North West Landowners Seminar - Browsholme Hall Wednesday 30 April 2014
New Questions; 2014 update on topical rural matters Jason Beedell
“I am afraid that too many people still believe that life in a historic house [and estate] is a bed of roses and that we are surrounded by powdered-wigged footmen and champagne.� Lord Montagu of Beaulieu (1976) President of the Historic Houses Association
“One day son, none of this will be houses”
New questions
Smart answers to new and old questions
As we see it The future is bright
Key indicators for 2014 and beyond‌
Rural businesses more positive‌ England
Source: CLA / Smiths Gore Rural Economy Index
Commercial property demand rising but‌ ‌remains weakest sector UK and Northern England commercial property Property Survey
Source: RICS UK Commercial
Agricultural rents are still rising fast‌ ‌but commodity price outlook uncertain England, average rents, year to 31 October 2013
Source: Smiths Gore
Agricultural Rents database
Existing tenancies AHAs + 21% FBTs + 32%
(262) (150)
(69,000ac) (21,600ac)
New tenancies FBTs
(82)
(9,200ac)
+ 59%
Historic high values and historic low supply… …our forecast is +0% in 2014 and +7% in 2015 and 2016 English farmland values Source: Smiths Gore Farmland Market database
+35%
Since 2008
+73 % Since 2008
House prices are expected to rise nationally‌ England & Wales and Northern England house prices Housing Market Survey
Source: RICS UK
‌but the picture is varied regionally‌
Change in house prices in year to January 2014 (%) Source: Smiths Gore Rural House Price Survey
October
Janua ry
‌but the picture is varied regionally‌
Change in house prices in year to February 2014 (%) Source: Smiths Gore Rural House Price Survey
October
February
Residential rents market to remain buoyant in the coming 12 months‌ UK and Northern England residential rents Lettings Survey
‌with Source: growth expected RICS UK Residential
Visitor attractions more positive‌ ‌with higher profits expected Source: Historic House Group; analysis by Smiths Gore
Visitor numbers + 8% (outperforms Visit England 6%) Financial performance 2013 slightly or much better than 2012 2014 2/3rds slightly better performance 1/3rd similar performance
Tax
Land Tax Inheritance tax Business rates CAP reform Rents Repair costs GMOs Sustainable intensificaHon Non-‐acHve farmer Commodity price volaHlity Non-‐food crops Climate change Energy costs Renewable energy Industry GHG AcHon Plan Extreme weather Localism Community Right to Build Community Right to Buy Community Right to Challenge Assets of Community Value Neighbourhood planning Planners understanding estates Affordable Housing Services Housing costs Rural job creaHon Local Enterprise Partnerships Natural Environment White Paper Flood risk management Water availability Water charging GeneraHng income Rural commercial property Skills Broadband RegulaHon Public v private
Tax
Land Tax Inheritance tax Business rates CAP reform Rents Repair costs GMOs Sustainable intensificaHon Non-‐acHve farmer Commodity price volaHlity Non-‐food crops Climate change Energy costs Renewable energy Industry GHG AcHon Plan Extreme weather Localism Community Right to Build Community Right to Buy Community Right to Challenge Assets of Community Value Neighbourhood planning Planners understanding estates Affordable Housing Services Housing costs Rural job creaHon Local Enterprise Partnerships Natural Environment White Paper Flood risk management Water availability Water charging GeneraHng income Rural commercial property Skills Broadband RegulaHon Public v private
Tax
Land Tax Inheritance tax Business rates CAP reform Rents Repair costs GMOs Sustainable intensificaHon Non-‐acHve farmer Commodity price volaHlity Non-‐food crops Climate change Energy costs Renewable energy Industry GHG AcHon Plan Extreme weather Localism Community Right to Build Community Right to Buy Community Right to Challenge Assets of Community Value Neighbourhood planning Planners understanding estates Affordable Housing Services Housing costs Rural job creaHon Local Enterprise Partnerships Natural Environment White Paper Flood risk management Water availability Water charging GeneraHng income Rural commercial property Skills Broadband RegulaHon Public v private
Tax
Land Tax Inheritance tax Business rates CAP reform Rents Repair costs GMOs Sustainable intensificaHon Non-‐acHve farmer Commodity price volaHlity Non-‐food crops Climate change Energy costs Renewable energy Industry GHG AcHon Plan Extreme weather Localism Community Right to Build Community Right to Buy Community Right to Challenge Assets of Community Value Neighbourhood planning Planners understanding estates Affordable Housing Services Housing costs Rural job creaHon Local Enterprise Partnerships Natural Environment White Paper Flood risk management Water availability Water charging GeneraHng income Rural commercial property Skills Broadband RegulaHon Public v private
Outlook positive‌
Net income should grow Not just about new enterprises Cost control important
The Farmland Market Will Douglas
Strong demand (but weaker in some areas) Amount of land for sale at an all Hme low We don’t expect demand or supply to change much unHl 2014 -‐ 2015
In England in last five years
+34% for all farmland +38% for equipped farms +46% for bare land
What affects the value of land?
