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Get orf my land!: Landed estates and The Agriculture Bill

16 September 2020

April French Furnell

Forget the image of the old-fashioned landed estate owner resting on his laurels, today’s landowners are land entrepreneurs who embrace change to sustain their operations, according to advisors to the UK’s largest landed estates. However, a change is on the horizon; one that will bring a mix of opportunity and challenge.

“From an academic view, it is the most exciting time in agriculture for seventy years. The last legal change was post-war in 1947”, said Jonathan Thompson, senior associate at Hunters Law, who specialise in advising UK landed estate owners and farmers. Jonathan says that: “BREXIT is bringing much of this change, as well as the UK Agricultural Policy which is currently before the House of Lords in the shape of the Agriculture Bill. Importantly, it is an enabling structure, providing a new way for farming to go forward”. So, what does this mean in practical terms? Citywealth’s April French Furnell spoke to leading advisors to find out how their clients are meeting the challenges ahead.

Put out to pasture

Past concepts will no longer apply. “Rather than rewarding farmers for simply farming their land, they’ll be rewarded for delivering ‘public goods’, including delivering various environmental benefits”, explains Martyn Dobinson, a partner at Saffery Champness, who works with families and owner-managed businesses with a particular focus on landed estates, farming, agribusiness and property. He adds, “The direct subsidy payments that farmers currently receive based on the number of hectares of land that they actively farm, will be phased out over the next seven years in favour of a new ‘Environmental Land Management Scheme’. This will mean a seismic shift in focus for many, particularly those who have been reliant on the direct payment to make ends meet.

Reaping what you sow

This ‘seismic shift’ is being implemented for environmental reasons. “Farmers are custodians of 70% of the UK’s land mass”, highlights Martyn. And as such, “will be at the forefront of driving the green agenda. Gone will be the days of farming unproductive land to benefit from the direct payment.” Already, innovation has emerged. He says “carbon schemes attracting a lot of attention because many supermarket contracts already include carbon metrics amongst their criteria in determining payments under, and acceptance of, farm contracts”, explained Martyn.

Not putting all your eggs in one basket

One positive outcome of the new system, is an anticipated increase in collaboration between farmers to deliver certain environmental schemes, says Martyn. Jonathan agrees: “Traditionally, farmers were not always entrepreneurial co-workers and were often closed off to working together but the new scheme will change that”. One relationship which could alter is the traditional landlord and tenant. “From landlord and tenant, we could see the relationship alter to two business owners with respective expertise and assets who come together to work in a different way”, adds Jonathan.

Sowing wilder oats

Landowners have also been looking beyond farming to generate other income streams in order to diversify and spread risk. As a result, there has been a great deal of creativity from land-owners. Interestingly, this is where some of the younger generation and heirs to estates have played an important role. Having often worked in the City and gained commercial awareness away from the estate, the next gen’ are confident in their business decisions and ability to create new products and offerings. “They come to the table with a different outlook and a desire to look at the estate as a business. They are brave with their decisions and capital, and they ensure historic buildings and barns are being actively managed and used”, explains Naomi Nettleton, a partner at law firm, Charles Russell Speechlys who has experience helping landowners with their commercial and events agreements. “People management is the key to the role of a landowner”, explains Jonathan. “One of my client’s heirs works in TV production. Very different to being a landowner but it has taught him both leadership and management skills to bring back to the estate”. A more common early career path is to work in commercial property in London.

Ducks in a row

The key to success in diversifying is to look at the whole estate and farm plan and focus on making the most out of each area to generate greater revenue. In this respect, “larger farms and estates have an advantage over smaller operations”, commented Tristram Van Lawick, also a partner at Charles Russell Speechlys in the private property team, “as they can have a spread of business interests”. Just some ideas clients of those we spoke to are exploring or have already established are: weddings and larger events such as conferences, holiday rentals, flexible working spaces and office lets, farm shops and housebuilding.

Sorting the wheat from the chaff

Underpinning some of these decisions is the desire to create a heart and centre of the community, harking back to the role of the estate in the community hundreds of years before. As Work-From-Home becomes a larger part of daily life for many office workers, and individuals look to be more local and environmentally friendly with their purchasing, the role of a local shop, deli and restaurant is becoming more important in people’s lives. “One client of mine has created a farm shop hub. With many more people working from home in the village, the shop has become part of their routine with a daily visit for food and coffee”, added Tristram. “With the impact of COVID-19 forcing everyone to work from home, he might have been ahead of his time”.

Farm futures

A successful example is Daylesford Organic Farm, started forty years ago by Lady Carole Bamford who decided that her family should change their way of farming. She founded Daylesford on a passion for organic farming, natural clothing and well-considered beauty products and turned her family farm into a destination in and of itself. The ‘brand’ Daylesford is now internationally recognized.

The Goodwood effect

‘Brand’ is becoming increasingly important to estates, commented Naomi and Tristram. “Brand awareness is certainly growing. The number of referrals we make to our IP and trademark team highlights the increasing work in this field. Landowners are becoming aware that the estate can be a trusted brand and marketed internationally. From their signage throughout which must use their font, to specific paint colours”. Another example is Holkham in Norfolk whose studio has become a commercial environment and home to the jeweller Monica Vinader. Their second phase has now launched offering flexible working through serviced office accommodation. It’s another growing area. “Regional high spec future-proofed buildings whereby local residents can set up businesses are being considered by a few estates. The idea behind it is to live locally, work globally”, said Jonathan.

Inheritance tax brings trouble at t’mill

There are some reports that given the current COVID-19 pandemic, estates are facing a challenging time. Paula Steele, director of John Lamb Hill Oldridge is of this opinion “The future of the UK’s landed estates is more uncertain than it’s ever been. The impact of Covid19, coupled with potential tax changes, has created a bleak outlook”. Paula points to the conundrum facing many estates when looking to pay inheritance tax. There can be a difficulty with liquidity to pay the tax, which raises the issue of funding the amount payable – either to be paid out of the estate or through buying an insurance policy to fund the liability. Paula describes a current client case, “we are looking at insuring an 18-year-old for £4mn, which will levy an annual cost for the next 50 years of c£1000”, which we think is excellent value. However, “there is severely restricted capacity for life cover in the insurance market at present. Re-insurers don’t understand their risk with regard to Covid-19 so are reducing what they will offer and have put rates for ‘whole of life cover’ up by around 15%. They are also being very picky about the risks they are taking on and the capacity they are offering, so individuals will need help to understand the current insurance landscape,” she adds.

Staycation bonanza

Yet, Naomi and Tristram paint a different picture: “Events might have been cancelled, but holiday let bookings are through the roof, as well as long term lets to those who have left London for longer periods of time. Landowners can weather the storm. They take a long-term approach. Issues such as COVID-19, BREXIT, they are little blips in their overall estate planning”.

 

Looking for an advisor who has experience with landed estates? Visit our User-Rating site, Citywealth’s Leaders List. To find out more about the advisors mentioned in this article, click on their name to view their profile or click on the link below for a curated list of advisors.

https://www.leaderslist.co.uk/lists/editors-choice/landed-estate-advisors

 

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