Don Macleod

Lawyers choose their words carefully, and my title is no exception. Nor is the reason I consider the bill to be junk, and that reason is because the proposed law around large land holdings (so called) is an appalling mess that deserves no place on the statute book of any Parliament. For sure it will be a major problem for rural property, but the lesser known fact is that it is potentially a problem for all of us. Lawyers dealing with brownfield sites, development land, residential property, or indeed any property at all – read on.

Let me clear up any potential misunderstandings at the beginning. I will confess that when it comes to criticism of land reform, this is not my first rodeo. The policy behind land reform represents a disapproval of what we know as a “Scottish Estate”. I, like many others, see the enormous good that flows from Scottish Estates – food production, employment, housing, tourism, preservation of built heritage, environmental stewardship, and so on. The concern expressed here has nothing to do with the policy, and everything to do with the fact that the proposed law is a severe hazard that should make all property lawyers take notice – even if you consider land reform a good thing.

Large land holders

The policy of the bill is to designate a person owning more than 1,000 hectares as a “large land holder”. That seems simple. If you are a large land holder, then (a) you must prepare a Land Management Plan, (b) you cannot sell any of your land without following a statutory process (subject to some exempt transfers which will be confirmed in due course) and (c) the government will be able to dictate whether you can sell all of your land in one go, or whether you need to sell it in Lots (the Lots being dictated by the government). The government intervention involved with (b) and (c) is a big thing. The problem is that working out whether you are a large land holder, or not a large land holder, is potentially a nightmare. In a transactional context, that would be the seller’s problem initially to work out. However, it could be worse still for the unsuspecting buyer trying to work out whether the seller to them is a large land holder, or not.

Why do I consider it a potential nightmare? Because there are such severe problems of process and definition that there could be huge consequences for property transactions. Let me break that down a bit more and say that there are two problems. The first is that working out the law is going to be extremely difficult. That is clearly sub-optimal when at the heart of the matter lies your ability or inability to deal with a property right. The second problem is that the proposed law runs a coach and horse through established conveyancing processes.

If an Estate-owning client comes to see me and asks if they can sell their land without government intervention, the answer could well be “maybe”. It could also be “I don’t actually know”. Or it could be “no you can’t, because you are accidentally a large land holder – even though the government never intended that”. To keep my non-rural professionals interested and to convince you that it really is a problem for the whole profession, let me pose a scenario here: you are acting in the sale of a bungalow in Colinton on the outskirts of Edinburgh. Would you have the faintest idea that your client could be an accidental large land holder for the purposes of the proposed definition? Probably not. But they could be.

Problem 1 – difficult law

The proposed definition of a large land holder is the government’s third attempt. The definition in the first draft of the bill was poor. The second attempt at stage two was worse, and contained loopholes that could be spotted a mile away. The third attempt – in advance of the stage three debate next week – is, in fairness, better in terms of achieving the stated aims.

But the main problems around definition relate to the fact that one of the primary tests for most relevant landowners is linked to the requirement to register under the Register of Controlling Interests in Land (RCI). The RCI is, of course, intended to deal with transparency of ownership – in terms of highlighting differences between whose names are on the deeds to a property, and who actually controls the land. land reform policy is concerned with economic ownership and control – which is not what RCI is about. A RCI registration could also involve a judgment call about whether a registration is necessary, or not. If the large land holder test is pinned to RCI, then the logical conclusion is that your legal ability or inability to sell your land is rooted, in part, on a judgment call. That can’t be right. And to make it worse, the land reform test is pinned on whether there was a “requirement to register” under RCI (which may be complicated) and not whether a verifiable and public registration has been made.

My previous draft version of this article (almost ready to go but hadn’t quite left my computer) was foxed by the government publishing their proposed stage three amendments. That article identified all of the unintended consequences that could have arisen. Those now seem less likely to arise – which is good – but the proposed law is still strange. For example, you have two completely unconnected trusts with completely separate beneficiaries. Each trust owns 900ha (beneath the threshold). But they could still be aggregated together as a large land holder, even although the different sets of beneficiaries don’t know each other. 

