Landplan Autumn 2012 by Chesterton Humberts

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LANDPLAN

autumn / winter 2012

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farmland market review demand shows no sign of slackening pg 4

new tax regime for high value dwellings new 15% SDLT rate payable by “corporate” buyers of dwellings worth more than £2m

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striking a balance landowners considering entering a lease agreement for a renewable energy scheme need to fully understand the issues pg 18

pg 11

Inside this issue continued 6

Regional Round-up

Cash Management

The National Planning Policy Framework

Rural News Board

Newly Appointed Ministers

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Contributors David Hebditch, FRICS FAAV Head of Rural Division Tel: 01823 331234 E: david.hebditch@chestertonhumberts.com Andrew Pearce, MRICS Head of Rural Agency in Lincoln Tel: 01522 516830 E: andrew.pearce@chestertonhumberts.com Harry Baines, MRICS Director at Chesterton Humberts in Stamford Tel: 01780 762849 E: harry.baines@chestertonhumberts.com David Pardoe, MRICS Director at Chesterton Humberts in Salisbury Tel: 01722 520117 E: david.pardoe@chestertonhumberts.com Charlotte Smithson, BSc (Hons) MRICS Associate at Chesterton Humberts in Lincoln Tel: 01522 516838 E: charlotte.smithson@chestertonhumberts.com Neil Gladwin, MRICS FAAV Director at Chesterton Humberts in Taunton Tel: 01823 331234 E: neil.gladwin@chestertonhumberts.com Colin Tebb, BA (Hons), Btp, MRTPI Chartered Planning Consultant at Chesterton Humberts in Salisbury Tel: 01722 342390 E: colin.tebb@chestertonhumberts.com Hannah Twells Graduate Surveyor at Chesterton Humberts in Taunton Tel: 01823 331243 E: hannah.twells@chestertonhumberts.com Charles Lucas, FRICS FAAV Director at Chesterton Humberts in Marlborough Tel: 01672 519111 E: charles.lucas@chestertonhumberts.com Caroline Lawrence Associate Director at Chesterton Humberts in Taunton Tel: 01726 77565 E: caroline.lawrence@chestertonhumberts.com Christopher Jerram, FRICS Director at Chesterton Humberts in Chippenham Tel: 01249 444555 E: christopher.jerram@chestertonhumberts.com

Introduction David Hebditch, Head of Rural Division

In my introduction to the spring Landplan edition I wrote about how agriculture’s run of much improved returns was continuing. The past few months shows how quickly things can change in a sector whose fortunes depend on the weather. W hen writing that piece we had had a couple of welcome weeks of rain to break a drought; it seems like it has rained every day since. From the Midlands southwards, crops that had looked the best for years were, in many cases, little short of disastrous. Low yields and poor quality are commonplace causing extreme difficulty for some arable farmers, especially those who have sold forward extravagantly. It’s not just cereals – many other crops have been hit hard, too. Livestock farmers have also been affected badly: grass silage cuts were seriously delayed, maize crops look dreadful and feed costs are going up day by day. A tough winter lies ahead. This summer has certainly challenged the feel-good factor that was returning to agriculture. There is a sense of shock among the farming community. However, it’s not all doom and gloom. If there is only one thing farmers have in abundance, it is resilience. One bad summer won’t change that. Opportunities offered by landownership remain encouraging. Last spring, we were talking positively about land values and there is no reason to change that view. The fiscal advantages of landownership and the security that it provides compared to other investments, still remains. For landowners and farmers, agriculture has been traditionally seen as a safe bet for lenders and the rising value of this most important asset can only help. Commodity prices remain strong. Where we were probably budgeting for £135/t for feed wheat the spot market is now nearer £190/t. For those with something to sell, that will help offset the dreadful harvest. And, with futures at £170/t for November 2013