No obvious relaHonship with wheat prices
No obvious relaHonship with rents
But rents becoming relaHvely cheaper
The North West – Area sold and number of sales 120
14,000
12,000
100
80 8,000 60 6,000 40 4,000 20
2,000
0
0 2006
2007
2008
2009
Number of sales
2010
2011 Area sold (ac)
2012
2013
Acres
Number of sales
10,000
Low supply is the dominant factor affecHng prices
Usually, land prices are affected by the economy
Our model esHmates
+0% in 2014 then +7% 2015/16 Our farm agency team feels this is conservaHve and they do not expect average prices to fall
General market observations • • • •
Hotspots Beware of local demand influences Two tier market? Low supply
Residential Property Market Update Will Douglas
England and Wales
North West region
Source: Land Registry
Gross mortgage lending
ÂŁ Million
Year Source: Council of Mortgage Lenders
The outlook…… • Confidence increasing • Transactions numbers rising • Lending increasing – what effect will the new assessment rules have? • Help to buy • Stamp Duty • London overheating? – trickle out effect? • More properties on the market • Increased buyer enquiries
CAP Reform Impact on Rural Estates Duncan Winspear
Overview • From 2015 we enter a new CAP era • The Single Payment will be replaced by the Basic Payment (BPS) • Environmental Stewardship will also change moving from ELS/HLS to NELMS
Basic Payment • It will be an area based flat rate payment, similar to current SPS in England • No link with production and the BPS • Single Payment entitlements held on 31st December 2014 will be rolled over into the Basic Payment
Basic Payment - Continued • Active farmer test- focus will now be on a negative list of non eligible claimants • Eg airports, railway services, water services, permanent sports & recreation grounds • Land must also meet cross compliance and greening will impose additional requirements
Modulation • In England modulation has been set at 12%. There will be no EU modulation with the new system • EU equivalent of modulation is now removed at source. • The greater level of English modulation compared with the current 9% should increase the budget for rural development and agri environment funding
Environmental Stewardship • Existing ELS & HLS agreements will run until their specific end date. • A new scheme will start in 2015, that will replace ELS & HLS • The new scheme is being called NELMS • Double funding due to similar options in ELS / HLS and greening could be an issue
New Environmental Land Management Scheme (NELMS) • NELMS will be more targeted than ELS, not being available to every farmer • However it will also be more flexible than HLS • Farms in the uplands could be favoured in terms of being selected for NELMS • NELMS may cover elements of grant funding that are currently part of EWGS and Catchment Sensitive Farming
Implications for Incomes Defra have estimated the following payment rates in Euros for the 2015 Basic Payment, depending on the moorland payment rate: Estimated Payment £:€ 0.83. Payments are after modulation
2015: No increase in moorland payment Per ha est.
2015: With increase in moorland payment Per ha est.
Comparison with 2013 Actual Payments Per ha
Non SDA (lowland)
€247 £205
€244 £202
£214
SDA
€247 £205
€244 £202
£172
€35 £29
€70 £58
£30
Moorland
•
Slight reduction in direct payments in the lowlands. Farms that are unable to enter NELMS will see greater reductions
•
Uplands - especially while the UELS is in place - will see an increase in income
Implication for Landowners •
Lower subsidy payments in lowlands
•
Probably higher payments in uplands
•
Divergence in future rent trends?
