review South West Rural
spring 2012
Salisbury Taunton Honiton
Truro
Taunton Mansfield House, Silver Street Taunton, Somerset TA1 3DN T: 01823 331234 F: 01823 332034 E: taunton.ag@chestertonhumberts.com Truro 40 Lemon Street Truro, Cornwall TR1 2NS T: 01726 77565 E: caroline.lawrence@chestertonhumberts.com Honiton 105 High Street Honiton, Devon EX14 1PE T: 01404 42456 F: 01404 43643 E: honiton@chestertonhumberts.com Salisbury 37 Castle Street Salisbury, Wiltshire SP1 1TT T: 01722 342393 E:salisbury@chestertonhumberts.com
This Edition Welcome to the Spring edition of the South West Rural Review, which demonstrates that amongst the continual reports of economic gloom, the outlook for the agricultural sector remains more positive. This has been demonstrated in the farmland market, which has gone from strength to strength over the last year. However, the review of the Single Payment Scheme brings uncertainty to the subsidy system. The Localism Bill is also due to shake up the planning system considerably. This will have an impact on many landowners and so to add to our expertise, at the end of 2011 we were very lucky to welcome
both Colin Tebb and Hannah Twells to the team. Colin Tebb is a chartered town planner and is able to help with routine planning advice including applications, appeals and enforcement action. He is also able to advise clients on, as well as identify, new opportunities that the Localism Bill throws up. Hannah Twells joins us having worked in the renewables sector and has particular expertise in advising on potential wind turbine sites. We hope that you will find the articles of interest and, if there are issues that you wish to discuss further, please feel free to contact us.
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Farmland Report: Land Prices Continue to Rise david hebditch
Throughout 2011 farmland values
continued to climb both nationally and,
in particular, across the South West. According to the RICS Land Price Survey, Grade 3 arable land rose by an average of 11% during the year. During
the current turbulent economic times, demand has outstripped supply with
purchasers viewing land as a relatively
safe asset when compared with other investments both within the eurozone and further afield.
As ever, there is a wide range of buyers. However, commercial farmers, keen to
expand, account for about 60% of the
market. It is anticipated that during 2012, this demand will continue to underpin
land values and, in our opinion, is likely to generate a further small increase in
values. The strengthening of commodity
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prices has also helped generate a steep increase in achievable rents.
These improved returns have encouraged both
pension
funds
and
private
investors to re-enter the market. Investors are now willing to purchase
vacant possession farms with a view to letting them out on long term farm
business tenancies. Often, investors are
keen to purchase privately and we have seen a marked increase in private deals (where the farm is not brought to the
open market) and these now account
for about 25% of all sales nationally. Lifestyle buyers have also re-emerged
following the difficulties of 2009 and 2010 but have become more selective.
Due to the changing demands of
buyers, the chosen method of sale has
now become of paramount importance. Prior to marketing, serious consideration
has to be given to the various methods
available, i.e. whether to sell by auction, private treaty or informal tender. Over the course of 2011, by taking careful
consideration of the likely purchaser
into account, Chesterton Humberts achieved an excellent record of success using all three methods of sale. For example, the sale of Park Farm (a
commercial holding located in a local hotspot) was sold in lots by auction
and achieved an average land value of ÂŁ11,300 per acre.
However, elsewhere, in order to protect client confidentiality and to encourage
investor buyers, parcels of arable land were sold extremely successfully by
informal tender. For more traditional
Lending to Agriculture: Is it Bucking the Trend? caroline lawrence
ABOVE IMAGE: Halsdown Farm, Waterrow, Taunton – a 112 acre ringfenced livestock and arable farm with period farmhouse, further detached farmhouse and 3 letting cottages, currently available at £1.85m LEFT IMAGE: Hamatethy.
With commodity prices remaining fairly
Lending margins may have crept up over
volatile, rising input costs and general
the last year but the cost of borrowing
economic gloom, one bright spot is
remains very low when compared to where
that the cost of borrowing remains low.
it has been over the last 10 years. Over the
The Bank of England’s base rate has
last 9 months, the increased margins have
remained unchanged at 0.5% since 2009,
been offset for new buildings, capital items
in spite of inflation rates staying above the
and machinery where certain lenders, such
Government’s target level. Although there
as the AMC, have had access to funding
has been intense speculation from the
from the European Investment Bank. This
pundits, it remains anybody’s guess when
has enabled money to be borrowed with a
this situation will change.
0.8% discount over the first 10 years of the
Much has been made about the lack of
holdings, private treaty may well suit buyer and seller alike – as was
demonstrated by the sale of Hamatethy
in Cornwall (542 acres) which sold in excess of its guide price of £4 million.
