Business Clinic: Selling farm with solar and buildings leases

Whether you have a legal, tax, insurance, management or land issue, Farmers Weekly’s Business Clinic experts can help.

Here, Andrew Chandler of Carter Jonas advises on farm sale considerations when a solar lease is involved, along with let buildings in alternative uses.

Q: I’m thinking of selling my farm, which includes a leased solar farm, in year five of a 25-year lease. Also, we rent out redundant farm buildings on short fixed-term leases. Should we get vacant possession before marketing the farm? All tenancies have signed lease agreements.

A: As soon as you begin to think about selling a farm, it is worth considering the details, so it is great that you have already turned your attention to these matters.

The more issues reviewed before launching to the market, the smoother the sale process often is – it can also reduce the likelihood of a sale falling through once agreed.

The first step for your solar farm is to look at the lease carefully. We know the remaining term, but it is worth checking for break clauses, rent reviews and any other details and conditions.

See also: Business Clinic: What to know when renting out cattle housing

The solar farm could be lotted separately, as it will likely have a different pool of potential buyers to the main farm – namely investors. That said, I have known of agricultural buyers being happy to buy the whole, inclusive of the solar farm.

Even in these circumstances, however, it is important to consider lotting as a potential option, as it could help maximise the value of that asset. The question of access will be a central consideration – can the solar farm be reached in a way that has minimal impact on the rest of the holding?

I advise getting the solar farm valued by someone experienced in this sector. The principles of valuing this type of property are very different from those for agricultural property.

Let buildings

There are two schools of thought regarding the let buildings. The short answer is that there is a market for holdings with either let or vacant buildings. Much depends on the use of the buildings, proximity to the rest of the holding and/or the principal dwelling, disturbance and so on.

We see a lot of buyers looking to acquire holdings that have income streams in place, which can help to service debt from the outset.

If the buildings are not adjacent to the main holding, you could consider longer-term leases to further increase yields and security of income, improving value and saleability.

As you have signed lease agreements already in place, you should be ready to go the market with them as they are.

There is no good reason to terminate such short-term leases unless a buyer requests it. If you find a buyer who would prefer vacant possession, you can always terminate the leases at that stage.

If you are thinking of selling, it’s worth getting in touch with an agent sooner rather than later as there could be other matters that are easily rectifiable or used to your advantage if picked up in the early stages.

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