Hamish Lean discusses the importance of checking your joint agricultural tenancy agreement to avoid problems that can arise following the death of a partner.
Difficulties can arise where a partnership holds an agricultural tenancy and there is a change in the constitution of the partnership. In some instances, that might lead to the end of the tenancy itself, as a partnership is a separate legal person in Scots law; separate from the individual partners within the partnership.
What is the position with joint tenancies? Concerns are often raised that the tenancy might be at risk if a partner were to die or retire. A joint tenancy means that each of the tenants holds a joint interest as atenant in the lease as an individual, and it is quite distinct from the situation where a partnership is the tenant.
It is common for a tenancy to be held jointly by different family members, for example by a father and son.
Accordingly, even if joint tenants conduct a family farming business within a partnership, that does not mean that the partnership is the tenant.
A change in the identity of the individual partners will not lead to the end of the tenancy. However, there are some important consequences of a joint tenancy of which people should be aware.
Generally speaking, a written lease will provide for one of two ways in which a joint tenancy can be held. It can be held by the joint tenants and to the survivor of them, or it can simply be held by the joint tenants equally without any mention of a survivor.
If it is held jointly and to the survivor, this means that on the death of the first joint tenant, their interest as joint tenant passes automatically to the survivor without any legal proceedings having to be carried out.
The survivor becomes the sole tenant in their own right under the same lease.
However, if the tenants hold a joint tenancy without a survivorship destination, steps have to be taken on the death of one of the joint tenants to transfer that interest after death.
In most cases, the deceased joint tenant's executors will have a year within which to carry out the necessary procedures to transfer the interest. If this is not done, the tenancy will come to an end.
There are a number of instances where this step has not been followed and secure agricultural tenancies have been lost.
Joint tenants who are unsure of the precise nature of their joint tenancy and whether it will pass automatically to their survivor should seek advice so that appropriate provisions are made in their wills to take account of the joint interest after death.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.