Rural Law update. Welcome. Willans LLP I solicitors. Harvest days until nomination entries close

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1 Rural Law update Willans LLP I solicitors Harvest 2014 Welcome This is the first issue of Rural Law Update, a twice yearly bulletin designed to keep you up-to-speed on the latest developments in the agriculture and agri-business industries. We welcome feedback to help us improve future issues. Also, please do give us a call if you wish to discuss any of these articles in more detail. frank.smith@willans.co.uk or call In this issue we cover: Local farming awards Voluntarily registering your land New face in agriculture & estates Annual tax on enveloped dwellings a pitfall for the farming community? Details about the greening element of the CAP changes Implied rights of way - not to be relied on Agricultural buildings to residential dwellings Transfer of existing agrienvironment schemes Give accurate descriptions - or you could be held liable! 9 days until nomination entries close We are delighted once again to be one of the sponsors of this year s Taste of Gloucestershire Food and Farming Awards and, in particular, to be sponsoring the award for Farmer of the Year. The awards celebrate the best of Gloucestershire s farmers, producers, retailers, pubs, farm shops and restaurants. There are 12 categories including Farmer of the Year and Young Farmer of the Year. To enter all you have to do is visit co.uk/gloucestershire/taste and complete an online entry form answering the set criteria. Applications close Friday 15 August. Winners will be announced at a gala dinner on 21 October. Frank Smith of our agriculture & estates team said: With around 75% of Gloucestershire used for farmland or forestry, farming is an essential part of our economy. There are 3,000 farm businesses in the county with a combined gross output in excess of 400 million yet they are largely unnoticed. These awards are an excellent way for the county s businesses, no matter how big or small, to be put on the map and recognised for their efforts. We urge you to enter yourself or your favourite businesses in these awards. To read Frank s interview in full about his involvement with these awards please click here. Contact details Willans LLP solicitors, 28 Imperial Square, Cheltenham, Gloucestershire GL50 1RH law@willans.co.uk Follow us Page 1

2 Willans has negotiated a service level agreement with the Land Registry s Gloucester office which reduces the costs involved. Significant benefits to be had when voluntarily registering your land We have been encouraging our clients for some time to make voluntary applications for first registration of their property. The Land Registry have announced that approximately 20% of all land in England and Wales remains unregistered, which amounts to just over 3 million hectares. We are working on an initiative to get this land registered as soon as possible. Why should I register my property? Registering your title to your property can bring significant benefits, many of which are set out below: Registered land is far easier to deal with, meaning that any future transactions will generally be cheaper and dealt with more efficiently. Registration creates a clear record of ownership, with an identifiable title plan, evidencing any matters that affect the property and making it readily marketable. Registered titles are protected under a government guarantee. Boundary disputes are less frequent, less costly to deal with and are more easily defeated once title is registered. Adverse possession (commonly known as squatting) claims are much easier to defeat. Registered land can be valued more quickly and inexpensively. What benefits can we provide? Willans has negotiated a service level agreement with the Land Registry s Gloucester office which reduces the costs involved and the time taken for those people who wish voluntarily to register their land before compulsory registration is triggered. The benefits of voluntary first registration and this agreement include: The Land Registry fee is 30% lower than for compulsory first registration. All applications will be dealt with by a dedicated team at Gloucester, with whom we have an excellent relationship, and who will liaise with us constantly throughout the registration process. Your best estimate of the value of your property will be acceptable you do not need to have it professionally valued (thereby reducing your costs). You do not need to have your property accurately mapped, as the Land Registry will provide a plan to be discussed and agreed with us before completion of the registration (which will further reduce your costs). We no longer need to provide copies of all documents evidencing your title to the Land Registry, thereby reducing the amount of time we need to spend preparing the application (and further reducing your costs). The Land Registery team at Gloucester will aim to complete the registration within 4 weeks. If you would like to know more about our service or the benefits of first registration, contact Rupert Burchett. Nowadays, in almost all situations where there is a change in ownership of property (including on inheritance or when trustees are changed) or the creation of a mortgage over it, registration is compulsory. Introducing Rupert Burchett... We are delighted to announce that due to team expansion, Rupert Burchett has joined our agriculture and estates department. Rupert trained at London firm Clifford Chance LLP before moving to a leading Oxford firm, where he specialised in agricultural and property work. Frank acts for many regional landowners and several large estates, is rated by Legal 500, and is an enthusiastic ambassador for the rural community. He has wide experience in agricultural property and advises clients on agricultural tenancies, sporting rights, farm partnership agreements and first registrations (including large estates). An enthusiastic supporter of country pursuits, Rupert is a member of the Agricultural Law Association. He will help partner Frank Smith to develop the department which was established when Frank joined the firm in January Page 2