and £160/t 12 months further out, there is a real opportunity to lock into some profit, though rising costs must be watched. That’s not such good news for livestock producers. However, cattle and sheep prices are as good as they have been. And the dairy sector’s unprecedented collaboration, backed by a supportive public, has resulted in the reversal of the damaging price cuts seen earlier in the summer as well as a much needed voluntary code of practice. CAP reform continues. Some proposals that threaten farming’s productivity thankfully appear to be losing support, particularly those concerning environmental measures. I hope, for example, that common sense will prevail so that farmers in the Entry Level Scheme will not have to adopt Ecological Focus Areas. Whatever happens, an ongoing business health check for all landowners is vital to avoid any nasty surprises when reform becomes reality. The extension of Capital Gains Tax to ensure individuals and companies pay a fair share of tax on residential property is a further concern. While outwardly it seems to have little effect it could have potentially serious consequences for those acting as trustees or personal representatives. While it is sad to see farm minister Jim Paice removed from his post as a result of the Government’s September reshuffle, the new team at DEFRA, under the leadership of Secretary of State Owen Paterson, looks as though it means business when it comes to backing the rural economy. Let’s hope their supportive words turn into action. A profitable and competitive agricultural sector that can make the most of the opportunities that lie ahead is vital if our countryside is to prosper.

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Farmland Market Review Land prices continue to climb, albeit slower than of late, and demand shows no sign of slackening. Arable farmers may have had an appalling harvest in some areas, but one poor summer is unlikely to dent the market for bare land. Although farmers account for over 60% of open market deals, supply is currently extremely tight and there are enough alternative buyers waiting in the wings even if farmer interest does temporarily dip. So far just over 60,000 acres has been marketed in England in 2012, according to our research. If that trend continues, the annual total could struggle to reach 80,000 acres, the lowest figure for many years. Sales are also down. The latest RICS survey for the first half of 2012 records just under 8,000 acres sold, compared with almost 10,000 acres during H1 2011. Most active farmers continue to sit tight on what has become a very valuable asset. They have more confidence in the future, and those that might have thought about relocating know they may struggle to find what they want. Most investors continue to view land as a safe haven and expect to see their asset appreciate for a while yet. When it comes to demand, the appetite for farmers to add acres to an existing enterprise is as keen as ever. I am sure they will still account for well over 60% of the market this year. Foreign investors are also in the market. Growing Chinese interest is reported and German clients are seeking large blocks

of good bare land in the eastern counties – typically 500 to 1,000 acres that can be easily contract farmed. The Church Commissioners and the Crown Estate have also been active, and private investors remain keen. Not surprisingly, prices are buoyant. Based on surveyors’ opinions, the H1 2012 RICS survey puts the average acre in Great Britain at over £6,600/acre; 8% increase in 12 months. From our experience, Grade 2-3 arable soils vary from £7,000 to £10,000/acre, the upper end for bigger blocks or where neighbouring interest is high. It’s a big spread and can vary from parish to parish, making valuation very difficult. Pasture is typically selling for £1,000 to £1,500/acre less.

Bare land is one thing – the residential market is another. Unless close to London, farms with big houses are harder to sell, especially small estates with a large house, a few cottages and 500 to 1,000 acres of land. Notable transactions this year include Armigers Farm, Thaxted in Essex, extending to 287 acres, which we acquired for the Braemar UK Agricultural Land Fund. This commercial, bare land holding has very good soil capable of growing a range of combinable crops and roots. Sales include Halsdown Farm, near Taunton, Somerset. This 112-acre arable and pasture farm included a six bedroom farmhouse, modern three bedroom farmhouse, three cottages and a small range of modern

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“

Not surprisingly, prices are buoyant ... the average acre in Great Britain at over £6,600/acre.”

buildings within the centre of the farm set down a long private drive. It sold in July this year at around the £1.85m guide price. About 70 acres of arable/vegetable cropping land near Helston, Cornwall sold in June for around £7,100/acre, while some 27 acres of pasture land at Hyde Lane, Taunton, topped £11,000/acre in March. Other recent notable sales by Chesterton Humberts include the Ilsington Estate in Dorset and the Hamatethy Estate, St Breward, Cornwall. We are also selling about 400 acres of arable land near Helston in Cornwall. What of the outlook? I believe land prices will continue to rise, perhaps by 4-5% over the next year. I don’t see any sign of land prices crashing, but they could be trending to a plateau over the next few years.

FARMLAND VALUES

2011 H1

(TRANSACTION BASED)

2012 H1

Prices are attractive, so if you are looking to sell for the above reasons now is as good a time as any. Chesterton Humberts offer a free market appraisal so please contact any of our expert staff located in our 11 rural department offices for an in-confidence discussion.

