crofting status and on the assumption that no further development of the site would be permitted in terms of the planning legislation.

[177] Thus when it comes to the crofter purchasing the house which the landlord has provided, the basis of determination is such that the crofter will normally be able to acquire the fabric of the house for, broadly speaking, half of its market value. In the present cases, the landlord’s predecessors have in fact provided houses which would have been relatively new in 1976. Whatever the open market value of these houses at the present time, on exercising their rights to buy, the crofters can expect to acquire the fabric of their houses at a very significant discount to that value. In considering the interests of parties, we think it right to bear in mind that the landlord has to allow for that in the context of his own estate management strategy.

[178] Clearly the crofter will normally require a house. If he did not have that provided by the landlord, then he would have to rent one or buy / construct one. We had no evidence as to house prices on Colonsay, but plainly the cost of buying or building a house on the island would be very substantial. At present day interest rates, the cost of financing a loan of say £100,000, even on an interest only basis would be of the order of £5,000. On the other hand, if the house was built on the croft and was deemed suitable, the crofter would have the assurance of compensation from the landlord at the end of the tenancy. Thus we have no doubt that the provision of a house by a crofting landlord is of considerable financial benefit to the crofter, albeit that he has significant obligations in respect of upkeep.

[179] Although the Court has shunned the market place as a basis for determination of croft rents generally, we are of the view that for the croft house – and for the croft house only – the only realistic starting benchmark may well ultimately be the market rent for similar non-croft houses of similar size in the same locality. When assessing rent for the croft land and common grazing, although we do not have regard to open market rents for the subjects, our assessment is based on the productive capacity of the ground. For the house, that type of appraisal is simply not available to us.

[180] In determining the fair rent for a croft house, we therefore consider that it is appropriate to take as a starting point the market rent for similar non-croft houses. We then require to eliminate or discount any element of competition or scarcity from that market rent. We had little detailed evidence, but Mr Addison-Scott exhibited copies of registered rents under the Rent (Scotland) Act 1984 of houses which he said were located close to and were similar to the houses we have to rent. There was no challenge in respect of their inherent comparability in terms of location, size or quality. He told us that the registered rents for those houses were of the order or £2,000 to £2,700 and that such rents were around half of open market rents. On a broad approach and in the absence of challenge, we take it from his evidence that a crofter seeking to rent a house on the open market would require to pay some £4,000 to £5,400 to secure the tenancy.

[181] Mr Addison-Scott, rightly in our view, did not in fact found on open market rents, but rather focused on regulated tenancies whereby a fair rent for a tenancy established before 1989 can be fixed by the Rent Officer or, on appeal from the Rent Officer’s determination, by Private Renting Housing Panels. We accept that in relation to those the landlord is responsible for all upkeep and also that the rent is assessed in accordance with the applicable legislation – namely the Rent (Scotland) Act 1984, which we understand to be on what might be said to be a non-market basis. Whilst a more detailed analysis would have been preferable, we are prepared to accept that the houses which he cited as comparables were broadly similar in nature to the subjects with which we are concerned here, albeit not sited on crofts and not subject to crofting tenure. We are also prepared to accept that the rent for those houses was fixed on the basis of an assumption in terms of section 48(2) of the Rent (Scotland) Act 1984 that there is a neutral market with no scarcity of houses. Because we seek to eliminate scarcity and competition in determining fair rents for crofting subjects, it seems to us that the comparison here with rents determined under the 1984 Act is apt.

[182] What then requires to be considered is what adjustments require to be made to take account of the particular circumstances of a house let under crofting tenure. On the one hand we have the very significant responsibilities put upon the tenant in respect of upkeep, but then on the other we have the benefits to that tenant (and accordingly the disadvantage to the landlord) of the right to buy and the compensation available to the tenant for any replacements / renewals which he undertakes. Mr Addison-Scott submitted that “a discount of 75% plus” on the regulated rents was fair. Broadly we agree with him, but as with many valuations, the difficulty is arriving at a defensible figure.