Chesterton Humberts has an established and experienced team operating across the South West, supported by a national
and international network of offices
which can generate demand from local, regional and national buyers.
availability of credit in the press, but over
Farmers across the South West region have
the last year, lending to the agricultural
taken advantage of this to fund a range
sector seems to have remained strong.
of items such as new buildings, upgrades
Continuing demand for land and the drive
to milking parlour equipment, robotic
to invest in machinery and equipment
milkers, wind turbines, slurry stores and
before the changes to the capital allowance
farm machinery.
regime in March has helped fuel the continuing demand for farm finance. The need to have adequate slurry storage to meet the NVZ deadlines has also added to this, together with the drive to ensure renewable energy schemes beat the reductions in the Feed-in Tariffs. For the most part, lending has kept up with
For a free and confidential marketing appraisal please contact David Hebditch
loan.
this demand subject to the viability of
For the most part therefore, agriculture certainly seems to have been bucking the general trend over the last 12 months. There appears to be no reason for the appetite to lend diminishing. However, it must be stressed that key to all propositions remains serviceability of both existing and proposed commitments.
the business and the serviceability of the proposition.
t: 01823 348290 m: 07968 216655 e: david.hebditch@chestertonhumberts.com
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Single Farm Payment: the Next Chapter? jack mitchell
The Single Payment Scheme (SPS) as
scheme. However, entitlements will
entitlements in 2014 may be passed on
set to continue until the end of 2013,
at least one SPS entitlement against
albeit to one party only. Accordingly,
we have known it over the past years is when it is due to be replaced by a new
‘Basic Payment Scheme’ from 2014
onwards. As the current proposals for the new scheme have now had time to be aired, it would seem a good time to
consider some of the potential practical implications of the current proposals.
Firstly, under the new scheme it is proposed that all existing SPS entitlements will be cancelled with new
entitlements granted against eligible land occupied in the first year of the
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only be granted to those who activated eligible land in 2011. This has several
potential implications: firstly, for those ‘new entrants’ into farming, who did
not activate entitlements in 2011 (such
as Landlords taking land back ‘in hand’ from Tenants), or those purchasing a farm or land for the first time; and
secondly, for business which may have undergone
significant
restructuring
between 2011 and the end of 2013.
A potential solution is provided by
the fact that the right to establish
(becoming known as the ‘golden ticket’), those first time purchasers of land and
farms must take care to ensure it is a contractual term of the sale that this
right shall be passed from vendor to the
purchaser. Where a farm or land is sold in lots to different purchasers, there will
still be an issue because the right may be passed on to one party only.
Secondly, there have been concerns raised about proposed ‘greening’ requirements which may form part of the new scheme.
Proposed Greening Requirements permanent pasture maintenance
Those areas of pasture which are five years old will be designated
as permanent, and a minimum of 95% of this area will have to be maintained as such. This is clearly restrictive and may arguably
have implications for capital and rental values of land going forward. Some may consider ‘ripping up’ pasture in light of this proposal, but care must be taken to consider the implications of this – where it
has been down for fifteen years or more (or is the subject of a wide range of designations), an Environmental Impact Assessment is required.
intensively over a small acreage, or those businesses concentrating solely on one crop.
Those affected may have to make some arrangements for the
business management control of more diversely cropped land under the scheme. For example, the rental of neighbouring land which could then be contract farmed back by the neighbouring farmer.
ecological focus areas
A further proposal is for a minimum of 7% of holdings to be
diversity of cropping
It is proposed that all holdings with 3ha or more of arable land must have a mixture of at least three crop types, with each type
covering a minimum of 5% of the holding, and a maximum of 70%. This may create a wide range of issues. For example, for livestock
environmentally managed. Although this 7% will include features such as hedges and ditches, and is likely to include areas managed
under environmental agreements such as Entry Level Stewardship, the true advantages versus the practical implications don’t seem to have been considered.
farmers only cropping maize, or arable farmers operating
It has also been proposed that payments
income. Receipts from direct payments
a payment in excess of €150,000.
from ‘non agricultural activities’. This
will be capped for businesses receiving However, the effects of capping may not
be too significant as it is proposed that
salaried labour may be deducted before capping is applied, as can any ‘greening element’ of the payment.
In addition, further clarification is being
sought on ‘active farmers’ – payments will only be made to those satisfying the ‘active farmer test’. This means
that there must be ‘agricultural activity’ carried out on the land, i.e. positive land management. A further condition of the active farmer test looks likely to focus on
must amount to at least 5% of receipts may create difficulties for diversified businesses, such as rural estates, where
there may be significant property-based
income from residential, commercial and
holiday
letting
property
for
example; or where a farm business has diversified, such as retail or renewable energy schemes. One solution to this could be to split sectors of the business
into separate entities. However, this may have wider administration and taxation
implications. It must also be considered that regulating such a policy is likely to be very difficult, and the need to supply
information could be very intrusive for all businesses involved.
