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Agricultural Holdings (Scotland) Act 2003

Section 43:  Agreements as to compensation for improvements

133.This section amends provisions in the 1991 Act that relate to compensation that is payable to a tenant on quitting the land at the termination of the tenancy (known as “waygo”) for improvements the tenant has made to fixed equipment during the term of the lease. Subsection (1) inserts new section 33A into the 1991 Act, which applies to improvements made prior to the coming into force of this Act where the tenancy is a 1991 Act tenancy. Subsections (2) and (3) make provision in respect of improvements made on or after the coming into force of this section where the tenancy is a 1991 Act tenancy.

134.Schedule 5 to the 1991 Act lists improvements which, if carried out on an agricultural holding and begun after 1st November 1948, entitle the tenant, on quitting the holding at the termination of the tenancy, to compensation under Part IV of the 1991 Act. Those improvements listed under Part II of Schedule 5 to the 1991 Act are improvements in respect of which compensation is payable only where the tenant gave at least three months written notice to the landlord in accordance with section 38 of the 1991 Act. Those improvements listed under Part III of Schedule 5 to the 1991 Act are improvements in respect of which compensation is payable irrespective of whether the landlord’s consent was obtained or notice was given to the landlord.

135.Section 5(2)(a) of the 1991 Act places upon the landlord an obligation at the point that the lease was entered into, albeit an obligation that could subsequently be contracted out of by virtue of section 5(3) of the 1991 Act, to carry out certain works in respect of fixed equipment and buildings. New section 33A provides that where a tenant carries out an improvement listed in either Part II or III of Schedule 5 to the 1991 Act by executing work which the landlord would have been under an obligation to carry out at the time the lease was entered into by virtue of section 5(2)(a) of the 1991 Act, then that tenant is entitled to compensation under Part IV of the 1991 Act on quitting the holding at termination of the lease This compensation is payable even where the parties have contracted under section 5(3) to vary the landlord's obligations at the time the lease was entered into and to make the tenant responsible to carry out those obligations instead. In this event, the restoration of the tenant to entitlement to compensation under Part IV of the 1991 Act is achieved by disapplying any term of the lease or agreement between the landlord and tenant restricting or excluding compensation in relation to such part or proportion of the improvement carried out by the tenant as the landlord would have been under an obligation to carry out at the point the lease was entered into by virtue of section 5(2)(a) of the 1991 Act. Such a term of the lease or agreement, however, remains in effect in respect of such part or proportion of the improvement carried out by the tenant which the landlord was not under an obligation to carry out, by virtue of section 5(2)(a) of the 1991 Act, at the point the lease was entered into.

136.Subsection (2) of this section repeals provisions of the 1991 Act that enable a landlord and tenant to contract out of the provisions in respect of compensation payable to the tenant under Part IV of the 1991 Act. This does not affect existing agreements that provide for the payment of compensation, except insofar as new section 33A, inserted into the 1991 Act by subsection (1) of this section, applies.

137.New subsection (2A) of section 38 of the 1991 Act (inserted by section 43(3) of the 2003 Act) disapplies the requirement for the tenant to give notice to the landlord of the tenant’s intention to carry out an improvement listed under Part II of Schedule 5 to the 1991 Act where the improvement carried out by the tenant was one which the landlord was under an obligation to carry out at the point the lease was entered into by virtue of section 5(2)(a) of the 1991 Act. The effect is that any failure by the tenant to give notice in respect of such an improvement will not prevent the tenant from being entitled to compensation under Part IV of the 1991 Act.

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