•
Could the 3 crop rule or ecological focus areas provide an opportunity for inhand shoots.
•
More rural development funds, greater opportunities for supporting wider rural enterprises
Farming Outlook For North West England Alastair Johnston Farm Manager and Farm Consultant
Enterprises • • • • •
Dairy Beef Sheep Arable, Maize, Potatoes Land Values
Dairy • • • • •
Milk Price Milk production Input cost falling Cattle numbers stable Quotas removed in 2015
Beef • • • • • •
Horse gate Imports Inputs Economics Feed Supply
Sheep • • • •
Productivity Exports Imports Inputs
Arable, Maize, Potatoes • • • •
Production levels Global markets Land availability Inputs
Land Values • • • •
Rentable values Selling Values Land availability Environmental benefits
Questions
Estate Management – Reactive or Proactive?... David Steel FRICS FAAV
Why have an Estate Strategy…1 • Stop and think time • Close working • ID reasons for ownership
Why have an Estate Strategy…2
• Questions the ‘status quo’ • Takes stock • ID core assets
Why have an Estate Strategy…3 • Gets owners across generations to engage • and encourages family discussion…
Why have an Estate Strategy…4 • ID challenges • Risk management • ID opportunities • A balanced approach
Why have an Estate Strategy…5 • Sets measureable targets • Utilises Key Performance Indicators (KPIs)
Building your plan… • • • • • • • • • •
A Team effort ‘Horses for courses’ Input sources Internal & external Best advice High level first The detail Draw together Objective reviewer Consensus
The component parts… • • • • • • • • • • • •
Principle strategy (master) plan Tax strategy plan Trust bible Estate terrier/asset register Succession plan Farm tenancy vision plan Planned preventative maintenance Heritage management plan Woodland management plan Development register Statutory compliance register Restrictive covenant register
What do you do with your Plan?... • • • • • •
Treasure Store Share Implement Review Change
Why sometimes reactive is right…
• • • • • •
New legislation New technology Gov’t grants/incentives Innovation Unforeseen events Unsolicited approaches
Evolving economic climate Inheritance tax VAT on listed buildings Business rates Let property markets High speed Broadband Repair costs Energy Act 2011 The Green Deal Risk Management CAP reform Sustainable intensificaKon Non-‐ acKve farmer Capping subsidies Commodity price volaKlity Demand for non-‐food crops GMOs Food security Climate change Energy costs Renewable energy Industry GHG AcKon Plan Extreme weather Natural Environment Water availability Water charging Localism The Local Community Community Rights Assets of Community Value Neighbourhood planning Planners understanding estates Affordable Housing Housing costs Rural job creaKon Government RegulaKon Farm tenant succession Re-‐capitalisaKon of farming EssenKal investment Europe Referendum Public access Family succession
Choices
Circumstances
Challenges and opportuni1es from the exchequer Challenges and opportunities from the Catherine Desmond Partner Landed Estates and Private Wealth
Topics for today • Recent announcements • IHT relief • Main residences
Protect your IHT relief • Na1onal Audit Office counts the costs of – Agricultural property relief – Business property relief
• Es1mated cost to treasury in 14/15 -‐ £800M • Sugges1on that relief claims are not being scru1nised carefully enough
Inheritance tax and relief • IHT normally payable on death at 40% • Current nil rate band £325,000 • Relief available for Agricultural Property – – – – – –
100% in hand 100% FBT 100% AHA tenancies recent succession 50% old AHA tenancies Agricultural land CoYages and buildings appropriate to the land
Inheritance tax and reliefs • Business property relief – – – –
100% Shares in trading companies Unincorporated businesses & assets within them 50% for assets used in a business
• Combina1on of NRB, APR and BPR can take many outside the IHT net
Common pi^alls to avoid -‐ APR • Redundant farm buildings • Entries on tax returns and IHT / probate forms – Describing the deceased as a “re1red farmer”
• Who lives in the farmhouse? • Applica1ons for reduced council tax for “unoccupied” coYages • “Hope value” on agricultural land • Diversifica1on • Horses
Common pi^alls to avoid -‐ BPR • • • • •
Ensure contract farming agreements mean “trading” Correct repor1ng on IT and VAT returns Diversifica1on e.g. renewables can change profile Are there large cash balances? Any investment assets within a business?
