Rural Affairs, Climate Change and Environment Committee

Meeting date: Wednesday, February 8, 2012

Official Report 335KB pdf

---

Long Leases (Scotland) Bill: Stage 1

Agenda item 4 is our first evidence session on the Long Leases (Scotland) Bill. We will hear from Scottish Government officials on the content of the bill and the associated documents. It is not for officials to answer questions on policy decisions, but they can offer clarification on the content of the bill and the associated documents. Discussions on the policy aspects should be left for the minister. We expect to hear from stakeholders at our meetings following the recess on 22 and 29 February and from the minister on 7 March.

I welcome the Scottish Government officials: Simon Stockwell is bill team leader, family and property law, in the law reform division; Sandra Jack is policy officer, family and property law, also in the law reform division; and Graham Fisher is head of branch in the constitutional and civil law division.

Thank you for providing written evidence in advance of your appearance. I invite questions from members.

I have questions on two matters, which both concern common good. First, which eight councils did not respond to the consultation? Does the Scottish Government have any powers to compel them to provide the information?

Secondly, is the Scottish Government taking on trust the figure of four possible cases that might be affected by the bill? There is, for example, a degree of dispute over whether the land on which the Waverley shopping centre stands could be included, and at least one council initially indicated that it had a case but then changed its mind.

The councils that do not seem to have responded to the survey are Angus Council, Western Isles Council, Dumfries and Galloway Council, Moray Council, North Ayrshire Council, Perth and Kinross Council, Scottish Borders Council and South Ayrshire Council. It is possible—although I cannot say for certain—that some councils take the position that they have no common good property. Some local authorities have suggested that to us. We had no power to compel local authorities to respond to the survey, which was voluntary. When we wrote to ask them to complete the information, we cited no statutory powers.

We are taking on trust the figures that councils have provided to us. We have no way of checking whether properties are part of the common good. I asked Registers of Scotland whether it had any way of knowing that and it said that it did not, and the Government has no way of knowing that.

Fife Council changed its initial view after it looked further at the titles and at what the occupants had the power to do. I recollect that the council said that the tenants have the right to use the hall occasionally over the next 1,000 years but do not have exclusive occupation of the property.

Why is the Scottish Government minded only to recommend to local authorities—rather than instruct them, if you can do that—that any compensatory or additional payments that are received through the conversion of common good land to ownership should be allocated to common good accounts? Is it feasible that there could be an impact on common good land in, for example, a rural burgh that no longer has a functioning common good fund? If so, what would happen to any payments?

I am not sure about your last point. We propose to make a suggestion to local authorities rather than put a provision in the bill because that is in line with our general approach to working with them under the concordat. We work in co-operation with local authorities rather than give them too much instruction through legislation or statutory guidance.

We sent local authorities an initial letter in which we said what we planned to do. We have had two or three replies, but we have not had significant responses that said that we should do something different.

We have said that, if a lease on the common good converts to ownership under the bill, we recommend that any moneys that accrue from that should be allocated to common good funds. If no common good fund exists, I suppose that we would tell local authorities that they should consider the best way of allocating the money so that it can continue to benefit the people of the burgh or local authority area.

In general, we do not expect the compensation to be all that much, given that most of the leases involved are ultra long. As the rental is quite low, we would expect the compensation that is payable to be quite low in most cases.

I declare an interest, as I am still a member of Scottish Borders Council. I am well aware that that council has quite a large amount of common good property. You said that the survey was voluntary, so that lets the council off the hook, if you like.

I do not know whether Scottish Borders Council is unusual in having large tracts of agricultural land that is leased to tenants—I can point to Selkirk and, I think, Hawick. Has the Government thought about any implications for agricultural tenants?

Nobody has raised with us agricultural tenancies in the common good context. The survey took place some time ago, when the previous bill was considered by the previous Justice Committee, and we chased up the local authorities that did not respond, but we can certainly chase them up again to see whether we can have to hand any more information that would help this committee. If you think that issues could arise in Scottish Borders Council’s area, we will chase up that council after the meeting.

There will be issues, so that would be appreciated.

Perhaps I should declare an interest as well, as I am still a councillor in North Ayrshire, where there are common good assets and a common good fund. I am disappointed that the council did not respond.

North Ayrshire is also one of the areas in which there are ultra-long leases.

I will look into the matter.

What would happen if a local authority retrospectively discovered that it had common good land or some common good assets? Registers are not always up to date and people do not always have access to the records that they should have.

I know that local authorities are constantly trying to improve their common good registers. Audit Scotland and others have put pressure on them to try to update them. To reflect the situation that you raise, when we write to local authorities—if and when the bill is passed—we will have to include something to say that, if an authority discovers that a piece of land was, after all, part of its common good assets, it should look to see whether the compensation can be moved into its common good fund. We would also emphasise, again, that authorities should be making every effort to try to identify common good property. That is in line with the general guidance that they are getting at the moment.