3 Annual tax on enveloped dwellings a pitfall for the farming community? If you are a farming business that has structured itself either as a limited company or as a partnership with a corporate partner, then this new regime is something that you will need to look at closely. Since 1 April 2013, an annual charge has been levied on residential property worth more than 2 million owned by non-natural persons, known as the annual tax on enveloped dwellings ( ATED ). In the 2014 Budget, the Chancellor extended this charge to include: properties worth over 1 million from 1 April 2015 properties worth over 500,000 from 1 April 2016 Properties are assessed using their market value either on 1 April 2012 or on the date the property was acquired, if later. Properties will be revalued every 5 years. For the purposes of the regime a non-natural person includes limited companies and partnerships where one of the partners is a corporate partner. The farming community has reacted over the years to the various announcements from the Chancellor, restructuring where necessary to ensure they take advantage of any relevant reliefs or exemptions. If you are a farming business that has structured itself either as a limited company or as a partnership with a corporate partner, then this new regime is something that you will need to look at closely. There are provisions for reliefs and exemptions for the farming community. Farmhouses and cottages on the farm are most likely to be caught, particularly in the future as the threshold comes down. Depending on the circumstances, there are reliefs available for property rental businesses (broadly, where a residential property is held for the purposes of a property rental business run on a commercial basis) and farmhouses (broadly, where the farmhouse is occupied for the purposes of a farming trade). However, to benefit from a relief, you must file an ATED return. If you do not, you will be liable for the tax and subject to the normal rules governing late filing of tax returns and late payment of specified taxes. Environment Secretary announces more detail about the greening element of the CAP changes With the Basic Payment Scheme coming into effect in six months time, the government announced on 10 June some much needed clarification about how they intend to implement the new greening requirements of the revised Common Agricultural Policy (CAP), together with further information about changes to the cross compliance regime. Greening The greening element forms 30% of the direct payment to farmers. Under the rules, farmers will be required to designate 5% of their arable area as an Ecological Focus Area (EFA) if they have more than 15 hectares of arable land. When the new system is implemented the following land may be classified as EFA: Buffer strips Fallow land Areas with catch crops or green cover Areas with nitrogen-fixing crops (DEFRA will allow the broadest possible range of crops, and will impose no additional restrictions on their cultivation) Hedges (although DEFRA noted that these will be difficult to map accurately and that farmers proposing to include these will need to be prepared for delays to their payments whilst the mapping is carried out). Double funding Farmers with Entry Level Stewardship (ELS) agreements (including Organic ELS agreements) starting on or after 1 January 2012 will need to be careful that those areas which are included in their points calculation for those types of agreements are not also used to meet the EFA requirements of the greening payment. Otherwise this will be considered as double-funding. The EFA requirements will be calculated first and those features in an agreement-holder s ELS that are put towards the EFA calculation will not earn points towards the ELS agreement. Agreement-holders will not be affected and need do nothing if they are delivering options over and above the ELS points threshold, as that should allow them to receive their full ELS payment after the greening calculation has been carried out. If an agreement-holder does not have sufficient surplus options then they can either amend their ELS agreement to add additional options, accept the reduction in payment or leave the ELS scheme with no penalty. Higher level scheme agreements are not affected, nor are any agreements entered into before 1 January The replacement for the agri-environment schemes and the New Environmental Land Management Scheme (known as NELMS) will also take doublefunding into account. Page 3