Increase in nil rate band? • • • • •
David Cameron promises increase to £1M Is this £1M each or between married couples? Will this impact on reliefs? Could take a large number of estates outside the IHT net Could make planning during life1me simpler too
Main residence relief • CGT relief on disposal of main residence • Elec1on if more than one residence • Two years from 1me of change of combina1on of residences • Or HMRC decides which is residence based upon facts
Period of relief • Period when property is main residence • When working overseas / away from home • Final 36 months grace period, reduced to 18 months since 6 April 2014
Consulta1on on elec1ons • Currently where there are two residences there is choice • Proposal to remove choice and prescribe which will be the main residence • May cause issues for those living between two proper1es • May make succession planning more complex
Challenges and opportuni1es from the Exchequer
Catherine Desmond Catherine.desmond@saffery.com 0161 2008383
Conservation & Heritage Management Peter Hallam
Introduction
Conservation Looking after and protecting something of value and significance and enabling appropriate opportunities for it to have a sustainable future. Securing a future through effective management maintenance, repair and use !
Heritage English Heritage defines Heritage: “All inherited resources which people value for reasons beyond mere utility�
Protection & Designation
• • • • • •
Local Authorities & English Heritage protect heritage by designation: Listed Buildings Conservation Areas Scheduled Ancient Monuments Protected Wreck Sites Registered Parks and Gardens Registered Battlefields etc.
Why Bother?
A Good Reason!
It had a past, secure a Future!
Securing a Future - Repairs
Securing a Future - Repairs
Securing a Future - Maintain
Securing a Future - Damage
Securing a Future - Hidden Defects
Securing a Future – Too Late!
Securing a Future - Expensive
Plan Ahead
In the Meantime
Finding a Solution - Change • Know your building, be informed – Research (Significance), Survey • Do not neglect - Maintain and Repair • Know Heritage/Conservation Deficit • Work with challenges – Listed/ Scheduled, National Parks, Conservation Areas
Finding a Solution - Change • Consult and engage early – English Heritage, Conservation Officer • Other Considerations – Ecologist (bats, newts) • Be prepared to listen and perhaps compromise • Put a clear well argued case forward
Managing Change - DIY
Managing Change - DIY
Managing Change - Grant
Managing Change - Dispose
Managing Change - Solution Best Fit and Compromise ! Outcomes: • Heritage • People • Communities
Constructive Conservation • Positive and collaborative approach to conservation • Active management of change: – Recognising and reinforcing the historic significance of places, while accommodating the changes necessary to ensure their continued use and enjoyment (English Heritage)
Protecting Significance • What is it ? • Conservation Principles – consistency, a value-based approach – Historical – Aesthetic – Communal – Evidential
Historical Value •  The ways in which past people, events and aspects of life can be connected through a place to the present
Aesthetic Value •  The ways in which people draw sensory and intellectual stimulation from a place
Communal Value •  The meanings of a place for the people who relate to it, or for whom it figures in their collective experience or memory. Closely bound up with historical and aesthetic values but with additional and specific aspects
Evidential Value •  The potential of a place to yield evidence about past human activity
Thank you
Planning for Planning and Value Jennifer Hadland MRTPI & Richard Shield MRICS
What we will cover: • • • • • •
National & Local Policy context and resultant opportunities Benefits to you Typical Development Opportunities and relevant case studies Market context Planning options and managing risk Conclusions
What has changed?
• National Policy - NPPF (2012)
What has changed? • Local Policy - Local Plans - Following behind (and must reflect) the NPPF - Sustainable Development is key! - Boosting the economic climate - Deliverability - Rural diversification - Rural Economy - New housing in rural areas - Rural Vitality and Viability
What should you be doing? Opportunities! Things to think about •
What does the Business or each Owner/Partner want/need?