Concerns have been raised about the fact that, although Peterhead harbour has been excluded from the revised bill, common good property has not been. Will you comment on the reasoning behind that? I am not suggesting that the two are analogous but it would be good to know the reasons behind the non-exclusion of common good property from the revised bill.

The point that was raised by Peterhead harbour was reflected in representations that agents acting for the harbour made to the previous Justice Committee. They said that, if the bill proceeded without an exemption for harbours, that could have an adverse impact on the operation of the harbour at Peterhead, because the south breakwater has been leased for 999 years.

One of the questions that we considered in that regard was whether the leasehold conditions could convert under the bill as well. The arrangements at Peterhead are that, although the breakwater has been leased for 999 years, there are leasehold conditions that allow the harbour authority to continue to exercise functions in relation to the south breakwater, to ensure that the harbour can continue to operate safely.

When we considered the issue, we thought that it would be difficult to ensure that the leasehold conditions could convert under the bill, and we also asked some other ports and harbour bodies whether they had particular concerns about the potential implications of the bill for the operation of ports and harbours. Most of them said that they did not, but one said that they did. It could not point to any particular examples, other than Peterhead, but it thought that the issue that Peterhead raised about the possibility that the leasehold conditions might not be able to convert might have negative implications.

The conclusion was that, as we did not want the bill to impact adversely on the operation of ports and harbours, we would exempt harbour authorities. Of course, the exemption is not just for Peterhead; it is for harbours generally.

Unlike the situation with Peterhead, where concerns were raised about the fact that the harbour might not be able to continue to operate, the arguments that were made with regard to common good property and other areas that have not been exempted from the bill did not concern whether the land could continue to be used; they were more to do with the benefits to the people of the burgh.

Many local authorities are trustees for funds. What happens in that respect? Will they be bound by the conditions of the trusts? I imagine that they would be, but what happens if land is involved in that?

Do you mean land that is owned by the local authority?

No, the land could be owned by a trust, but managed by the local authority.

10:45

An arm’s-length trust?

No. If somebody has left land to the local community and it is managed by the local authority, any leases on that land are managed through the local authority.

The bill generally affects the owner of the land that is let when the leasehold interest converts into ownership in the hands of the tenants. Generally, that owner will be affected in the same way as any other landlord.

As a principle, if local authorities get any compensation as a result of common good land converting to ownership, we would say that they should allocate that to the common good fund. Your point is that, if a local authority owns land in trust that would convert to ownership under the bill, the compensation should benefit the people of the burgh or local authority rather than go into the local authority’s coffers. We can certainly reflect on that point when we write to local authorities once the bill is enacted. We were initially talking about common good. If there are other scenarios that are similar to common good but are not called common good—if land is held in trust in a similar arrangement—we could reflect that in the advice that we give local authorities.

There are bequeathments that are set up as trusts.

Yes. We could reflect that when we give advice to local authorities after the bill is enacted.

Good morning. I have a question on a different point. Is there any concern about the preservation of sporting rights under section 8 when a tenancy moves to ownership? For instance, if there was a change of use of the land and the person who took on the ownership did not want the former landlord to have the right to come on to the land, what would happen?

That point has not been raised specifically with us during the consultation or the scrutiny of the bill. I thought that we might get more comments about the preservation of sporting rights, but we have not had any so far. If a new owner discovered that someone had sporting rights and they were unhappy about that, we would probably have to leave it up to a private arrangement between the new owner and the holder of the sporting rights—for example, if the new owner wanted to buy out the holder of the sporting rights. The principle behind the bill is that a landlord who has sporting rights at the moment will be allowed to maintain those sporting rights—his or her rights will continue to be protected under the bill. If somebody was unhappy with that, they would have to buy out the holder of the sporting rights through a private agreement.

I have some more technical questions further to concerns that have been raised by different bodies. The first concerns the need to preserve the standard security on conversion. From a very legalistic perspective, concern has been expressed that the language in section 6 may not be sufficiently clear. Will you comment on that?

Yes. Over the past couple of days, we have looked at the points that have been raised by the various consultees. I have a lawyer—Graham Fisher—sitting to my left, so I hope that I get this right. We think that the answer to the point that was raised by Morton Fraser is that the relevant provision is in section 6(2) rather than sections 6(3) and 6(4). Section 6(2) states:

“The converted land is subject to any subordinate real rights to which the qualifying lease was, immediately before the appointed day, subject.”

That is certainly the intention. If the tenant is granted a standard security, it should transfer to his new right of ownership under section 6(2).

The point has also been raised that the landlord might have granted a standard security. What would happen to that, come the appointed day? In most cases, the landlord’s interest in these leases will be very low. The typical rental for an ultra-long lease, as shown by the survey that was carried out by the Scottish Law Commission, is less than £5 a year, on which the landlord would probably not be able to raise much of a loan or advance. We have already excluded from the bill cases in which the landlord has a significant interest by excluding leases for which the rental is more than £100 a year. We do not think that there is an issue. It has been suggested that we should write to the British Bankers Association just to check that it is content. We will do that later this week.

