Business Clinic: Will known issues derail the sale of our farm?

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

Here, Andrew Chandler, head of rural agency with Carter Jonas, advises on how much to do in preparation for a farm sale where there are known planning and other issues.

See also: Business Clinic: renting a shed to a neighbour for youngstock

Q: We are preparing to sell our late parents’ farm, which is a farmhouse, 81ha, barns and some let commercial space. We know there are a few problems. The farmhouse is listed but has replacement windows that were installed without consent. One of the barns has a roof with broken asbestos sheets, and several of the commercial lets have only informal agreements rather than proper leases.

We don’t have lots of capital to put everything right before selling. Will these issues cause major problems with the sale or lead to a big reduction in value? Should we try to fix them or just accept that buyers will pay less?

A: The reality is that very few farms come to the market in perfect condition. Most carry a legacy of untidy paperwork, outdated buildings or unfinished projects. These do not automatically stop a sale, but they do need careful handling if you want to protect value.

Unauthorised works on a listed property always ring alarm bells. Strictly speaking, the replacement windows in your farmhouse are non-compliant.

A buyer planning a full programme of modernisation will factor replacement windows into their plans anyway, so it may not be an issue, but to maximise appeal, you may wish to consider resolving this.

There are two ways: apply for retrospective consent or take out an indemnity policy. The former gives certainty but takes time; the latter is quicker but does not resolve the underlying breach.

Be transparent  

Whether you act depends on buyer profile – some will take a view, others want the comfort of paperwork. The key is transparency. Disclose the issue up front so it does not become a nasty surprise during conveyancing.

Asbestos is another common obstacle, but it isn’t always the major hurdle that many believe it to be.

We have seen instances where buyers have reduced their offer by up to £100,000 because of the perceived cost of dismantling and disposal of asbestos from a farm building, only for the seller to be quoted £15,000 for the work.  

The solution is to obtain a proper survey and a contractor’s quote. That way you set the narrative, showing buyers the issue is manageable and preventing them from pricing in exaggerated costs.

Formalise lettings

Income from commercial tenants is attractive to some potential buyers, but only if it can be relied upon. Informal arrangements without leases or certificates of lawful use are vulnerable to challenge. In valuation terms, that income is “soft” – buyers cannot place full weight on it.

Where there is evidence of continuous occupation, you can usually apply for a Certificate of Lawfulness of Existing Use or Development.

That process will probably take a few months from start to finish, but is worthwhile where the income is significant, as it allows a valuer to capitalise it properly.

Without it, buyers may simply treat the space as redundant farm buildings and discount accordingly.

Consider buildings potential

It appears there are numerous farm buildings so it might also be worth spending some time and money securing development permissions on them.

Class Q may be an option if the building could be used as a residence, or Class R if it might lend itself to commercial use.

In the majority of cases this is unlikely to dramatically change the sale delivery but it underlines key values on certain elements.

It can be a sweetener for certain individuals and makes your property stand out from the crowd.

In an ideal world, every loose end would be tied up before marketing. In reality, many sellers – particularly in probate or trust situations – cannot commit funds to remedial works.

That does not mean you cannot sell well. The trick is to identify the problems, obtain evidence and realistic costings, and then decide which issues are worth tackling and which can be left for buyers to take a view on.

Buyers dislike uncertainty. If you do nothing, they will assume the worst and reduce their offer heavily.

If you can present facts – even if those facts acknowledge a problem – you remove uncertainty and protect value.

Do you have a question for the panel? Outline your legal, tax, finance, insurance or farm management question in no more than 350 words and Farmers Weekly will put it to a member of the panel. Please give as much information as possible. Email your question to FW-Businessclinic@markallengroup.com using the subject line “Business Clinic”.