Modern Limited Duration Tenancies (MLDTs) — a new type of agricultural tenancy

In practice, there isn’t a great difference between an LDT and the new MLDT, created through the Land Reform (Scotland) Act 2016.

The minimum term is still 10 years, and obligations for fixed equipment are largely the same, with some greater freedom to negotiate these.

In short, most people will not notice much difference between the two lease types. That said, a significant and innovative change relates to “new entrants” to farming where the parties can agree to a break clause provision in the lease, exercisable after five years.

At the core, it seems, is the Scottish Government’s recognition of the need to attract young farmers to the sector: a key part of building growth in the rural economy, and securing a sustainable future for the agricultural industry in Scotland.

This break provision means an MLDT could potentially both be long enough to allow those starting out to become established and progress, while also short enough for landlords not to be deterred from leasing their land.

Of course, time will tell how it translates in practice, but meantime, what questions are landowners and tenants likely to ask? What are the criteria for new entrant eligibility?

A tenant is not a new entrant if at any point in the five years preceding the MLDT they have been —

• A tenant under an LDT

• A tenant under another MLDT

• A tenant under a secure 1991 Act tenancy

• A small landholder A crofter

• A tenant under an SLDT for three years or more

• An owner of more than three hectares of agricultural land

How do I terminate if there is a break clause?

If there is a new entrant break clause then the tenant may terminate after five years by giving written notice to the landlord not less than one year, and not more than two years before the end of the five-year period.

Landlords looking to terminate must, in addition to the same requirements which are on tenants, also state their reasons for termination in a written notice. Such notice can only be given if the new entrant tenant is not using the land in accordance with the rules of good husbandry, or is otherwise failing to comply with any other provision in the lease.

What is the procedure for terminating an MLDT at the end of the 10-year period?

Where there is no break clause, then the procedure for terminating the MLDT at the end of the agreed tenancy period (whether that is 10 years or more) is similar to that for an LDT. If the landlord wishes to terminate there is a two-stage procedure.

• The first stage is the notice of intention: the landlord must give written notice to the tenant. This must be done no less than two years, and no more than three years before the end of the tenancy

• The second stage is the written notice itself: this must be served on the tenant not less than one year, and not more than two years before the end of the lease If the tenant wishes to terminate, they must give written notice to the landlord not less than one year, and not more than two years before the end of the tenancy.

What happens if there is a breach of the MLDT?

An “irritancy clause” may be included in an MLDT and the lease itself can specify the grounds for irritancy. This allows for the lease to be brought to an end (irritated) if there is a breach of the tenancy.

The landlord must allow the tenant time to correct any breach of the tenancy agreement before they can bring the lease to an end. Written notice must be given to the tenant specifying the ground for irritancy and stating a period, of at least one year from the date of the notice, for the tenant to remedy the breach.

If the tenant doesn’t remedy the breach appropriately, the landlord has to serve a further notice no less than two months in advance of enforcing the removal of the tenant.

Can I continue an MLDT beyond 10 years?

If termination procedure is not correctly followed, then the MLDT will continue, automatically, for a period of seven years, compared with LDTs that would continue, initially, for three years. Alternatively, the tenant and landlord can agree to extend the MLDT.

What happens to my existing LDT?

LDTs in place before 30 November 2017 will continue as LDTs.

What if I want to convert my tenancy to an MLDT?

If you have an LDT, Short Limited Duration Tenancy (SLDT) or secure 1991 Act tenancy, and wish to convert to an MLDT, this can be done voluntarily if both the tenant and landlord agree in writing, provided certain legislative requirements are met. SLDTs — which run for no longer than five years — can automatically become an MLDT if the tenant occupies the land after the expiry of the five-year period with the landlord’s consent.

Keeping an eye on the dates in your lease agreement is therefore crucial. In short, LDTs will soon no longer be able to be created. The MLDT will be the new letting vehicle for all agricultural tenancies over 10 years with its key feature being a break clause option for new entrants.

As ever, we’ll have to wait and see how the regime works in practice, but meantime the message is clear: think ahead and seek specialist advice.

Please get in touch to discuss if the new rules affect you