Buying a Farm

For most individuals, the purchase of a farm is a once in a lifetime opportunity. Therefore with so much at stake finding the right farm, at the right price, at the right time is crucial. Obtaining legal advice from an early stage, from an adviser who has agricultural property knowledge is also crucial. You will want to ensure that the property is fit for purpose and you go in to the purchase with as much knowledge of the land and the matters affecting it as possible.

Before buying a farm

Having made the decision to purchase a farm, the next steps, before looking for a suitable farm are:

1. Agree the business structure. Who will be the purchaser? Is it a company, a partnership or Sole Trader.
2. Get a business plan prepared. This is essential if you are going to seek funding. Most farms have an agricultural adviser whom they have worked with for many years
3. Meet with your Accountant, who should specialise in Agricultural Business to discuss the plan.
4. Meet with your legal adviser who has agricultural experience and your bank manager if you are seeking funding.

In this way you will have a plan, accountants blessing and a team in place for when the right farm becomes available.

Between 2006 and 2016, the value of farmland increased by 277% according to a report prepared by Savills. Since 2016, values have continued to rise, with the North West seeing anything from £7,500 per acre to in excess of £18,000 per acre, dependent upon quality and location.

How farms are offered for sale

With sellers looking to maximise their return when selling their farm, land agents frequently advise a sale of the farm in separate lots rather than a sale as a whole. A separate sale of the farmhouse, buildings (perhaps with planning consent for conversion) and the farmland in small enough lots to appeal to adjacent farmers and land owners may achieve a higher return than the farm as a single lot.

If a farm is being offered as a single lot or with the option to buy all lots, if you can, view the farm in all the seasons, as farms are often offered for sale either in spring or late summer when they are looking their best (and wet farms are dry).

Farms are normally offered for sale in three ways:

Auction:  This is far less popular than it was 20 years ago. Bidding is public, the contract is binding on the fall of the hammer and if the bank or financial institutions have queries, you could find yourself without fund for completion and in breach of contract. All enquiries should be raised prior to the auction which means if you are not successful you will have incurred costs and fees for no return.

Formal Tender: The buyers must put forward their highest bid, and if accepted, they will be required to sign the contract within usually a very small time frame.

Private Treaty: The majority of purchases are conducted via Private Treaty, often through a land agent (think of residential purchase through an estate agent). The advantage is that the information is confidential, although the Land Registry will record the identity of the buyer and the price paid. The main advantage is that it gives the buyer time to make all reasonable enquiries, and opportunities to walk away if anything untoward is found.

Due diligence

Once a farm has been identified, there is a business plan in place, and the finance agreed in principle, the buyer will then instruct their Legal Adviser to undertake a thorough review of the contract pack, undertake searches and raise any necessarily additional enquiries.

The legal adviser will:

• Investigate the seller’s title. This is a relatively easy process if the seller’s title is registered, but unregistered land can present more issues.
• Check with the sellers Solicitor if there has been any unauthorised occupation such as an informal grazing agreement.
• Ascertain if there are any overage provisions or promotion agreements in place to which the buyer is bound.
• Carry out searches. This is a combination of desk research and site inspections. Common searches are a local, environmental, drainage, wayleaves, chancel and depending on area, salt and coal or HS2 route searches.

Searches will reveal public rights of way, planning consents, building regulation approvals, site special scientific interest, listed buildings, conservation areas, tree preservation notices and historic enforcements. Chancel repair liabilities may also exist, especially with an older property. Mineral rights should be attached to the land.  Given how important wildlife issues are and the financial impact of pollution, checking all environmental issues is similarly vital.

Acting upon the established principle of caveat emptor or buyer beware, the legal adviser for the buyer will raise additional enquiries, such as querying which schemes the seller has entered into. Some, such as the Landlord Grant Scheme, require the buyer to enter into a Deed of Covenant.

A legal adviser will ascertain as much information as possible from the sellers, since once contracts have been exchanged there is no obligation to fill in any gaps. Therefore choosing the right legal adviser, with extensive knowledge about Agriculture and Rural Affairs is vital for that once in a life time opportunity.

Make the right choice.

If you would like any further information in buying a farm, Mike Bracegirdle can be contacted on 01606 334309 or emailed at mbracegirdle@butcher-barlow.co.uk