Business Clinic: Best route to market for large farm sale?

Whether it’s a legal, tax, finance or management question, Farmers Weekly’s expert panel can help.

Here, Taunton based Jack Mitchell, a partner in Carter Jonas, advises on the different methods of land and farm sales. 

See also: Business Clinic: advice on selling own units on BNG market

Q. We are selling a 445ha farm with a mix of farmland, houses and development potential, and our advisers have suggested different routes to market.

Some favour a tender, others an auction, while there is also interest in an off-market approach from a known buyer.

How do we choose the right sales method, and what are the trade-offs in terms of price, certainty, confidentiality and timescale?

A. There is no single approach that guarantees the highest price, fastest completion or greatest certainty in a farm sale, so the key is to decide which factors matter the most to you and tailor the process accordingly.

Private treaty dominates 

Private treaty remains the most common method of sale and generally offers vendors the greatest control and flexibility. Farms are marketed openly and offers can be received at any stage.

Sellers can decide whether to enter negotiations with an early bidder or wait to create competition between interested parties.

This approach works particularly well where buyers need time to arrange finance, undertake due diligence or assess planning and environmental considerations.

There are many different components to a farm sale nowadays – factors such as services, tenancies, planning permissions and stewardship schemes all need to be checked, and a hard deadline can be a barrier.

Digital marketing enable agents to reach a national and international audience, so private treaty sales have become increasingly popular.

They also allow negotiations to evolve with a range of potential purchasers for different lots, combinations of lots, or the whole property, into best-and-final offers if strong interest emerges.

An informal tender process can provide some of the competitive tension associated with an auction while retaining control of the process through greater confidentiality.

A marketing period is set, followed by a deadline for written bids. Sellers can then compare offers on a like-for-like basis and are not obliged to accept the highest or, indeed, any offer.

Because bids are not legally binding with the informal tender route, further negotiations are possible and timescales can be adapted.

This route can be particularly useful where several parties are interested, but there are complex issues that require time to investigate.

Formal tenders, where buyers submit a legally binding offer and a deposit and contracts are exchanged immediately upon acceptance, are rare.

These tenders offer a high degree of certainty, and progression rates are generally strong, but the rigid structure can deter potential purchasers, especially where significant due diligence is required.

Auction offers speed and certainty

Auction remains an effective route where speed and certainty are priorities.

Once the hammer falls, the successful bidder is legally committed to complete, usually within four weeks, and a deposit is paid immediately.

Auctions also provide a highly transparent process and can work well in strong markets or where there is a need for a quick sale, such as probate cases.

They can be conducted both in person and online and typically suit smaller blocks of land and farms.

However, the downside is that buyers must have finance and due diligence in place before the auction. If bidding fails to reach the reserve price, the property may subsequently prove more difficult to sell.

For a mixed farm with residential property and development potential, the amount of legal, planning and environmental information that buyers need to assess may make a formal tender process or an auction purchase less attractive.

Restrictive deadlines can discourage bids rather than encourage competition.

Off-market option

An increasingly popular option is an off-market sale. Rather than advertising widely, the property is quietly offered to a carefully selected group of known buyers.

This approach appeals to vendors seeking confidentiality and can avoid unnecessary disruption to tenants, staff or family members. We have already sold several farms off-market this year.

However, limiting exposure to the wider market means there is always the possibility that a stronger offer might have emerged through a public marketing campaign.

Ultimately, there is a trade-off between maximising price, achieving certainty, preserving confidentiality and controlling timescales. For a large, mixed holding, there is also no reason to adopt a single strategy.

A 445ha holding with a combination of productive farmland, houses and development potential could attract a range of buyers, from neighbouring farmers and private investors to developers and institutions.

Different elements may appeal to different purchasers and, in some cases, selling in lots rather than as a whole is likely to maximise value.

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