7794

8357

£ PER ACRE

7659

9600

TOTAL LAND SOLD (ACRES)

BARE LAND VALUES

AVERAGE £ PER ACRE

source: RICS

ARABLE £ PER ACRE

6008

5868

7249

7160

6628

2012 H1

6514

(TRANSACTION BASED)

2011 H2

Farming is doing well, so it is not surprising there is a lack of acres coming to the market. Those that are tend to be due to retirement or relocation to another part of the country.

PASTURE £ PER ACRE

For further information please contact Andrew Pearce MRICS, Head of Rural Agency t: 01522 516830 andrew.pearce@chestertonhumberts.com

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Regional Round-up Keen competition means some high prices are being paid for the restricted amount of land coming to the market, according to Chesterton Humberts’ regional experts.

CENTRAL SOUTH

SOUTH EAST

Charles Lucas

David Pardoe

Director – Marlborough

The first half of the year showed a continuing increase in land prices. This was driven by sustained demand from commercial farmers looking to expand after a very successful 2011 harvest. Outside investors also continue to look for opportunities away from the turmoil of the financial markets and the Euro in particular. However, the worst harvest in living memory in this area may have a short term impact on farmers’ ability to expand without the assistance of their “friendly” bank manager. Bare land continues to attract more interest than residential farms, a trend likely to continue. We have sold 141 acres of bare arable land in Oxfordshire well over the £7,600/acre guide. Pasture in the same area also sold above its guide price of £6,500/acre. We have also acquired for clients a 380-acre farm below the guide of £4m. Smaller parcels of pasture and amenity land are also keenly sought. Prices vary between £6,000 and £10,000/acre. It is perhaps too early to predict the impact of this year’s harvest on rent review negotiations and contract farming arrangements. But I suspect that there will be some reluctance to be too bullish on figures in the immediate future.

Director – Salisbury

Relatively few commercial agricultural units have come to the market so far this year. Demand remains strong, particularly where the overall value is not heavily weighted to residential elements. We are expecting to have some attractive blocks of land on our books in 2013. Anything with a significant residential element is sticking – buyers don’t seem to believe house prices are going to rise in the near future so feel under no pressure to leap into action. Demand for “proper” estates with thousands of acres and a good property portfolio is stronger. They are like hen’s teeth and we know of people with deep pockets keen to buy. Farms that have diversified into leisure enterprises have seen little market interest, reflecting the lack of discretionary spending into such businesses in the downturn. Smaller parcels of land up to 100 acres still attract considerable interest from farmers looking to spread costs. £10,000/acre seems commonplace and occasionally we have seen over £12,000. Pony paddock values seem particularly unaffected by the economic situation. Strong bidding at a recent auction saw over £16,000/acre being paid. Given the size of these blocks the overall sums are well within the means of many buyers.

EAST MIDLANDS Harry Baines

Director – Stamford

Land supply remains very restricted in the area, whether bare land or equipped farms. With many more buyers than sellers, prices remain very firm. Both Chesterton Humberts and other quality research forecasts growth in values of around 6% per annum over the next five years and the market will remain strong. An economic recovery might put some pressure on values, but until that happens land, like gold, will remain a favoured safe haven. Farmers have always been reluctant sellers and I see no reason for change. Those who might want to relocate and reinvest can’t, because there is nothing for them to go to. It’s a similar story for investors. I have seen increasing interest from private investors. Several want to build portfolios of several thousand acres and have it contract farmed. They will take increasingly low returns of under 2% gross – while base rates remain at 0.5% that is likely to remain the case. Prices vary from £7-9,500/acre for good combinable crop bare land, and £5,500 – 6,000/acre for pasture. Woodland is fetching around £3,500/acre. Estates are proving hard to move – the classic estate mansion is expensive to maintain and is not in vogue in times of recession.

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COTSWOLDS Christopher Jerram

Director – Chippenham

The Cotswold property market has suffered from – the difficult global economic environment although there are a number of active buyers looking to purchase residential property with or without land. This bucks the trend seen elsewhere, though being a well-off area the Cotswolds has always been an exception. Hartshill is a typical example of what attracts people to the area. It is a wonderful small Cotswold estate between Cirencester and Northleach with traditional six bedroom farmhouse, a well-maintained stable yard and approximately 62 acres of pasture. The asking price is £2.5m. There are also a number of buyers looking for commercial farms. These are mainly active farmers – investors tend to have their sights on larger, more commercial blocks of land in the east.

