The case of Olive Borland v Crofters on the Lochend Estate was “the most extensive exercise in fixing croft rents in nearly two decades.” The landowner in this case requested a decision from the Scottish Land Court on whether the current crofting rates for his tenancies were reasonable and sought to achieve a “fair modern rental for each croft”.
Facts
The landlord of a Shetland crofting estate asked the Scottish Land Court whether his crofting rates, some of which were crofting rates set back in 1948 and not been reviewed since, were reasonable. For example, one of the crofters was paying £33.25 annually for exclusive possession of 199 hectares (approx. 295 acres). The question was: what is fair rent?
Members of the Court visited the crofts on Shetland and commented about the good maintenance and upkeep of the crofts. The Land Court noted the changing landscape of the crofts since the rents were first set.
Law
Fair rent is regulated under the Crofters (Scotland) Act 1993, Section 6(3) which provides that the Land Court may, on the application of the crofter or the landlord, determine what is a fair rent to be paid by the crofter to the landlord for the croft.
The legislation continues to state that where the rent payable has been so fixed by the Land Court it shall not be altered, except by mutual agreement between the parties, for a period of 7 years from the term at which it first became payable or for such longer period as the parties may have agreed.
The period of seven years was relevant because two of the crofts in question were new crofts that only came into being in 2013 as a result of the division of the original croft but the Land Court were able to determine the rent for these new crofts “in contemplation of the expiry” of the 7-year period.
While the Land Court had decided crofting rates on several occasions, it commented that there is no definitive answer to “what is fair rent?”. They did however consider similar cases and draw on their methods used and considerations made in these cases to determine this one.
In previous cases, two methods were used to determine rent (i) a “profits” basis where a net annual profit is ascertained (taking into account agricultural subsidies received and deducting fixed costs other than rent). From this there would be deducted the amount which the tenant would expect to receive as income from the croft, with the landlord receiving the rest of the profit as rent and (ii) a “comparative” basis, where broadly, the rent for comparable crofts is used to determine the rent taking into account the individual circumstances of the croft.
In this case the Court incorporated both methods and additionally applied their expertise to assess the crofts by calculating the number of breeding ewes they could carry, taking into account the remoteness of the crofts and the quality of the land. The levels of support from agricultural subsidies was also considered.
Decision
The Court fixed rents it believed achieved the result of both being affordable for the crofters and provided the landlord with a fair return in respect of the croft land. It also made a determination of a fair rent in contemplation of the expiry of the 7-year period of the two new crofts, which they note they are entitled to do.
Update
Following the above case, in December of last year the Land Court was again asked to determine what is a fair rent to be paid by the crofters for the crofts on Burrastow Estate (Trustees of the late Miss Gwendolen Ruth Foster v Crofters having Rights in Crofts on the Burrastow Estate). Again, members of the Court inspected the crofts. The court followed their previous decision and used the same methodology for fixing croft rents.
Comment
The objective was to achieve fair modern rental values for each croft. The Land Court assumed, in the absence of reliable evidence to contrary, that agricultural support for marginal areas such as Shetland will continue to be paid at or about present levels over the next seven years, despite uncertainty on the terms under which the UK will leave the EU.