A Guide to Selling Your Farm

Selling your farm is a huge undertaking. Much more than just a business, it is also the family home which has likely been passed down through generations. Yet whether a sale is required due to a divorce, rising costs, or retirement, it’s essential to obtain legal support to ensure the process is as smooth and profitable as possible. 

From preparation and timing, to marketing and future planning, there’s a lot that goes into selling your farm. This article gives you all the information you need to understand how to sell a farm and explains how our specialist agricultural team can help.

Preparation, preparation, preparation

Put together a sales pack

It’s quite common for a seller to only instruct a solicitor once the farm is on the market and a buyer has been found. If any issues arise from this point, they could take a lot of time and money to resolve.

The answer to this is to put together a detailed sales pack. This would include things like rights to ownership, replies to standard enquiries and a skeleton sales contract. Understanding everything you need to put into a sales pack is a key component of grasping how to sell a farm, so getting the right legal advice is key. This is why you should speak to a specialist agricultural solicitor at your earliest opportunity.

Ensure everyone is on board

Unlike most businesses, farms are often family operated and can also be tied up in trusts as part of a comprehensive wealth management and estate planning strategy. It’s therefore important to ensure that all interested parties completely agree to selling your farm and any objections can be dealt with as soon as possible.

Check the title deeds

Title deeds will need to be obtained so proof of ownership can be satisfied. This should be sorted before the sales process begins and ideally be placed in your sales pack. The deeds will also refer to any documents relating to any rights or liabilities attached to the land which the buyer may be interested in. 

It’s common for farms to be passed from generation to generation, meaning they will often not be registered with the Land Registry. If this is the case for you, register your property well in advance of selling your farm so you have all the information you need.

Particularly large farms may be made up of land with different titles of ownership. It’s therefore necessary to compare the title deeds with the land itself to get a clear understanding of who owns what.

Identify potential pitfalls 

There are a lot of issues which routinely occur when selling a farm. These include government grants, crops and livestock statistics/licences, undocumented/informal occupancy agreements, and the rights of tenants and employees. If you’re in the process of selling your farm and one of these problems crops up, it could cause delays if not adequately prepared for. 

Experienced agricultural solicitors will have come across these potential pitfalls many times and know the precise questions to ask to ensure all relevant information is provided. This gives you complete confidence that everything will be taken care of and no unforeseen circumstances will be able to disrupt the sales process.

There’s a lot to consider when selling your farm business. From maximising your tax benefits and solving access issues to thinking about development potential and ensuring the provision of amenities, consulting a specialist agricultural solicitor will ensure everything is taken care of. 

Here are a few things to be aware of:

Land access

It’s common for rural premises to be accessed via private or shared roads off the public highway network. Formal rights of way should be established, as well as responsibility for maintaining the private roads. Ideally, this information should be noted in your sales pack. You should also confirm public rights of way access and any permissive routes which may apply.

Tax matters

While there are a lot of legal issues to be worked through when selling your farm, it’s also important to remember your tax liabilities as well. These include:

• Capital Gains Tax (CGT): Selling your farm will often result in a CGT liability. Depending on your circumstances, it may be possible to reduce the amount you’ll need to pay using Business Asset Disposal Relief. 
• Inheritance Tax (IHT): Once the sale has been completed, you will not be able to benefit from Entrepreneurs’ Relief or Business Property Relief and will instead be subject to IHT. Having a comprehensive tax strategy in place will ensure your subsequent liabilities are kept to a minimum. 
• Entrepreneurs’ Relief: As mentioned above, Entrepreneurs’ Relief will no longer be available once the sale has taken place. You may therefore wish to make use of this before deciding to sell by making a gift to a spouse who has been involved in the business for more than two years.
• VAT: Occasionally, VAT will be payable on the value of land. Given that VAT must be accounted for to HMRC by the seller, they must pay the levy should the buyer fail to. 

Working with a full-service law firm which also specialises in the agricultural sector is ideal for situations like these. Not only will they be able to support you through the process of selling your farm, but they can also assist with matters such as tax planning so you can get all the help you require in one place.

Timing can be key

The ideal time for selling your farm is from spring to mid-summer, when the land is looking its best and crops are flourishing. While the market is becoming less seasonal, it’s still a good idea to enhance the visual appeal for your buyers as much as possible.

Marketing 

It’s also a good idea to put together some high-quality marketing material to entice potential buyers. This can include things like taking professional photographs, making detailed floor plans of the farmhouse and other residential properties, creating plans for farm buildings, and producing a detailed plan of the farm as a whole.

Services and amenities 

Providing details of how to access services and amenities is also essential when selling your farm. Information on mains or private connections or abstraction licences for water must be provided, as will any wayleave agreements for electric or telephone lines. If there are any gas pipes under the land then this should be declared too.

Potential for development

If the land has potential for future development, you may want to consider whether the buyer should pay extra (known as an overage payment) in case planning permission is later granted for non-agricultural development. This can typically be around 20%-40% of the net increase in value. An overage agreement commonly lasts for between 15 and 25 years after the process of selling your farm has been completed. 

How to sell farmland 

If you are wondering how to sell farmland, rather than the entire business, you’ll still need to consider elements such as title deeds and searches, access, amenities, tax liabilities, and the potential for development. 

If you’re going to keep responsibility for maintaining existing services or upgrading them, you’ll need to ensure you have permission for this on the land you’re wanting to sell. On the other hand, if the land you’re keeping gets its services from the plot you’re selling, you’ll need access to those. 

You may also wish to consider whether to impose covenants or restrictions on the land you want to sell, to block things like development, or prevent the buyer from using the land for certain activities. Another possibility is that you might want the buyer to contribute towards shared costs. Your legal representation will be able to guide you through the entire process and provide you with a complete understanding of how to sell farmland.

Getting the right advice at the right time is essential when selling your farm. While many law firms handle commercial property sales or business acquisitions, these services often overlook the unique complexities of farming and agricultural land. 

On the other hand, choosing a firm that focuses solely on agricultural law but lacks expertise in commercial and real estate matters can leave gaps in your overall coverage.

By partnering with a legal and professional services business such as ours with extensive experience in rural matters and access to over 1000 in-house specialists from various departments, you gain the advantage of a comprehensive service that addresses every aspect of your transaction.

Comprehensive support for selling your farm

If you are looking for expert guidance on how to sell your farm, our team has extensive experience helping farm owners with a range of complex issues, from agricultural land laws and divorce-related matters to the sale and purchase of rural businesses. We have worked with clients across the country, from small family farms to large corporations.

As a full-service legal and professional services firm, we can draw on the expertise of specialists across different departments and regions. Whether you need advice on the employment implications of selling your farm or strategies to reduce your tax liability, our team is here to provide prompt, practical support.

To learn more about how we can assist, contact our team today.