Rent reviews update

    The Scottish appeal court (the Court of Session) has handed down its judgment on the Morrison-Low vs Paterson case. In reversing the principle, and much derided, findings of the Scottish Land Court in June 2010, it has positive ramifications for landlords undertaking rent reviews.

    The major points raised by the Court of Session's ruling are as follows:

    • There is no reason to omit the SFP from considerations regarding the assessment of rent, since it is the tenant’s occupation of a holding that unlocks the payment in the first place
    • Although the Court of Session’s decision has no authority in England and Wales, there are significant similarities between the agricultural holdings legislation in each jurisdiction. This makes it persuasive authority, and its acknowledgment of the situation in England and Wales supports the case’s relevance throughout the UK.
    • When reviewing rents, open market evidence is more important than budgets.
    • It is legitimate to establish whether a tenancy being used as an open market comparison included a premium paid by a neighbouring farmer for ‘marriage value’ – the advantage of farming the holding along with his existing land. Such a premium would not reflect the open market, and therefore should not be considered when reviewing rents. However, if there is reliable evidence that an open market letting of a subject holding would attract a marriage value premuim, that element must be taken into account.

    The Court of Session's judgment is good news for landlords, particularly since there is some support for the view of using the equivalent of Farm Business Tenancies (suitably adjusted) as comparables for more traditional rent reviews. The message for landlords is that they need to take a holistic view of rent review valuations and judge whether a deal looks plausible in the current open market.

     
     

    Key contacts

    Johnny Dudgeon FRICS FAAV

    Johnny Dudgeon FRICS FAAV

    Director
    Estate Management

    Savills Lincoln

    +44 (0) 1522 508 952

    +44 (0) 1522 508 952

     

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