[183] The tenancy of croft houses is particularly secure – providing certain conditions are met by the crofter – and these, in the normal case, go beyond responsibility for the upkeep of the house alone. Failure by the tenant of the croft to comply with the statutory conditions in relation to the land can lead to termination of the whole tenancy – not just that of the house site and house. Also, although it is perhaps much less relevant once the market effect has been eliminated, whereas regulated tenancies may involve a relatively wide range of tenants, the let of a croft house is restricted to individuals who are prepared to take on board all the conditions associated with a crofting tenancy. Broadly speaking, however, regulated tenancies are relatively secure and it seems to us that, in these cases, little adjustment is needed to reflect any differences in security between croft houses and houses subject to the 1984 Act.

[184] What is clear, however, is that we have no evidence of croft house rents fixed by the Court in recent times. Thus we cannot – as in the renting of the land – apply a “rate” based on our widespread experience of cases throughout the crofting counties. Although we do not rule out other approaches, including the possibility of being persuaded to adjust open market house rents in another case, we are satisfied that the basis argued for by Mr Addison-Scott and discussed above is appropriate and valid in the present circumstances.

[185] Lest our acceptance of Mr Addison-Scott’s approach might be thought to be contrary to the earlier Full Court decision in Mackay, we would point out that, at appeal, the evidence which was sought to be led related to “gross annual value and other data relating to non-croft houses on the estate”. In that case, the Court said that the evidence “was directed to establishing the alleged comparative values for the purpose of fixing fair rents for croft houses and crofts”. The solicitor for the crofters objected to that line of evidence on the basis that the proposed comparisons were totally invalid. The objection was sustained, but it is important to note that the Court did not set out in detail its basis for upholding the landlord’s position. Rather it simply emphasised that because it was hearing an appeal, “strictly speaking further evidence could not now be led unless it was competent and shown to be justifiably omitted at the Divisional Court hearing”. In the event, no further evidence was in fact tendered and we do not consider that our decision in this case is at all at odds with the earlier one.

[186] Crucially, we do not consider that the opinion of the Court in that case prevents us from relying on the unchallenged evidence which Mr Addison-Scott put before us in relation to regulated tenancies. There was no objection to the veracity of the evidence and no suggestion that the houses which were subject to those tenancies were not generally comparable in terms of size and location. Accordingly, were these houses not subject to crofting tenure, we think that we are entitled to make a finding that under regulated tenancies they would command a rent of the order of £2,433 – the average rent in the three cases exhibited here. We again point out that such figure would normally include an element of rent for the associated garden and amenity ground of the house whereas in the croft house situation that element would usually be so low as to be ignored.

[187] We had no evidence whatsoever as to what the annual costs of maintaining the two houses in question might be on an ongoing basis – or indeed what sums it might be appropriate for the crofters to set aside by way of provision for eventual renewal or replacement of at least parts of the structure. That said, we think that it is important to remember that we are fixing a rent for the next seven years. To some extent, the longer term interests of both landlord and tenant set a background to our consideration. They are “circumstances of the case”.

[188] Nonetheless, we have no doubt that the provision of these substantial bungalows – albeit having regard to the improvements which have been undertaken since they were originally provided – is clearly of significant benefit to the crofters when compared with the outlay which they would be likely to encounter were they to rent or to buy elsewhere or build their own houses on the crofts. Although we accept that the burden of maintenance and repair is a high one, we are satisfied that the general level of rent sought by the landlord through his approach of applying a substantial discount to the average rent for comparable houses under regulated tenancies is appropriate here. We think such an approach is fair as between the parties in these cases. We have already expressed our view that both houses should command a similar rent. Taking all the circumstances into account, our own view is that a discount of 80% is appropriate and accordingly fix the rent for both houses in the sum of £486.60, which we think can fairly be rounded to £490.