It can be seen that there are currently
a wide range of proposals under consideration. Theoretically, we are
just under two years away from the introduction of a new scheme but in
reality, these proposals represent the
very first stage of a long process of
negotiations over CAP reform. Indeed, many feel that a new scheme will not
be in place until at least January 2015, with the SPS continuing for an extra year. Nevertheless, farming businesses must not lose sight of the implications of CAP reform.
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LEFT IMAGE: Grade II listed farmhouse where permission was secured to extend and carry out restoration work. RIGHT IMAGE: Former stables where permission was granted to convert to a residential use
The Planning System: Update on the Localism Bill colin tebb
The much anticipated Localism Bill, which contains the National Planning Policy Framework is intended for release in April 2012. This will condense over 1,000 pages of planning policy into a single document of 52 pages with the intention of simplifying the planning system. One of its main objectives is to devolve more power to the local community and perhaps the three most important key changes proposed as far as the rural sector is concerned will be: neighbourhood plans: The major proposal is for Neighbourhood Plans to be introduced to allow communities to come together through a local parish council or neighbourhood forum and agree where they think new houses, businesses and shops should go. These plans can be very simple and concise, or go into considerable detail. The draft Bill indicates that Parish and Town Councils will be able to use a Neighbourhood Development Order to grant full or outline planning permission in areas where they most want to see
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new homes and businesses, making it easier and quicker for development to go ahead. At this stage, it is unclear quite how this fundamental aspect of the Bill will be implemented by Councils.
community right to build: The Community Right to Build is a similar set of proposals that would give local communities the power to decide what is built in their area. The new powers would mean that where developments for new houses, community facilities or shops have the agreement of the local area through a ‘community referendum’, and meet a minimum criterion, communities will not need to go through the normal planning application process. It will be for communities to identify suitable land, sources of finance and secure support for their proposals, and new powers will mean that community organisations would be able to take forward new local developments without the need to go through the normal planning application process. s
To further strengthen the role of local communities in planning, the Bill will introduce a new requirement for developers to consult local communities before submitting planning applications for certain developments. Unfortunately, despite it being less than one month before it becomes Statute, the draft Bill still fails to explain quite how these fundamental reforms to the planning system will be implemented. Chesterton Humberts will endeavour to keep you updated, but in the meantime, we would suggest that landowners consider discreetly discussing with their local Parish or Town Council how they see local decisions being made and how they (the landowner) might become involved, and ‘assist’ Parish or Town Councils in achieving their objectives for new homes and other community facilities.
Meet the Team TAUNTON
David Hebditch Head of Rural
Neil Gladwin Director
Caroline Lawrence Associate Director
01823 331234
david.hebditch@chestertonhumberts.com
01823 348294
neil.gladwin@chestertonhumberts.com
01726 77565
Marie Handel Associate Director
Kate Thomas Land Agent
Jack Mitchell Assistant Land Agent
Hannah Twells Graduate Land Agent
01823 348292
01823 348287
01823 348293
01823 348286
David Pardoe Director
Colin Tebb Chartered Planning Consultant
John Dawe-Lane Associate
01722 520117
01722 342390
01722 342393
marie.handel@chestertonhumberts.com
kate.thomas@chestertonhumberts.com
caroline.lawrence@chestertonhumberts.com
jack.mitchell@chestertonhumberts.com
hannah.twells@chestertonhumberts.com
SALISBURY
david.pardoe@chestertonhumberts.com
colin.tebb@chestertonhumberts.com
john.dawe-lane@chestertonhumberts.com
Dates for the Diary Chesterton Humberts will be exhibiting at shows throughout the country and particularly two of the principal shows in the rural sector during 2012.
royal cornwall show
game fair
gillingham & shaftesbury show
20th – 22nd July 2012
15th August 2012
The Showground, Wadebridge
Belvoir Castle, Nr Grantham
Turnpike Showground, Motcombe
cereals
honiton show
the dairy show
Boothby Heath, Lincoln
Honiton Showground, Stockers Farm
Bath and West Showground
7th - 9th June 2012
13th & 14th June 2012
2nd August 2012
3rd October 2012
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Our South West Rural Offices Honiton 105 High Street Honiton, Devon EX14 1PE
Taunton Mansfield House, Silver Street Taunton, Somerset TA1 3DN
T: 01404 42456 F: 01404 43643 E: honiton@chestertonhumberts.com
T: 01823 331234 F: 01823 332034 E: taunton.ag@chestertonhumberts.com
Salisbury 37 Castle Street Salisbury, Wiltshire SP1 1TT
Truro 40 Lemon Street Truro, Cornwall TR1 2NS
T: 01722 342393 E:salisbury@chestertonhumberts.com
T: 01726 77565 E: caroline.lawrence@chestertonhumberts.com
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