Ten key legal considerations when selling your farm
Deciding to sell your farm can be a challenging and emotional process. There are numerous factors to consider early in the legal process to ensure the sale goes as smoothly as possible. Engaging a solicitor early on, ideally before marketing the farm, is crucial. Doing so allows time to address the following important matters:
Title deeds
While the majority of land in England is registered with HM Land Registry, a significant amount of property remains unregistered. Selling unregistered land is certainly possible, but registered titles are not always straightforward either. Your solicitor will need to review the title deeds to ensure that all necessary documents are in order and to identify any potential issues that might complicate the sale. This is an essential first step in avoiding delays later on.
Enquiries and documentation
As a seller, you will be required to complete detailed enquiries regarding all aspects of the farm. This process can be time-consuming, so it’s best to start gathering the necessary documents as early as possible. These enquiries serve as a comprehensive checklist for preparing the property for sale.
Documents you may need to provide include:
- Planning and building regulations documentation for any work undertaken on the property.
- Details of any restrictions, such as an agricultural tie, on residential properties.
- Wayleave agreements.
- Information about services, including private drainage systems and water supplies.
- Participation in environmental schemes affecting the farm.
Searches
Although it is typical for the buyer to arrange property searches, in some areas, local authorities can take several weeks or even months to return search results, potentially causing delays in the sale process. If you are selling in such an area, you may wish to consider conducting these searches in advance. The buyer could then reimburse you upon completion of the sale.
Covenants
If parts of your farm have development potential and you wish to sell subject to a development clawback covenant (also known as overage), it is important to discuss this with your solicitor early on. The terms of this agreement, such as the length of time the covenant will apply and the types of planning permission that will trigger it, need to be defined before negotiations with prospective buyers begin. Leaving this to the contract drafting stage often results in unnecessary delays.
Retained land
If you are retaining some of the land or a residential property, it’s important to consider whether any rights of way or rights for services will need to be granted to the property being sold, or vice versa. Your solicitor will ensure that these rights are properly incorporated into the sale documents.
Tenancies and other occupiers
If any part of the farm is occupied by tenants, whether under formal or informal agreements, these arrangements will need to be reviewed. Any unwritten agreements should ideally be formalised to avoid uncertainty during the sale process. If the property is to be sold with vacant possession, arrangements must be made to serve any necessary notices to vacate well in advance.
Employees
If you employ workers on the farm, you will need to determine whether their employment will continue under the new owner or if it will be terminated. It is advisable to seek advice from an employment law specialist to ensure that all legal obligations are met prior to the sale.
Tax considerations
The sale of a farm can have significant tax implications, including potential liabilities for capital gains tax, VAT, and capital allowances. Additionally, long-term inheritance planning may be affected by the sale. To avoid surprises and ensure the sale is structured in the most tax-efficient manner, it’s vital to involve your accountant at the outset.
Bank security
If you are only selling part of the property and not repaying the entirety of your debt, early discussions with your lender will be necessary. You will need to negotiate the release of the sold portion from their security.
Seeking legal guidance
Selling a farm involves complex legal, financial, and practical considerations, all of which require careful planning. To ensure that your sale proceeds smoothly, it’s essential to engage with a solicitor specialising in agricultural property early in the process. If you are considering selling your farm or any portion of your land, contact Helen Lock or another member of our agricultural property department for expert guidance and support.
By addressing these key legal factors in advance, you can minimise delays and ensure a successful sale.
Speak to an expert
To avoid complications, engage a solicitor early. Contact Helen Lock or our agricultural property team for expert advice on selling your farm.
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