Diversification (Non-Agricultural Activity)
89. During the consultation process a number of small landholders identified that their houses cannot be used for collateral for loans, improvements or diversification because they do not own the site of the house. Some also wished the ability to diversify without their landlords consent. There was a range of non-agricultural diversification sought, including craft businesses, self-catering, livery, farm shops and cafes. This has led some small landholders to reach a view that a right to buy the land under their house would provide them with the necessary borrowing power they require to develop their business, including diversification for non-agricultural purposes, which could also provide greater employment within their community. (see also Finance section)
90. A further number of small landholders, with the knowledge and consent of their landlords, had already diversified into non-agricultural businesses and taken the risk upon their investment (as they do not own the land under the house or buildings being used for the diversified activity).
91. The 1911 Act allows a landholder "to make such use thereof for subsidiary or auxiliary occupations as in case of dispute the Scottish Land Court may find to be reasonable and not inconsistent with the cultivation of the holding."  Common auxiliary or subsidiary occupations could include, for example, carpenter, mason, fisherman, postmaster, keeping a small shop, letting lodgings, spinning & weaving, keeping caravans for holiday lets, provision of camping ground and arts and crafts. 
92. The lack of direct reference in the legislation as to what is and is not permissible for non-agricultural diversification means that there is little guidance at present and our consultation unearthed confusion amongst small landholders and landlords about whether diversification is possible. Consideration could be given as to whether non-statutory guidance or perhaps a code of practice would be beneficial in this area. However, it would have to be clear that any guidance was not binding and small landholders should seek independent advice if they have concerns about whether their proposed diversification is lawful.
93. Compensation for improvements is discussed below, however that subject is also relevant for diversification. It is not clear as to the extent to which small landholders can claim compensation as regards improvements made for the purposes of subsidiary or auxiliary occupations. Crofters are able to claim compensation for improvements made on the croft for the purposes of subsidiary of auxiliary occupations. Consideration could be given as to whether a similar explicit right could be introduced as regards small landholders.
Email: Claudine Duff