THE IMPOSSIBILITY OF PURCHASE
This is the tenth of 11 posts ( it was to be 12 but two were amalgamated) serialising my chapter on crofting law which appeared in “Land Reform in Scotland” edited by Malcolm Combe, Jayne Glass and Annie Tindley and published by Edinburgh University Press in 2020.
The first 6 posts charted the development of crofting law from 1886-2019.
The last 5 posts discuss the challenges to crofting law. This week we discuss the impossibility of purchase.
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Section II: challenges for the crofting system
(4) The Impossibility of Purchase
According to the Crofting Commission’s figures,[i] 87 % of crofters are aged 41 years or above, with only 10% in the 21-40 age range. One factor undoubtedly affecting this statistic is that crofts on the open market (whether owned or tenanted) are exclusively available to cash purchasers. Even agricultural lenders will not lend on croft land or croft tenancies. Whilst there are (theoretically) support mechanisms available to those who already own or tenant a croft, the only support mechanisms[ii] available to assist in purchasing the land itself are hopelessly oversubscribed and are withdrawn for 2018/2019. Furthermore, these schemes are not crofting-specific. To purchase a croft, even of modest size and productivity, without any improvements or planning permission and not particularly close to a population centre, might costs tens of thousands of pounds. If planning permission has been obtained, then the price will escalate. It is possible that these values are inflated by the possibility of development introduced by the 1976 Act. The Shucksmith Committee proposed measures to encourage commercial lenders to provide conventional mortgages to allow prospective crofters to purchase land. They proposed (1) a map based Crofting Register to be introduced to establish boundaries in order to give lenders a clear idea of what they were lending on, and (2) that the Registration of Leases (Scotland) Act 1857 should be amended so that a crofting lease could be registered; thus making it possible to grant a standard security against it.
No headway seems to have been possible in relation to the funding element, despite a 2009 Scottish Government consultation paper which accepted, in general terms, that crofters should be able to obtain loan finance without having to decroft an area of land to do so. The Scottish Government also agreed to consult with the Scottish Committee of Clearing Bankers and the Council of Mortgage Lenders with a view to moving forward with the idea of obtaining private sector mortgages over croft land, but the results of those discussions (if they took place) were not made public. Reaction to the consultation paper was generally negative, and ultimately, when the draft Crofting Reform (Scotland) Bill 2009 was published, the mortgage provisions had been dropped. A common concern seemed to be that lenders simply would not agree to lend; there being simply too many variables to satisfy the lender’s understandable requirement for certainty in all matters.[iii] Until the market in crofts no longer requires a lump cash sum, the age demographic will not improve. Healthy communities need people of all ages, backgrounds and abilities, and the lack of loans means that as land prices rise and wages continue to stagnate, there will be a decreasing number of young people entering communities in crofting areas.
Professor Shucksmith and his Committee noted that although the population of the Highlands and Islands has generally grown since the 1960s, particularly between 2001-2006 when there was an increase of 1.7 % across the region (more than three times that of Scotland as a whole), the growth is spread unevenly, and those moving in to the area tend to be older.[iv] Furthermore, the Report noted[v] that in a survey of crofters and non-crofters, the most important characteristic in making a thriving crofting community was said to be having younger crofters.
Young people generally require loans to enable them to purchase crofts. If the Government is serious about encouraging young people into crofting, then creative solutions must be engineered to open up the market in crofts and croft tenancies. The Scottish Government have recently announced,[vi] as part of their crofting reform package, a dedicated new entrant scheme for crofters, which is a very welcome development indeed. However, the detail of that is not yet clear, and that is where the devil can usually be found.
[i] http://www.crofting.scotland.gov.uk/facts-and-figures [accessed 14 March 2019].
[ii] Young Farmers Start up Grant Scheme and New Entrants Start-Up Scheme, detailed at <https://www.ruralpayments.org/publicsite/futures/topics/all-schemes/new-entrants/young-farmers-and-new-entrants-start-up-grant-schemes/> (last accessed 28 March 2019).
[iii] On this point, in his 2012 paper MacLean remarked, “I was deeply sceptical about this even before the turmoil in the banking world which has seen such a sharp brake being applied to lending, and I remain to be convinced that prudent lenders will be prepared to advance significant sums on the strength of such a dubious security.” Recent Developments in Crofting Law, paragraph 32.
[iv] Final Report of the Committee of Enquiry on Crofting, p. 17 paragraph 2.2.3.
[v] Ibid. p. 20, paragraph 2.4.4.
[vi] <https://blogs.gov.scot/rural-environment/2018/04/12/crofting-update/> (last accessed 14 March 2019).
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Reading this section five years later has made me stop and consider for a moment that this was written (2019) just before the pandemic supercharged the Scottish rural property market. Anecdotally, professionals working in the sector seem to broadly agree that from September 2020 onwards, the market heated up exponentially and I recall one solicitor saying (and I am paraphrasing) “things must get quieter soon, every house in the county must have been sold already”.
It was extraordinary; the number of instructions must have doubled, with hugely inflated prices being offered, routinely 50-75% above asking price, and without a doubt there was an element of urgency amongst purchasers who seemed to be trying to escape the virus.
The uncomfortable truth is that if it was impossible for most to purchase a croft in 2019, how on earth would we describe it post-2020? In dire need of statutory intervention would be my first suggestion. Certainly the market generally has slowed down in the last 6-9 months, but the rapid rise in prices between September 2020 and September 2023 has not been reversed; the rate of the rise has merely slowed slightly.
The natural capital market is also feeding the rise in prices, and unfortunately the Land Reform Bill does nothing to regulate that booming market, which currently threatens to benefit everybody except ordinary people living and working in the Highlands and Islands. Without swift and radical legislation it will be too late to regulate that market in any meaningful way and it will surely continue to affect the market in crofts and rural property in the Highlands.
Neither is there any reason to believe that the new draft crofting bill (expected any time), will provide any solutions.
In all of this, the Crofting Law Group would be enormously helpful in providing a forum for discussion and a route to influencing new legislation. It has been dormant now for five years, which is a big loss and a very great pity.
The next post is the last in this series; the conclusion from my chapter.
See note below for details of all (now) 11 posts.
As always, if you need help or wish to discuss crofting law, do get in touch.
In the meantime, to compensate for such a depressing post, here’s a very cute photo of my Senior Associate (who just turned 11), when he was just a pup.
Eilidh
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Note Referred To:-
Introduction
Development of Crofting Law
1886-1911
1911-1955
1955-1976
1976-1993
1993-1997 & 1997-2019
Challenges
Crofting legislation
Crofting law v land reform
The Conflicting Priorities of the Crofting System
The Impossibility of Purchase
Conclusion