However, large farms are hard to find. Most sales involve small blocks, in demand from neighbouring farmers and residential owners keen to add amenity value to their property. Recent sales have exceeded guide prices, which typically range from £6,500 to £10,000/acre for bare land. Location, rather than quality, usually takes priority.

SOUTH WEST Caroline Lawrence

Assoc. Director – Taunton

Demand continues to outstrip very tight supply, particularly for commercial farms and bare land. We estimate commercial farmers keen to expand account for 60-65% of the market. We are also seeing interest in bare land from private investors and in particular pension funds attracted by tax advantages and the potential for capital growth.

Reflecting this demand, about 70 acres of bare land in west Cornwall has been sold recently off an asking price of £500,000 to a local farmer. Also in west Cornwall there is substantial interest in a further 373 acres of predominantly arable land with offers being invited in excess of £2.5m. Further afield we have seen sales of bare land achieving between £7,000 and £12,000/acre. Demand for residential farms also seems to be gathering momentum. Contracts have recently been exchanged for the Trevarno Estate near Helston, Cornwall, which comes with 104 acres including garden, pasture, arable land and woodland. It has been run as a commercial visitor attraction by the current owner but it looks as though it will revert back to a private residence. During the year a number of transactions have been undertaken on a confidential basis off market, a method that both buyer and seller favour, especially lifestyle buyers.

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future proofing the arable business The worst harvest for many years has highlighted the need to protect the farming business against unforeseen circumstances, writes Neil Gladwin.

For many cereal growers, harvest 2012 will stick in the memory for all the wrong reasons. At the beginning of June, farmers were looking forward to bumper crops then came the wettest summer for 100 years. Yield and quality suffered across most key arable areas as bushel weights fell through the floor. Losses of £200/ha from a typical 10t/ha budget will be all too common, double that in the worst cases. That’s without factoring in increased drying costs and the toll on machinery and equipment. It is not only the weather that is becoming more unpredictable and potentially costly. Fuel costs remain stubbornly high – although down slightly since January, the August average value of 67p/litre coincided with peak usage, with today’s large tractors easily gulping their way through £800-£1,000 worth of fuel a day. Fertiliser prices have been very volatile. Although values have eased recently UK ammonium nitrate is currently worth about £300/t, over 10% down on the year, and triple superphosphate costs about £350, 20% down – prices are still historically high and could easily change. TSP has ranged from under £200/t to £700/t in the past couple of seasons. The cost of metal and rubber also continues to rise in line with world demand.

Meanwhile, Sterling strengthened against the Euro, reducing the single farm payment by 8%. Added to this the cost of occupying land continues to increase, whether purchased or rented, due to higher values and the rising cost of borrowing, which now averages 3.5%. Fortunately for cereal growers, crop values rebounded, largely due to the drought in the US mid west. That has helped soften the blow this year, but weather events can also work the other way. All this shows how exposed arable farmers now are to forces beyond their control. However, with careful planning, much of the effects can be mitigated. Selling a proportion of the crop forward once profitable levels are reached is important to spread risk. However, this season has shown the risk of overcommitting. Budgeting is a must – unfortunately many farmers still ignore this, questioning its usefulness given the unpredictably surrounding crop yields, price and costs as outlined above. But this is exactly when budgets come into their own – it is not the outcome, but the opportunity to measure ongoing performance and adjust that matters. Budgeting will also help ensure

borrowing requirements are recognised and planned for, rather than last minute and ill conceived. Other areas where better farmers excel in maintaining profitability, as recognised by the recent Rural Business Research report (www.ruralbusinessresearch.co.uk), include cost control – and this starts with a good budget. There are opportunities to hedge by buying forward inputs like fuel and fertiliser. Joining a buying group or perhaps co-operating with like-minded neighbours can result in significant savings. Good farmers are also flexible and open to new opportunities – they are proactive and can assess the potential of different enterprises or ways of doing things and adapt accordingly. Once up and running they will focus on margins and product quality to maximise profit, just as with current enterprises. Researching and using a range of marketing channels to achieve good prices will also help manage risk. This might include central storage for a proportion of the crop, or speaking to local outlets to assess opportunities and build useful relationships. It may pay to set up a Euro account to receive the Single Payment in Euros to avoid the whim of currency exchange.

