Scotland: End of Tenancy...? Get Advice Early!
Fri 26 March 2021
At present, the COVID-19 pandemic is causing a lot of people to consider their personal circumstances. This coupled with the introduction of further reforms (as part of the Land Reform Act (Scotland) 2016) is bringing forward a lot of changes. The end of a tenancy may be part of this process, either for giving up a holding or indeed for a purchase of the holding.
These opportunities are realistically a once in a lifetime decision and require some very careful thought, consideration, and advice.
In order to take advantage of these opportunities, as indeed with any well-thought-out situation, there needs to be some considerable planning. The planning itself cannot start early enough and, in reality neither can the result once a decision of this magnitude has been made.
So, the question is, what needs to be planned?
Those who have undertaken the amnesty of improvements are probably ten steps in front. The amnestOM ty document may however need to be thoroughly checked through to make sure everything is in order. Likewise, if the improvements have not been addressed then a thorough dig back through paperwork to make sure all documentation is in hand will most certainly be necessary. A number of improvements and their value may be lost if they can’t be proven.
If the improvements are in order, then you will require some initial valuation advice. Realistically, if you are going down the route of either purchase or relinquishment, there needs to be a clear idea of the sums involved.
I do however bring a strong word of caution here as I have come across several circumstances whereby the thought processes is, “I’ll get a valuation and that will be it”, but in reality, it is not that simple. The valuation process is quite technical, clear thought is required as to what is to be included, and as to how items are to be valued. This might sound strange, but yes there are indeed different methodologies for different circumstances. The final point is that valuation itself is not an exact science and there can be a considerable difference of opinion. However, a well thought out, well-reasoned and transparent valuation will undoubtedly assist and speed up the whole process; and if not addressed properly, the whole process may indeed grind to a halt. A highly frustrating situation.
Once the sums are known there may be a knock-on situation with financial matters and therefore there is a need to involve your accountant. Timing may be highly relevant; how to deal with stock, Capital Gains, how the waygo process is documented and dealt with, are all significant issues. It is not in anyone’s interest to generate a big pot of money to simply then to give it away to the taxman. As a word of warning, there will undoubtedly be tax to be paid but the tax tail should not wag the dog!
If looking at a purchase, there may well be a requirement for finance. There is no need to go marching off to secure a deal with your bank manager at this early stage as the process could take many months, or even years, and the deals will change. An indication that finance is available is of great assistance; this also brings affordability into the thought process. In some cases, remaining as a tenant might be a more attractive option!
One thing that I would say is if you are looking at some major finance, then you may well want to look at multiple options. Different deals, different terms and different lengths of lending, capital and interest repayments or interest only, are generally all available. Do consider all options – let’s face it, if you’re buying a tractor, you would probably look at two or three different brands before making your choice. Finance is a business decision, no matter how long you have been with your current bank.
So, in completing the above you have probably involved your agent, your accountant, your lawyer and your bank manager, and this may be even before you have approached the landlord! Don’t be alarmed by all of this as forewarned is forearmed, and for that once in a lifetime decision you need to make sure it is the right one!Tom Oates, Director