I have another technical question on the concerns that consultees have raised about variable rent. There is a question in the submissions about whether there is sufficient clarity on how variable rent is to be calculated so that, where appropriate, the figure goes beyond the £100 threshold and therefore outwith the scope of the bill. It would be helpful if you could clarify the position.

We think that we are okay on that and that there is sufficient clarity. The interpretation that Brodies gave of the provision is in line with ours. However, we will double-check that and make certain that the provision captures what it needs to capture. There is an important point. The main point that Brodies and others have raised on the £100 exemption is that we need to be absolutely certain that, if there are variable rentals as a result of turnover, the leases can be exempted when the landlord has a significant interest. As I said, we think that we have got it right, but we will double-check that and report back to the committee.

I have one final technical point, which I think was raised by the Faculty of Advocates. The faculty is concerned that certain time limits will be prescribed by way of subordinate legislation, after the bill is passed, and suggests that it might be more helpful to have the provisions set forth in the bill. Will you comment on that?

To be honest, we think the reverse of that. Our view tends to be that it would be better to consult on time limits so that everybody can see the proposals and has a chance to comment on them. There is a lot of technical detail there. Before we came into the meeting, we were discussing what would happen if, for example, a case is appealed. It might be difficult to lay down precise provisions in the primary legislation.

We will have to consult on various issues, anyway, once the bill is passed, such as the draft forms of notices. It will take time to implement the bill. Therefore, rather than put something in the bill now that we might need to change later if we discover that people have different views from ours, it is preferable to leave the bill as it is and to carry out a consultation on the time limits so that the key bodies such as the Faculty of Advocates, the Law Society of Scotland and the keeper can comment on what is proposed.

I have a question on cumulo rental, which is mentioned in paragraph 7 of your submission. Can you give us more detail on the number of cases in which a single rent is payable for two or more leases? Are there many such cases and, if so, are they the kind of thing that should get in the way of attempts to deal with rentals that are under £100?

There are quite a lot of cumulo rentals. The Scottish Law Commission report gives a figure but, unfortunately, I cannot remember it off the top of my head. However, they are common in traditional ultra-long leases, so they will be a feature.

On the second part of the question, we suspect that the provisions will not have much direct impact because, in the vast majority of cases, rentals in ultra-long leases, particularly traditional ultra-long leases, are very low. Once the cumulo rental has been allocated, we will probably find that, in many cases, we are talking about rental of well under £5 a year, so there will not be much of a practical impact. However, this time round, we amended the previous bill because it is at least theoretically possible that there could be cumulo rental that, once it has been allocated, comes to more than £100. Those landlords would still have a legitimate interest in the property and should be given the right to seek an exemption in the same way as other landlords with a rental of more than £100. In practice, we do not think that there will be many such cases, given that, in traditional ultra-long leases, the rental is very low.

Do members have any further questions for the bill team?

I have a final question about a point that the Scottish Law Agents Society raised in its submission. The society felt that it would be useful for the committee to explore European convention on human rights compliance. I note that the Scottish Government feels confident that there is no compliance issue, but will you comment on that, in the light of the fact that the bill interferes in principle with property rights, albeit that the tangible value that is involved seems to be low?

We provide some information on ECHR compliance in one of the accompanying documents, which summarises our in-house analysis. The Scottish Law Commission considered ECHR compliance when it produced its report and we have had subsequently to look at it as well because some of the issues that have arisen have led to an increased number of exemptions in the bill, which raises the question whether we can justify an exemption for lease X but not for lease Y. We have gone into that in some detail and, because we have come up with justifications for the various exemptions that we have added, we have concluded that we are in line with the ECHR.

On the ECHR generally, the issue is not just about converting the leases to ownership but about providing appropriate compensation and additional payments to landlords. The main compensation is likely to come from the rental; in other words, from asking the landlord how much rent they are getting at the moment, which converts to a capital sum. However, there is also potential for additional payments if a landlord thinks that other rights would disappear. As we mentioned earlier, in the new world there will also be the right for landlords to convert certain things into burdens in the title deeds, including sporting rights.

We have gone through the ECHR implications in some detail. To be honest, it has been the bane of my life at times. Given the various provisions in the bill—the fact that there is compensation, potential for additional payments and the right to preserve certain rights—we think that the bill complies with the ECHR.

You mentioned “certain rights”. Can you give me an example?

Sporting rights are one example; those rights could convert under the bill.

Do you mean sporting as in gaming or fishing?

Yes. I mean fishing rights or the right to shoot certain types of bird.

What about rights of way?

They, too, could potentially convert.

There are no further comments from members. We have—remarkably—taken less time than I had expected. It is an interesting bill for the committee, and we thank the bill team for its input. I am sure that our witnesses at the next two meetings will come up with many more conundrums for us to juggle with.