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Machinery costs might be better controlled by renting in machinery on an hourly basis, especially to satisfy seasonal demand, freeing up capital for investment elsewhere in the business. Even land rentals can be future proofed to some extent, by splitting rent between a basic payment and a variable top-up, reflecting movements in the Single Payment and corn prices. In summary, attention to detail both physical and financial is vital across all aspects of the business and is a trademark of successful farming operations. We have heard a lot of talk about John Beddington’s “Perfect Storm” leading to improved farm incomes. This harvest shows clearly that UK farmers will have to overcome a lot of imperfect storms if they are to maintain their profitability in the meantime. For further information please contact Neil Gladwin MRICS FAAV, Director, Taunton t: 01823 331234 neil.gladwin@chestertonhumberts.com Chesterton Humberts is one of the leading agents for AMC finance and can help you secure a flexible and highly competitive financial package, including interest only and fixed-rate loan facilities. With our experience and expertise in the rural property sector we can also offer professional advice in respect of Farm Business Tenancy lettings and farm rent reviews.

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New Tax Regime for High Value Dwellings Nigel Popplewell Partner, Corporate Tax at Burges Salmon

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The main headline news from the Budget in March was the immediate introduction of a new 15% SDLT rate payable by a “corporate” buyer of a dwelling worth more than £2m. All companies are caught by these rules, and LLPs are caught if any of the partners are a company. Where only part of the land falls within the definition of a “dwelling”, the remainder will be charged at the “residential” (up to 7%) or “mixed use” (maximum 4%) rate. The Budget also announced an increase (to 7%) in the top line rate of SDLT for sales of residential property worth over £2m, if it does not fall into the 15% bracket. The 7% rate will only apply if the property is wholly residential; almost all farms will be within the “mixed” category which attracts the maximum rate of 4%. The definition of “residential property” is of critical importance, and buyers of country houses (many of which will have 10 or 20 acres which may include woodland, equestrian facilities and paddocks) will be very keen to find an area which is neither a dwelling nor “garden or grounds”.

Annual Charge

In addition, from 1 April 2013, corporate owners of dwellings worth more than £2m will have to pay an annual SDLT charge equivalent to between 0.3% and 0.75% of the property value (but initially capped at £140,000 pa).

The bands and rates of charge are proposed to be: Property

Annual Charge

£2,000,000 – £5,000,000

£15,000

£5,000,001 – £10,000,000

£35,000

£10,000,001 – £20,000,000

£70,000

More than £20,000,000

£140,000

As with the 15% rate, the dwelling must be a single dwelling, may be “suitable for use as” a dwelling, and includes “garden or grounds” and possibly other buildings or land. The aim will be to include as little as possible of the property in the “dwelling”, and, as above, the definition of “residential property” is of vital importance.

The charge will be indexed to the Consumer Price Index, but the bands will remain the same and the £2,000,000 threshold will not be reduced: so more properties will be brought into the charge by inflation, not legislation.

The annual charge will affect the same “non -natural persons” as are liable to the 15% rate of SDLT. It will not apply to high value residential property owned by a trustee, whether corporate or individual. It will also not apply where a property is held by a company as nominee for an individual, thus allowing privacy to be maintained.

Taxpayers can self-assess the value of their property, although formal surveyors’ valuations are likely to be a defence against penalties if HMRC finds that a property has been undervalued. A separate tax return for the annual charge will be issued, to be filed by 15 April each year for the year to 1 April. This is a very short time limit, although we

understand that the payment for 2013 will not be due until 1 October 2013.

Capital Gains Tax (CGT)

As if that is not enough, offshore companies (but also potentially offshore trustees) will be brought within the scope of Capital Gains Tax for the first time from 6 April 2013. Again, this is in consultation but will happen. Only disposals where the sale price is more than £2,000,000 will be affected, but the whole gain will be charged and there will be no equivalent of rebasing. This will include cases where no consideration is paid but there is a deemed disposal of a property, for example on assets passing out of a trust to a beneficiary or between trusts or the transfer of a property out of a company on its being liquidated. Crucially, the definition of “non-natural persons” is wider than for the annual charge and 15% SDLT rate as it catches broadly any entity that is not an individual. This will include non-UK resident companies,

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trustees (excluding bare trustees but including trustees who are themselves individuals), collective investment vehicles, clubs and associations, personal representatives and â&#x20AC;&#x153;entities which exist in other jurisdictions that allow property to be held directlyâ&#x20AC;?. However, Principal Private Residence Relief is likely to be available to trustees and personal representatives where the beneficiary is in actual occupation of the property as their main home. The normal rules for the use of capital losses and the general availability of reliefs that apply for CGT will apply. The interaction of the CGT rules with existing rules charging CGT on company participators, trust-settlors and trust beneficiaries is unclear. Our guess is that they will aim to charge a UK person in preference, but otherwise to charge the offshore trust or company.

