What are the legal issues which need to be considered before proceeding with a diversification scheme?
With Brexit growing closer and the recent publication of the new Agricultural Bill, we are likely to see the biggest shake up in the industry that has been seen for decades.
Due to such changes, especially in the way farmers and land managers are to receive future payments, diversification is likely to play a greater role in creating a strong, robust and successful farming business. A diverse farming business with more than one income stream has a greater chance of succeeding in the forthcoming changing landscape. However, it is essential that landowners are properly advised before embarking on such a project in order to avoid the various pitfalls.
So what are the legal issues which need to be considered before proceeding with a diversification scheme?
It is important to check the title of the property to determine whether there are any restrictions or third party rights which could prevent the diversification scheme going ahead. In addition, if the land is secured by a charge it is likely that bank’s consent will be required to any change of use, planning application or development works. If the property is leasehold do the terms of the lease allow for diversification? Is landlord’s consent required? If the land is tenanted, do the terms of the tenancy/licence allow for termination if required?
Careful consideration must be given as to whether the diversification project requires planning consent.For example, renovating a farm building to be used for commercial or residential use is likely to require a change of use and, as such planning consent. However, consideration should be given as to whether the proposed development would be permitted under Permitted Development Rights. If the development is not permitted under the Permitted Development Rights then a planning application would need to be made.
Development of land or buildings may require connection to utilities such as water, drainage, electricity, etc. Are there express rights for services in the title? If connection to the services cannot be obtained direct from the land, easements may need to be negotiated with neighbouring land owners.Consent to connect to public utilities may also be required from statutory undertakers.
Additional finance may be required to fund the diversification project.If so, it is essential to have discussions with a lender at an early stage to ensure funding is available.
Obtaining tax advice before committing to a diversification scheme is essential as diversification can have tax consequences, in particular inheritance tax implications for the landowner. As such, it is extremely important that tax advice is taken at the outset of the project.
If you have any thoughts as to diversification and wish to have an informal chat, please contact Lupton Fawcett’s agricultural specialist Caroline Hawcroft.
Tel: 01904 561414
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.