Guidance note on rent reviews
The Court has been considering its procedures in rent review cases under section 13 of the Agricultural Holdings (Scotland) Act 1991, as amended, in the light of the recent Report and Recommendations of the Tenant Farming Forum’s Rent Review Working Group. The Report is available at www.tenantfarmingforum.org.uk/tff/pubs.aspx. Whilst we may require to review matters in light of further developments and experience, it is hoped that the following comments will be helpful to parties involved in an application to the Court.
It is important to recognise that the role of a court is to resolve disputes. As an expert court the Land Court is familiar with agricultural matters and valuation principles and can be expected to have a good understanding of the evidence put before it. But we are not experts in current values and cannot simply use our experience to fix a rent. Parties should be in no doubt that we have to make our decisions on disputed matters on the basis of the evidence put before us and not on the basis of any impressions of our own.
Settlement by negotiation is preferable to formal litigation and we strongly urge parties to engage in meaningful discussion with a view to reaching as much agreement as possible. Where parties are genuinely in discussion over disputed or potentially disputed matters and there is a reasonable prospect of those matters being resolved, or at least of the extent of any dispute being more clearly focused, the Court will normally be content to sist (or “freeze”) the application to allow discussion to proceed. If both sides request us to do so, we will usually sist the case for three months during which time we expect parties to engage with each other on all relevant issues. But in every case, if either the landlord or the tenant decides that sufficient progress is not being made towards settlement, that party can at any time ask us to recall the sist and proceed with the litigation.
The Court expects parties to cooperate with it to progress applications to a conclusion as efficiently as possible. Accordingly, as soon as it becomes clear that settlement is not going to be reached by negotiation, we expect parties to disclose their relevant cases fully without delay. Parties are free to make suggestions as to how a case is dealt with, but as a first step the applicant will always be required to set out his contentions in sufficient detail such that the respondent can understand clearly the basis for the level of rent sought. If the Court thinks that an application as lodged does not contain sufficient material for the other side to make any proper answer, the applicant may be asked to revise his application before an order for answers is made. The respondent will then be given the opportunity to say which of the applicant’s contentions are agreed, which are not, and why; and to set out any other factors which they say are relevant to determination of the rent for the holding.
Our objective is to ensure that the applicant’s case is clear enough from the outset so that the other side can answer fully in their first response. Clarifying disputed matters early on means that further procedural steps are minimised and an early date for hearing can be set. That date will normally be fixed as soon as the respondent lodges answers. No detailed adjustment of pleadings should be necessary thereafter, although there may be cases where this is justified in the interests of ensuring that the matters in issue are clearly focused before the hearing. The Court will expect parties to continue to negotiate after the date for hearing is fixed, with the aim of producing, shortly before the hearing, an agreed statement of the outstanding issues which the Court will have to decide.
We do not attempt to lay down any firm rules as to what material we would expect parties to provide to support their contentions. It is up to them to decide what evidence to present and clearly much will depend on what is truly in dispute. Matters not in dispute but which are relevant to the determination of the rent should be set out. Similarly other relevant matters which are in dispute need to be spelled out, so that both sides and the Court know in advance of the hearing where the differences between parties lie and what relevance they have. As a general guide, we would normally expect to be provided with the following types of information in relation to the subject farm and in relation to any comparables relied upon:-
- Description of the land — areas and categories of land together with comment on stocking and cropping capacity.
- Aspects of the lease relevant to rent, including detail of any post lease agreement and other conditions. This would include obligations relating to how the subjects are to be used and how responsibility for maintenance of fixed equipment is allocated.
- Detail of the fixed equipment provided by the landlord.
- Detail of the tenant’s improvements (on which the tenant will not normally be rented).
- Details of any particular advantages or disadvantages which the various farms have and how this might bear on the rent.
Photographs and plans, including IACS plans, assist the Court, although it will normally inspect the subject farm and may also inspect any farms which the parties rely on as comparables. We would expect much of the factual detail to be agreed and that parties will concentrate on matters which are likely to have more than a marginal impact on the potential open market rent for the holding. The Court is obliged to fix the rent in accordance with the provisions of section 13 of the 1991 Act. In broad terms this will usually require it to determine the open market rent for the farm by adjusting the rents for any comparable farms to allow for all relevant differences between them and the subject holding. Then an allowance has to be made for identified scarcity. Both sides must be prepared to lead any evidence they rely on as demonstrating what the open market rent of the subjects would be and the evidence they rely on to show what adjustment or modification of that figure is required to allow for scarcity.
Litigation is an expensive process and both sides should try to ensure that the Court only has to decide matters which are important and cannot be agreed. Even if some matters cannot be fully agreed, it may be worth reaching an agreed compromise for the purposes of the case. Not infrequently we find that time, expense and angst are expended in having every last thing determined by the Court, when some disputed points would have little bearing on the end result: in other words some issues are simply not worth fighting about. Above all, we would expect parties to be practical and realistic in their approach to the evidence they put before the Court. The Court may impose a special liability for expenses if that approach is not taken.