What can be done?

other non-natural person and whether those reasons are still valid. For example, consider how import confidentiality is to the underlying client and how this might affect any restructuring? The annual charge and/or CGT liability might prove to be insignificant when balanced against other tax or commercial implications.

Non-natural owners of high value UK residential property would be wise to consider two points of action prior to the rules coming into force in April 2013.

In addition, trust companies and other providers of offshore structures should be reviewing their portfolio and calculating what the likely CGT effect would be of collapsing the structures. Certain planning techniques do look to be available, but these will depend on individual circumstances and it is important to obtain professional advice on the most appropriate course of action.

The Government consultation closed on 23 August 2012 and draft legislation will be brought out in the Autumn and incorporated into the Finance Act 2013. Depending on the responses received, the proposals may change after consultation, but they seem well-formed and big changes seem unlikely.

Firstly, ensure that a valuation is arranged and carried out before the proposed annual charge comes into effect. Although self evaluation is permitted, it would not protect the taxpayer from possible penalties where the property is found to have been undervalued significantly. Secondly, they should remind themselves of the reasons why the property was originally purchased by a company or

For further information please contact Nigel Popplewell, Partner, Corporate Tax at Burges Salmon t: 0117 902 2782 nigel.popplewell@burges-salmon.com

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The National Planning Policy Framework The National Planning Policy Framework released in March 2012 was seen as the long-awaited catalyst to stimulate rural communities. Six months on, Colin Tebb and David Pardoe ask: What has changed? Despite all the hype regarding neighbourhood plans, community right to build and community consultation, we have yet to meet anyone who has seen any first-hand evidence of change brought about by the new National Planning Policy Framework, particularly at a local rural level. Very little is actually changing. Developers, housebuilders and others are biding their time (and money) in these uncertain ‘times of austerity’.

As far as rural areas are concerned, the NPPF states that planning policies should support economic growth to create jobs and prosperity by taking a positive approach to sustainable development. However, this new framework is a long way from bedding down – previous experience shows it can take years for local planning authority rules to reflect the national position. Many councils still operate local plans based on early 1990s legislation, merely taking account of subsequent and current guidance. Others may have adopted later legislation, though there may have been several revisions since. Confusingly, this means different authorities can be at very different places along the curve of change and applying very different rules.

Some authorities may have identified sites and are actively pushing them forward; others have not told anyone what they are thinking. Some don’t even have an up to date plan or an identified five-year supply of housing land. So what does this mean on the ground? We are acting for a client in an area that actually has identified enough sites to meet its five year plan. The district council has told local developers that it will ensure these houses are built. Essentially this has created a free-for-all, with several potential sites identified and several developers all trying to demonstrate that their site is ‘developable’, ‘deliverable’ and ‘viable’ (in physical, legal and financial terms). The first site to meet these criteria

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More recent changes are in danger of adding to the confusion. ln a further bid to boost the economy, the Government has proposed a one-year sabbatical on permitted development rights, allowing home and business owners the right to extend their home and premises without the need for planning permission. Nothing has changed yet – whether it does remains to be seen, as some local authorities intend to challenge any changes. Perhaps a more relevant change to rural locations is the recent suggestion by Chancellor George Osborne to release green belt land and/or to find new housing sites around our towns and larger villages. It’s all very untidy. Applicants certainly can’t rely on what they read in the papers. These new proposals and consultations make the outcome of strategic planning considerations or even applications difficult to predict.

is likely to secure planning permission. (At least the council is encouraging local people to be involved in deciding where their housing should go – so perhaps this aspect of the NPPF might be realised). Another client in a different authority was unaware his site had even been identified by the district council as one for new housing. It was also within the existing defined village envelope so in theory a planning application could be submitted tomorrow for its development. How should landowners avoid the expense and costs of competing in a race to meet

local development targets, or of missing open opportunities? As a first step, landowners around larger rural villages should review their land banks/holdings and consider promoting them through the Strategic Housing Land Availability Assessment (SHLAA). This is required of councils to support the delivery of sufficient land for housing. If the council concerned has either failed to provide a five-year housing supply or has identified sufficient land through the SHLAA process, landowners could simply apply for planning permission.