•
What will the planning policies allow (now and in the future)? – Timing can be key!
•
Could they be improved with changes to policy?
•
Are there opportunities for conversion / marketing housing, neighbourhood planning?
•
Can the land be released for development? (Tenancies arrangements)
•
Asset release
•
Managing liability
•
Community benefit
•
How much could be achieved from sales over time?
•
Is there a need for a Strategic overview?
And •
Who do we need on-side to get achieve our objectives?
Typical Development Opportunities • Single house plots • Traditional buildings (conversion / sale /diversification) • Small scale residential development • Large development site close to key settlement / urban extensions • Large house – family or visitor attraction (tourism) • Enabling development • Renewable energy opportunities
What has / is currently being achieved for our clients:
1. Sustaining Rural Communities Infill development Windfall Sites Vitality of Rural Communities through building Supporting existing local facilities and services e.g. village shop, public house, bus service
2. Exception Sites – New Changes • Exception Sites (100% affordable Housing) is not the only rural opportunity anymore • NPPF – paragraph 54 “Local Planning Authorities should in particular consider whether allowing some market housing would facilitate the provision of significant additional affordable housing to meet local needs”.
3. Edge of Centre Housing Growth
Strategic site allocation of up to 1000 residential units in the Green Belt.
4. More Relaxed approach to Conversion Schemes
5. Sustaining Local Businesses Farm shop to Restaurant
6. Housing in the Open Countryside New residential development helps retain and increase communities within rural areas.
Application approved via delegated powers in May 2013 – significant uplift in land value!
6. Housing in the Open Countryside - continued
6. Housing in the Open Countryside continued Thinking differently – innovative and attractive. Situated in the open countryside on the edge of Northumberland National Park. Does not comply with adopted policy. Emerging Local Plan is still being prepared. Para 55 of NPPF explored. Wholly sustainable dwelling situated in the open countryside. The NPPF ‘presumption in favour of sustainable development’ The house will achieve ‘Passivhaus’ standards of sustainability using locally sourced Kielder Timber.
The application was approved via delegated powers in December 2013.
7. Rural Vitality and Diversification The dwelling had been subject to an agricultural tie legally restricting occupants to those who worked on the adjacent farm. The application sought to formally establish that the property, which had been used as dwelling house by tenants (or their dependants) employed in occupations other than agriculture and forestry, was lawful. We were able to demonstrate, through evidence submitted as part of this application, that the lawful use of the property is unencumbered residential use, as it has been occupied in continuous breach of the agricultural occupancy condition for at least a 10 year period.
8. Neighbourhood Planning Neighbourhood planning gives communities the power to: • make a neighbourhood development plan • make a neighbourhood development order • make a Community Right to Build order
How much of the new planning framework is innovative? • To be honest – not much! – However, it is more flexible and open to interpretation – more favourable to rural areas. • Opportunities available have opened following the NPPF and the political pressures which are placed on Local Planning Authorities to deliver development to help dig the Country out of recession. • Consider the development options you have – big or small.
Benefits of Whole Estate Planning? • Short term and longer term development opportunities • Revenue growth / capital release • A positive story to tell – long term commitment and re-investment
Market Context • Identified need for more housing • Increasing market confidence • Resulting appetite for land
Routes to Receipt • Promotion agreement • Option agreement • How best to maximise the receipt? • Invest
Which is right? • Attitude to risk • Status of Local Plan • 5 year land supply
Why involve a Development Consultant
or ‌.. alternative structures? Income return
Conclusion • More flexibility • Great rural development options – long and short term • Viability –increased focus on landowner viability – not just developer viability • This is your time!
