In Scotland, the witnesses who proposed to the Royal Commission on Local Taxation that owners of land values and feu duties should be specially rated, did so mainly on the ground that such owners secure an increase in the value of their property, owing to expenditure of local rates, the enterprise of the community, and the growth of population.

An important distinction between the systems of levying rates in Scotland and England is that in Scotland nearly all rates are divided between owners and occupiers,1 whereas in England they are levied upon the occupiers (except in the case of "compounded" property, or where special contracts are made). Consequently, owners in Scotland do not escape, during the existence of leases, some share of new or increased rates, unforeseen at the time of making their bargains.

1 Burghal rates fall chiefly on occupiers; the greater portion of the Land ward rates, levied by County Councils and District Fishery Boards, falls on owners; and, with the exception of the Heritor's assessments, which are entirely borne by owners, the Parochial rates are imposed one-half on owners, and one-half - under deductions of the Agricultural Rates Grant - on occupiers (see Local Taxation Returns, 1902-3, H. C. 341 of 1904, p. x.).

To rates leviable upon "owners" or "proprietors" all persons are liable who are in the actual receipt of the rents and profits of lands and heritages. Tenants holding upon leases of more than 21 years' duration, or, if the property be minerals, of more than 31 years, are deemed to be the proprietors, but have a right of relief against the actual proprietor to the extent of that proportion of the owner's rates as corresponds to the proportion borne by the rent to the valuation. Tenants holding under leases of shorter duration are taken to be the proprietors of any erections or structural improvements made by them, except in the case of certain agricultural and mineral properties. Superiors are not liable in respect of their feus.

Although it was not generally suggested that all rates should be levied on site values only, and none on the buildings upon them, certain witnesses expressed the opinion to the Royal Commission that this course should be adopted, either at once or by degrees. Some regarded the adoption of the system of rating site values as a means of ultimately transferring the ownership to the Local Authorities.1

The Separate Report on Urban Rating and Site Values suggested that "in the case of future contracts, the owner should be entitled to deduct from any rent, feu duty, or ground annual, payable to a superior, the amount of the rate in the pound upon the value which attaches to the site at the date when the contract is made, a like right of deduction being given to any intermediate parties against their superior."

A great deal of land in towns in Scotland is subject to feu duty, or a perpetual rentcharge, reserved by the grantor on parting with his land, and practically represents the purchase money agreed to be paid for the property by the feuar, who undertakes the present and future liability attaching to him to pay rates and other burdens in respect of the property. In a large number of cases the grantor sells his interest in the feu duty to a third party.

The grantor is generally known as the superior, the grantee as the "feuar" or "vassal." The rent reserved is called a "feu duty."

Lord Balfour of Burleigh has sent the author the following note upon the subject of feuing: "The Scottish system of land tenure is feudal, and the theory of it is shortly as follows: "The land is considered as originally all belonging to the Crown. The Crown made grants of it - as feus - to leading men who were bound to afford proportionate services, originally military. They in their turn feued their pieces of land in smaller portions to lesser men, who were bound to render to them services in turn. The grantor in each case was the 'Superior' of the grantee, who was the 'Vassal.' Thus an intermediate holder of land was, and is, the vassal of the person from whom he holds his land - his 'superior' - and the 'superior' of the person who holds from him - his 'vassal.' In due time money payments were substituted for services, and these money payments, where annual, are known as feu duties. In the old theory, the land, i.e., the ' feu,' was held to fall back into the hands of the ' superior' in certain circumstances, e.g., on the death of the vassal, or if the vassal wished to transfer his piece of land. The superior then, for a certain payment, granted the feu anew to the heir or transferee, the payment being, unless there was a special stipulation, a year's rent or a year's feu duty of the piece of land, and being known as a 'casualty.' In feus granted since 1874 no such casualties are exigible, unless specially stipulated for and of fixed amount and payable at fixed periods.

1 Cochran, 15,920-6, and Vol. III. of Min. of Ev., App. No. XII., par. 13; Burt, 16,188-209, 16,308-28, and Vol. III. of Min. of Ev., App. No. XIV., pars. 7, 8; Chisholm, 17,110-24, and Vol. III. of Min. of Ev., App. No. XXIV, pars. 8, 21; Gray, Vol. III. of Min. of Ev., App. No. XXV., par. 22; Waddell, 15,762-812. Also see Report of Committee of Lanarkshire County Council, Vol. III. of Min. of Ev., App. No. IV., p. 173.

"Though theoretically a feu may be of a piece of land of any size, it is, in modern practice, usually of a site for building purposes. The superior grants a feu to a vassal, i.e., the feuar, who may be bound to pay either (1) a capital sum down, i.e., a ' grassum,' with an illusory feu duty; or (2) a grassum with a real feu duty; or (3) - the usual case - no grassum, but a real feu duty. In addition, the vassal is commonly bound to pay every nineteenth year a double - known as a duplicand - of his feu duty, this payment coming in place of the casualties exigible in feu rights granted prior to 1874. Thus, taking the example of a piece of ground worth 1,000l., feued on a 5 per cent. basis, the ' superior' may either take (1) a grassum of 1,000l. with a feu duty of one penny Scots; or (2) a grassum of 500l., with a feu duty of 25l., with or without a duplicand each nineteenth year; or (3) only a feu duty of 50l., with or without a duplicand each nineteenth year.