Our city centre estate agency office

Securing the future of your crofting business through succession planning

In the third of this series on modernising crofting, we take a look at what’s key to successful succession planning.

The most important message?

Start now. It’s never too early.

Fundamentals

Succession’s not always a topic people want to discuss. It can be sensitive and deeply personal, but there’s no doubt the earlier you start, the easier it is to address any obvious issues before they become more complicated than they need to be.

After all, it’s easier to revisit and update a succession plan than it is to try and sort issues reactively once they’ve taken hold.

The other key element is communication — discussing your plans with your loved ones.

It’s all very well and good having your aspirations for what happens in the future, but what if others have different plans that don’t involve the croft?

What are the rules?

What can and can’t be done depends on whether you are a tenant, an owner-occupier crofter, a landlord or the landlord of a vacant croft — and take a look at my earlier blog post for thoughts on what legal reform might mean for each.

If you are a tenant, beware of the timescales.

Your executors will have 12 months to transfer a croft in accordance with your will. If they miss that they will have a further 12 months to deal with the croft under the intestacy provisions.

If they miss that, the tenancy could be terminated, meaning it would be lost completely.

Also beware of leaving your croft tenancy to more than one person, either specifically or through your residue clause.

The only way this approach is valid is if your executors successfully apply to the Crofting Commission to divide the croft. This is by no means guaranteed and is likely to eat significantly into the already tight timescales.

Instead, plan your will to avoid this scenario. This might involve leaving your tenancy to one person and different bequests to other beneficiaries to balance matters out. Discussions with your loved ones may identify those who are particularly interested in taking on the croft, and those who aren’t. With some luck too, joint tenancies will be part of future reform.

If you are an owner-occupier crofter or a landlord of a vacant croft there are no timescales, except in relation to any deemed crofts still held in tenancy.

That said, you’ll still need to consider how you will split your assets if you have multiple beneficiaries.

Decrofting land

One further aspect of crofting legislation that could do with reform is introducing the ability of an executor to apply to decroft land — removing it from crofting tenure.

At the moment, there are no specific powers within the 1993 Act (or indeed the Succession (Scotland) Act 1964) that allow an executor to apply for a decrofting direction.

Giving executors this power would greatly simplify some of the issues executors often face when trying to wind up crofting aspects of intestate succession or poorly drafted wills.

Take, for example, a will that leaves an owner-occupied croft to one child and the croft house to another. Under the current law, if the house isn’t decrofted, the executor must transfer the entire croft, including the house, to one of the beneficiaries.

That beneficiary must enter into an agreement with the other that they will apply to decroft the house and then, on the granting of a direction, carry out further conveyancing to give final effect to the will.

This is a drawn-out process that requires additional legal work to safeguard the rights of the beneficiaries, none of which would not be necessary if the executor could apply themselves to decroft the croft house.

And that’s just one example where this power would be a valuable addition to an executor’s powers.

It also gives crofters more options when considering how to deal with their estates.

Beware of landlords' interests

If you are a tenant, and another family member is the landlord (a fairly common scenario, used to circumvent the issue of vacant crofts prior to the introduction of owner-occupied crofts) you need to be wary of leaving the tenancy to the landlord.

In doing so, you don’t create an owner-occupied croft but rather a vacant croft. In the reverse scenario, the landlord leaving the landlord’s interest to a tenant, an owner-occupied croft is created.

In short, crofting can and does cover and create a wide range of scenarios when it comes to succession planning.

All of these have the potential to become much more complex than they need to be, if they’re not dealt with properly.

Legal reform should hopefully settle a number of these issues, or at least provide people with additional ways to resolve them. Meanwhile, the real key is to start early; keep communication with loved ones open and frank; and take legal advice from a solicitor with specific crofting law experience.

Gary Webster

Based in Inverness, partner Gary has extensive experience in the agricultural and rural sectors with a strong background in areas including agricultural tenancies, crofting law and rural business restructuring and succession.

Posted, 23 March 2021 by Gary Webster
Categories: Insights | Private client | Rural