Planning on farm diversification? Check your title deeds

Sophie Fletcher, Solicitor, Rural & Agriculture

With the cost of machinery, feed, utilities and, well, pretty much everything else rising sharply at the moment, more and more farmers are looking at ways in which to diversify their operations and create additional income streams that will help sustain their businesses over the long-term.

The nature of this diversification varies according to each individual’s particular situation. Converting unused buildings into holiday properties or residential units is a regular option, while renting them out as office, retail or factory space could be another.

Spare land can also be sold off to developers for a variety of purposes. Residential development is perhaps the most common one, but energy generation is another that’s increasingly regular, whether for solar energy schemes, gas peaker plants or, in some parts of the UK, onshore wind farms.

While it might seem like a simple process to develop what is, after all, your own land, there are a number of steps that you ought to be taking before the process begins to make sure that there are no hidden or forgotten issues that could cost you money, delay your plans or even stop them in their tracks.

A review of all the relevant title documentation has to be your first step, so that anything such as restrictive covenants that bind the land and potentially prevent the land from being used for certain purposes can be picked up quickly and addressed as required.

There is also the possibility of overage (or clawback or uplift) agreements being in place, which can significantly affect the land it is registered against, particularly its value.

The most common purpose is where the owner of the land in question agrees to pay the person they bought it from a sum of money if the value of the land increases after its development.

Clearly this will have an impact on the value of the land, which could in turn have an impact on what you can afford to invest in your new venture.

Getting expert advice on these types of agreements is vital when considering your options of diversification, as is looking at alternative solutions that allow you to proceed with your plans whether that be development, change of use or the sale of your land.

For example, a further issue may arise where mines and minerals beneath the surface of your land are owned by a third party who could exercise their right to the minerals and so could have a significant affect on development.

A common way forward would be to put indemnity insurance policies in place which are designed to meet your specific needs, will protect your interests and will allow development to progress without significant expense.

Your professional advisers should be able to review your title deeds and source a bespoke indemnity policy on your behalf which meets your individual requirements.

As ever in these situations, proper preparation is key to making sure you’re starting on solid ground, so to speak, and can keep the project moving along smoothly, on time and on budget.

If all parties know where things stand before contracts are signed, and all the potential nasty surprises have been discovered, dealt with or planned for, then you’ll have the best chance of completing your project to the satisfaction of everyone involved.

To find out more about how Sophie can help you, please do not hesitate to get in touch.