However, while landowners should not forge ahead without careful consideration, neither should they sit on their hands. The answer is to take advice from someone intimately involved in the planning world who will know what all these changes mean in practice, in their locality. For further information please contact David Pardoe MRICS Director, Salisbury t: 01722 520117 david.pardoe@chestertonhumberts.com Colin Tebb BA (Hons), Btp, MRTPI Associate, Salisbury t: 01722 342390 colin.tebb@chestertonhumberts.com

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CAP Reform Charlotte Smithson BSc [HONS] MRICS

Ministers are still implying that CAP Reform will be ready to implement in 2014 despite the 7,000 or so amendments demanded by MEPs to the European Commission’s original proposals. However, many suspect this will prove impossible to deliver and believe a 2015 start is more realistic. Some of the most recent CAP proposals include: • Existing entitlements may be able to be carried through to the new scheme. This will require a revaluation but will be much simpler for the RPA than reallocation. This could cause problems in some areas – for example, tenancy agreements, sales and where businesses split. All agreements must not only take into account the “Golden Ticket” but also the potential transfer of existing entitlements through to the new scheme. • “Golden Ticket” rules may be simplified. Initially the Golden Ticket – which referred to the 2011 single farm payment claimant status required to claim the proposed

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direct payments from 2014 onwards – could only be transferred to one person. Permitting transfers to more than one person is being considered, which would benefit the likes of partnership splits, giving both parties the right to claim. • The EU continues to amend the “Active Farmer Test” definition. A blacklist of activities (considered ineligible for direct payments unless those payments amount to at least 5% of total business receipts) include airports, railways, property companies, sports grounds, hunting estates, camping sites etc. • “Greening” changes:- Permanent pasture – There is a move to change the definition so land only becomes permanent pasture after seven years rather than five. - Crop Diversification – The three-crops threshold is likely to rise to a higher threshold, though it could still catch many arable farmers who contract their land out. - Ecological Focus Area – This threshold may be lowered to 5%; land in environmental schemes may not have to comply. Whether this includes the Entry Level Scheme remains unclear. Proposals need to be considered carefully by landowners when looking into entering into agreements for the sale of land, contracting or Farm Business Tenancies.

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Sporting Harry Baines, MRICS

Commercial shoots continue to suffer from the recession, with both syndicates and sold days affected. • “Last minute” pegs on quality shoots can be had for well under £30/bird, including hospitality. • The vogue for smaller days, typically 100 birds, has grown due to economic necessity and the increasing number of guns turning their back on big-bag days. This is affecting the viability of larger commercial /estate shoots. • Private shoots are scaling down to counter VAT and higher feed, fuel and poult prices. • Rental evidence is thin, with landlords and shooting tenants tending to keep their heads down in the current economic environment. As ever, rental values are case specific, being influenced by topography, amount of woodland and, for larger shoots, the presence or absence of gamekeeper’s cottage and buildings.

Holiday Cottages BPR

Christopher Jerram, FRICS

Following recent cases and HMRC’s present stance on allowing Business Property Relief for furnished holiday lettings, once the two-year period of ownership has been satisfied it is the level and type of services provided that is relevant over and above the accommodation itself. This is because, for BPR purposes, it must be shown that lettings are being carried out for a genuine business purpose rather than a property investment. HMRC Trusts and Estates have now conceded that even one unit can attract BPR relief. The following should be considered to protect the taxpayers’ position: • Guests should pay a ‘charge’ rather than a rent • Linen & towels to be provided

• Cleaning services including mid-week to be provided • Services, including gas, electricity and water to be included within the charge • Maintenance of garden and disposal of rubbish to be arranged • Sports facilities (pool, tennis court etc) to be included if available • Welcome pack and basic foodstuffs on arrival • Active marketing of the property, taking bookings and running a website Try to ensure services offered exceed those expected by the average hotel. The First-tier Tribunal decision in Pawson v HMRC is a noted success for the taxpayer.