What you won’t know about Smiths Gore • Sold or are marketing 480 acres for over 5,500 units • Advising on over 19,000 units in the planning system • Promoting over 13,000 units through the Local Plan process • Advising on Third Party agreements covering another 5,500 units
Thank you Richard Shield MRICS richard.shield@smithsgore.co.uk 01325 462966 Jennifer Hadland MRTPI Jennifer.hadland@smithsgore.co.uk 01325 462966
Renewable Energy – A 2014 update of the latest issues and developments Thomas McMillan – Head of Sustainability and Renewable Energy (N. England and Scotland) Clitheroe – 30th April 2014
Key Topics • Feed-In Tariffs & Degression Rates • Changing Cost of Renewable Energy Technologies • Renewable Heat Incentive (RHI) – Non-Domestic – Domestic • Recommended Key Areas of Focus • Key Timelines
Feed-In Tariffs (FITs) – Degression Rates • Degression was applied to the FIT subsidy on 1st April 2014; – Solar PV • under 50kW = 5% (for high and mid rate) • over 50kW = 0%
– Wind • All sizes = 20% cut
– Hydro • under 2MW = 5% cut • over 2MW = 0% cut
– Anaerobic Digestion • under 500kW = 20% cut • over 500kW = 0% cut
Worldwide Levelised Cost of Electricity Q1 2010 to Q1 2013 Onshore Wind (Large)
-5%
Offshore Wind
+23%
PV
-57%
Biomass/Anaerobic Digestion (Large CHP)
+47%
Source: Bloomberg, New Energy Biomass (Heat) Hydro (FIT scale) Onshore Wind (FIT scale) Anaerobic Digestion (FIT scale) Source: Smith Gore Project Experience
Renewable Electricity – Key Areas of Focus • Wind, Hydro and AD plants need to be completed quickly - Move Fast! • Match technology to on-site energy use • Solar PV is likely to offer best ongoing opportunities – Rooftop Systems - match system size to energy use (7 to 8 year payback on average) – Solar Farms - developers paying £600 to £1,000 p.a. per acre in North of England for sites
Renewable Heat Incentive (RHI) Non-Domestic RHI
VS.
– Been in place since Nov 2011 – For any size of technology – 20 years of RHI Payments – Must be paying business rates or connect two properties with separate council tax bills
Domestic RHI – Launched April 2014 (after 2 and half year delay) – For sub 45kW systems only – 7 years of RHI payments – Systems will require a green deal assessment and ‘green ticks’ will have to be undertaken
Comparison of RHI Rates
Proposed Changes to the Non-Domestic RHI • Increases to the non-domestic RHI rates for: – Biomass over 1MW =1p/kWh to 2p/kWh – Ground Source Heat Pumps = 3.6p/kWh and 4.9p/kWh to 7.2 p/kWh – Solar thermal = 9.4p/kWh to 10p/kWh
Proposed Changes to the Non-Domestic RHI • Additional technologies to be added to the non-domestic RHI: – Air Source Heat Pumps = 2p/kWh – Biogas combustion • 200kW-600kW = 5.9p/kWh, • over 600kW = 2.2p/kWh – Biomass CHP = 4.1p/kWh – Deep geothermal = 5p/kWh
RHI Degression Triggers •
Degression will happen sooner to the following technologies: – – – –
Small biomass (below 200kW) and Medium biomass (200kW to 1MW). 5% degression very likely on the 1st July 2014 20% degression possible on the 1st October 2014
• Degression does not impact on schemes already receiving RHI. • Degression on other technologies looks very unlikely in the next 12 months • For more information on implementation levels & degression see https://www.gov.uk/government/statistical-data-sets/rhimechanism-for-budget-management-estimated-commitments
Renewable Heat – Key Area of Focus • If considering biomass – Early implementers will receive most attractive RHI rates – Reassess technology choice – due to proposed uplifted RHI rates and new technologies supported by RHI
• Compare rates of return for using Domestic or NonDomestic RHI
Advice when you need it Smiths Gore’s Sustainability and Renewable Energy Department Edinburgh Office
Thomas McMillan T 0131 344 0886 M 07584 702 239
Adam Baxendine T 0131 344 0889 M 07834 625 875
Maidstone office
Henry Grant T 0131 344 0898 M 07220 496 511
Alan Harries Michael Wooldridge T 0207 409 9498 T 01732 879 052 M 07764 152 564 M 07979 811 511