4 The greening element of the CAP changes continued.. Cross compliance The burden of cross compliance will be reduced. The number of requirements placed on farmers to keep their land in Good Agricultural and Environmental Condition (GAEC) will be reduced from 17 to 11. This cut-back includes the following: There will be no requirement to keep a Soil Protection Review, which will be replaced with national standards on soil management. There will be no requirement to control injurious weeds and invasive weed species will not be included within cross compliance from The GAEC relating to agricultural land not in agricultural condition will be removed. DEFRA has also announced that it intends to review the penalty system for cross compliance to make it more proportionate. To prevent uncertainty, and to avoid being mired in the quagmire of implied easements, transfers and leases should expressly refer to any rights being granted or reserved. Implied rights of way - not to be relied on A recent High Court case acts as a reminder that you should clearly outline rights of way in any transfers and leases of a property. Failure to do so may mean you find yourself in the realm of implied easements where problems tend to arise, as there is conflicting authority on how these are created and interpreted. The case, Wood v Waddington, centred on a sporting estate which was sold in two parts. The claimant (X) had carried out extensive work to a livery yard on his part of the estate and claimed to have vehicular and equestrian rights of way over the second part of the estate, the defendant s (Y) land. Y did not agree and blocked X s access to these rights on the basis that they were rarely used and there were other rights of way available on different bridleways. First, the court found the original transfer referred to rights of a continuous nature and as a right of way cannot be continuous the transfer could not have granted any. Secondly, it has been established that, for the purposes of section 62, a right has to have been enjoyed by the land originally conveyed, rather than as part of the common ownership of the original estate. The court held that this was not the position in this case. Thirdly, the rights could not have been implied by case law because not only does that test require the rights to be continuous but also that they are necessary for the enjoyment of the land conveyed. This limb failed as well. X argued the original transfer expressly granted the rights being used, that they were enjoyed with the land and, therefore, became easements by virtue of section 62 of the Law of Property Act 1925, and that the rights were implied into the transfer by case law. To prevent uncertainty, and to avoid being mired in the quagmire of implied easements, transfers and leases should expressly refer to any rights being granted or reserved. The new regulations contain a number of features which will create significant debate over coming months... Agricultural buildings to residential dwellings Changes to the Town and Country Planning General Permitted Development Order have now been published, and in some cases these allow agricultural buildings to be converted into residential houses. These provisions came into force on 6 April 2014 and the first applications are due any day now. An agricultural building of up to 450 square metres, may be able to be converted into three residential houses. However, location will be a key consideration as buildings in, for example, National Parks, the Broads, Areas of Outstanding Natural Beauty and conservation areas are excluded. The new regulations contain a number of features which will create significant debate over coming months and will undoubtedly lead to different interpretations depending on your local authority. The new provisions are not just about a change of use, they also allow for new windows, doors, roofs and external walls and services to be installed. Partial demolition is also sanctioned. A prior approval application needs to be made to the local planning authority (LPA). Most disputes are expected to arise in cases where the LPA decides that prior approval of the application is needed due to transport, highway, noise, contamination or flooding impacts and risks. They are only able to make a judgment where the location or siting of the building makes it otherwise impractical or undesirable for the building to change from agricultural use to residential. This could be interpreted in many ways given the subjective nature as to what is impractical or undesirable. Structure, size, location and layout could all lead to a negative view on impracticality and desirability. Further guidance will no doubt be given as recommendations and appeals are heard and parameters become clearer. Page 4

5 Transfer of existing agri-environment schemes Natural England has confirmed that on the transfer of land subject to an existing agri-environment agreement, it will produce an agreement to assign the remaining obligations to the new owner, regardless of whether the transfer is a sale or change of tenancy arrangement. Be certain to include appropriate provisions in your sale contracts to ensure buyers are obliged to carry out the requirements of existing agri-environment schemes. This case is another clear illustration of the need when selling horses to ensure that they are fit for purpose and of a suitable quality for the purchaser s intended activity. Give accurate descriptions - or you could be held liable! A champion show jumper, who sold an elderly horse to one of her riding pupils, faces an estimated 150,000 legal bill after senior judges upheld the buyer s appeal. The buyer, a Mr Palmer, sued international 3-day eventer Pat Muir, claiming that in 2007 she sold him a mount that was unfit for purpose. The value of the claim was for less than 9,000. Ms Muir insisted that she did not actually own the horse, a 14 year old hunter, and was merely acting as an agent for the buyer in the purchase. She denied responsibility for the horse s health or that it lacked merchantable quality at the time of sale and was unfit for purpose. The buyer initially lost the case but the Court of Appeal has now upheld his appeal opening a new chapter in the enormously costly legal saga. Mr Palmer argued that he had asked Ms Muir to keep an eye out for a suitable mount for him to use as a novice eventer and initially agreed to pay 5,000 for the hunter in the belief that he was an 11 year old. The price of the horse was later dropped to 2,750 after he learnt that the horse was in fact 14. Once bought, the horse was found to have an abnormal gait which caused him to occasionally lose balance. The horse then went lame and was put out to grass. A vet later declared the horse unsuitable to ride and eventually he was put down in 2008 for medical reasons. A post mortem examination of the animal revealed that one of his front hooves was bigger than the other. The court was told that the horse turned out to be of unsatisfactory quality and unfit for purpose. It was bought from Ms Muir in the course of her business as a horse trainer and occasional dealer, and the sale was, therefore, subject to statutory implied terms as to quality and fitness for purpose. Ms Muir s defence was that she did not own the horse and the buyer knew this. She said that she was merely helping him find a horse in response to a request that she should source one. At the original hearing the judge found in favour of Ms Muir. However, the Court of Appeal said that the vital points in the case were the nature of the agreement and whether the horse was, in fact, defective. Granting permission for a full appeal hearing, the judges concluded that there was a need to establish the actual condition of the horse at the point of sale. This case is another clear illustration of the need when selling horses to ensure that they are fit for purpose and of a suitable quality for the purchaser s intended activity. Contact For advice on any of the issues covered in this bulletin please contact Frank or Rupert in our agriculture & estates department. Frank Smith LLB (Hons) Partner Head of agriculture & estates frank.smith@willans.co.uk (direct) Rupert Burchett MA (Oxon) Solicitor Agriculture & estates rupert.burchett@willans.co.uk (direct) More news on our website Contact details Willans LLP solicitors, 28 Imperial Square, Cheltenham, Gloucestershire GL50 1RH law@willans.co.uk Follow us