Or, two next door farmers own 600ha each, and (as is common) grant separate options to the same windfarm developer. They are neighbours but barely know each other. On one view of the law (which I do not necessarily share), the options could result in both farmers being large land holders. But, on the other hand, you could own 999ha as an individual and be the sole beneficiary of a trust that owns 999ha right next door and not be a large land holder – even though you are economically entitled to an area of land almost twice the threshold. And despite the lengths that the government have gone to in making exceptionally tight definitions, simple things like multiple family ownerships are not caught. So whilst two completely un-connected trusts owning land side by side could be large land holders, Mr X and Mrs Y who each own 999ha side by side will not be. I’m not for a minute suggesting they should be, but the contrast highlights the oddities of the bill.

In some ways I wonder if the government know that what they have proposed is problematic. The new clauses in the bill include provisions intended to be “for the avoidance of doubt”. But doubt is not avoided in the drafting. It is created in the first place, and then not clarified. And the government have reverted to their now common position of potentially leaving it to secondary legislation to sort it out. But what we have is a possible hybrid sort-out. The amendments would result in the bill containing the definition of a large land holder, but with the possibility of the government being able to “clarify” that in secondary legislation. Here’s an idea: how about we don’t need to anticipate that secondary legislation will sort out the likely mess that will arise, and just get it right first time?

Perhaps lawyers should not be scared of difficult and headache inducing law, but when does difficult law become plain unworkable? When does it become just impossible to actually sensibly legislate for something? I believe unworkable and impossible law is just what we are going to get if this sorry bill becomes law.

Problem 2 – conveyancing process

This is, I think, the bigger problem. The tools of the trade for any property lawyer include: searches in various registers; purchaser enquiries in relation to due diligence and seller responses; and contractual warranties and confirmations. Some things you want the seller to warrant. Some things you might want the seller to warrant but you also want to check it out yourself, just in case. Applying that to whether the seller is a large land holder or not is where the nightmare really lies. Any conveyancer would be wise not just to rely on a smell test of whether the seller might own lots of land. The seller could warrant in the contract that they are not a large land holder. But they could just be wrong about that (even in good faith), and the consequences for the buyer are huge: their title is not valid.

It would be impossible for the buyer to even begin a process of verifying the seller’s status. Such a process would need to begin with the buyer’s solicitor reviewing every title within a sphere of 250m of the land in question. That in itself could be a mind boggling process. But even if that was done, there would still not be a means of actually ascertaining whether a “requirement to register” under the RCI applies. And so buyer verification would be, in my view, impossible.

You want the seller’s solicitor to prove that there are no outstanding mortgages on the seller’s title? No problem. Get a search, and that will give you a definitive answer. You want the seller’s solicitor to prove that the individual signing on behalf of the selling company is a director? Also no problem. Get a search. You want to prove that the seller has the legal power in the first place to sell land to your buying client without going through an onerous government processes, therefore avoiding a dud title? Unfortunately you’ll just have to take your chances on that.

Poor law

The government has previous form on this when it comes to the law concerning rural property. The first time an act of the Scottish Parliament was declared “not law” concerned the niche area of terminating an agricultural lease. That has been an expensive disaster to sort out, and the sort out continues to this day, almost 12 years later. Keeping with our niche area, the Parliament passed a substantial piece of law around rent reviews for agricultural holdings in 2016 – an important thing for any tenant farmer or landlord. It has never actually been brought into force, and almost on the 10th year of it idly sitting on the statute book it’s about to be binned and replaced by something else – because it just doesn’t work.

In recent weeks some of us have had disappointed cats on our minds. The cats are disappointed that the new Scottish Parliament law against stealing dogs doesn’t apply to them. But we lawyers know that stealing a cat or stealing a dog is as illegal as it comes, and so the only disappointment must lie in the fact that our Parliament has wasted time and resource on making illegal something that is already illegal. The same is true of the 2021 Scottish Parliament law making it doubly illegal to assault a shop worker. The Land Reform Bill, unfortunately, joins this growing list of poor legislation. It’s sometimes hard to know when a proposed piece of legislation deserves specific and vocal criticism because it will simply be such bad law – policy questions aside. But I believe that is what we have here.

Don Macleod is head of land and property at Turcan Connell