Selling a Farm – Preparation is Key
At last, the Government has relaxed lockdown rules and is permitting property viewings, so the UK farmland market has resumed. Although the late spring and summer is traditionally the season when most farms are marketed, this year many farm agents are expecting the selling season to be extended well into the autumn months.
Selling any property or business can be stressful, but planning ahead will save time and money and ensure that the sale proceeds as smoothly as possible. Before putting a farm on the market, consider the following:
Choose The Right Professional Advisors
The team of professionals you choose should comprise at least a selling agent, a solicitor and an accountant, all with agricultural business experience. Ideally, they will work collaboratively together from the outset to ensure the sale of your farm is handled efficiently and quickly.
Invest in strategic tax advice from an accountant well in advance of the sale. A tax-efficient disposal will ensure that you retain as much of the sale proceeds as possible. There are many reliefs which may be available, for instance, Private Residence Relief or Entrepreneurs’ Relief. Both can potentially reduce Capital Gains Tax liability and may easily be lost if the requisite conditions are not met.
Prepare Your Farm For Sale
If your farm is in a state of disrepair, prospective buyers may be unable to see past all the work that needs doing, so you should address any obvious issues, such as mending potholes on driveways or mending cladding on farm buildings.
In addition to any physical remedial work, try to resolve any outstanding legal or regulatory issues around things like rights of way, private water supplies or lapsed permits. Ask your solicitor to review the legal title to the farm in advance of putting it on the market – any defects in the title may be addressed by an indemnity insurance policy and requisite third party consents (which often cause delay) can be identified early on to save time later. Consider also:
- are all the necessary planning permissions in place for the uses on the holding? If not, prior to marketing your farm you should consider rectifying this, whether by applying for retrospective planning consent or lawful development certificates.
- what services are available and where do they run? Are the necessary rights in place? If not, do you need to document any informal rights, or prepare a statutory declaration to evidence that the rights have accrued by being exercised continuously over many years?
- have all occupation arrangements with third parties been documented with an appropriate tenancy or licence agreement, so that the terms of occupation are clear for potential buyers?
- are there any public rights or private rights of way through the farm?
Anything you cannot get resolved you should be up front about with the buyer – trust is such an important factor on any business sale.
Get Your Paperwork In Order
Long before you put your property on the market, you should be keeping meticulous records of your accounts, taxes and other key legal paperwork. Having an extensive paper trail will set you up for a smooth transaction with fewer delays.
Locate all documents relating to matters like planning, tenancies, cropping schedules/rotation, entitlements, certification schemes, renewable energy installations, cross-compliance conditions, drainage plans, environmental land management schemes and capital allowances on plant and machinery fixtures.
Every prospective buyer wants to know what they’re getting themselves into. Do all that you can to reassure them that your farming business has been well managed.
Achieving The Best Price
Consider the farm’s development potential – is there any possibility of obtaining planning consent for other uses, for instance, residential? If so, it may be worth investing in obtaining planning consent prior to sale. Could the sale value be maximised by splitting the property into lots, as opposed to selling the farm as a whole? Much will depend on market conditions, as well as the assets in question.
Is it appropriate to sell the farm, or part of it, subject to an uplift clause or to sell with ‘hope value’?
Pitching at the right price is a skill; market the farm too high, it may put off viewings. Market it too low, and you could easily be underselling your asset. You must instruct a selling agent whose experience and judgement you trust, so you can be confident you have achieved the best price reasonably obtainable in the market.
Getting The Timing Right
No other sector is more seasonal than farming. The best time to market a farm is generally during the spring and summer, when farms are looking their best and crops are flourishing
If the sale includes livestock, then it’s worth timing the sale to coincide with the time of year when breeding stock prices are at their highest.
Marketing Your Business
The selling agent will suggest the most appropriate valuation method for setting a sale price and will advise on the best method of sale, whether it be by private treaty, informal tender or auction. The best format of sale will depend upon various factors, including the characteristics of the property, market conditions, and your personal circumstances.
In summary, the approach you take to preparing your farm for sale, from choosing the timing and method of sale, to identifying potential tax savings, legal issues and development potential, can all have a significant impact. Not only are you likely to maximise the price achieved, but planning ahead will reduce the risk of last minute hitches, increased legal costs and delay. Preparation is key, and seeking appropriate professional advice from the outset is likely to be a wise investment.