LANDPLAN

Striking a balance with renewables contracts Landowners considering entering a lease agreement for a renewable energy scheme need to fully understand the issues, explains Hannah Twells.

autumn/winter 2012

• reserved rights f rom previous owners or third parties - such as the mineral rights • consent f rom any mortgagees – it will be required. Exclusivity agreement Most developers want exclusivity in respect of a specific site. However, exclusivity can be used to tie up schemes that could potentially compete with a nearby more forward scheme, helping to improve the latter’s chance of planning success.

should consider the impact the impact of Feed-in Tariffs (FIT) and a decline in output over the lifetime of the renewable energy equipment. Often very nominal rent will be offered in the final year of the lease for decommissioning purposes. Ensure that rents are paid up until the date the equipment is shut down, as decommissioning only takes a matter of weeks.

More seriously, exclusivity can prevent landowners from seeking interest from alternative developers. Exclusivity agreements should be short and contain milestones to ensure that terms and documents are agreed by given dates. Option leases These entitle developers to trigger a lease upon the grant of planning permission and are common. Option periods can range from 6 months to 8 years depending on technology and scheme size, so careful negotiations with both surveyor and solicitor are vital. Consider switching to a lease for the construction phase and a further lease for the period of operation. Heads of Terms Heads of Terms require vast amounts of detail. While not generally legally binding they do form the principal basis of the agreement and require much care.

Several important areas must be examined to ensure a balance is struck between the needs of the developer and the desire of the landowner to protect his or her property interests and to maximise revenue. This article outlines some main points to be aware of when negotiating contracts, but professional advice is highly recommended. Parties in the scheme It is important to establish the clear title of the land. Check for: • tenants with rights over the land

Terms of the lease Professional advice should be sought when agreeing the terms of the lease. The main points to watch when negotiating a lease include: • Insurance – does the developer have adequate insurance cover? • Rights, user clauses and reservations held by each party. Developers will seek maximum flexibility and maximum obligations f rom the landowner. Ensure the scheme will not interfere with your rights, for example by placing restrictions on sporting rights in relation to wind turbines. Rental payments Rents are linked to turnover, so landowners

SOLAR PANELS Further recent falls in Feed-in Tariff (FIT) values for solar panel installations means fewer people are investing in the sector. However, good returns are still achievable. Larger (250kW-5MW) standalone photovoltaic installations with an eligibility date from 1 August 2012 to 31 January 2013 attract a FIT of 7.1p/kWh, down 1.8p on the pre-August level. FITs for smaller systems of 100-50kWh attached to buildings have dropped from 12.9p to 11.5p for higher-rate systems (one that provides no power to a building). Those that do provide power now attract 7.1p/kWh. The length of payments has also been reduced, from 25 years to 20 years. Despite these and future, but potentially lesser, reductions, solar panels are and will remain a good investment. Panel costs continue to fall – typical cost for a 4kW solar panel system has dropped by 17%. In addition, the payback for exporting power back to the National Grid has risen from 3.2p/kWh to 4.5p/kWh. Households and businesses can still make a return on investment of 6-9%, depending on the size, scale and nature of the development.

For further information please contact Hannah Twells Graduate Surveyor, Taunton t: 01823 331243 hannah.twells@chestertonhumberts.com

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LANDPLAN bulletin 19

David Hebditch, Head of Rural Division David Cameron’s cabinet reshuffle saw a complete change of DEFRA’s ministerial team in early September. Out went Secretary of State Caroline Spelman, Minister Jim Paice and Under-Secretary Lord Taylor of Holbeach, to be replaced by Owen Paterson, David Heath and Lord de Mauley respectively. While Jim Paice in particular will be missed – his enthusiasm and support for the farming and rural sector made him generally popular – the new line-up looks as though it could be more supportive of agriculture than any we have seen in recent years.

Both Mr Paterson and Mr Heath represent rural constituencies. Mr Paterson was shadow agriculture minister for a year from October 2005, when he became well versed in bovine TB and campaigned hard for the dairy industry. Mr Heath, Britain’s first Lib-Dem Agriculture minister, has outlined the need for a fair return for farmers and a fair deal for rural communities. Lord de Mauley, responsible for all DEFRA business in the House of Lords, comes from a farming background.

LANDPLAN

autumn/winter 2012

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The information contained in this publication is of a general nature for guidance purposes only and is not a substitute for professional advice. Before acting, or refraining from acting, you are recommended to obtain professional advice from a qualified adviser in relation to your personal circumstances. Accordingly, Chesterton Global Limited and/or its agents cannot be held responsible for any loss as a result of acting or refraining from acting in relation to the information given.

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