Protect Your Interests with a Family Farm Partnership Agreement
Rocketing land prices coupled with new planning rules make it more important than ever to have a properly written Family Farm Partnership Agreement in place, says John Llewelyn, Consultant Solicitor in the Agricultural Department of Battens Solicitors.
Increasing Diversification Means Increasing Value
The need to protect value in land is only likely to increase as prices continue to rise and changes in planning and energy policy lead to new opportunities to diversify and develop rural property.
In planning, there is the new planning class allowing for change of use from agricultural buildings to houses. Other opportunities are being created by the relaxation of planning laws, for example, the proposed relaxation of planning for brown field sites referred to in the last budget.
Interest in renewable energy opportunities has risen dramatically and we are increasingly being asked to advise on solar, roof panel and other energy projects, whilst lease income from telecommunication masts continues to provide a welcome source of extra income for many farms.
What a Partnership Agreement Covers
A properly written Partnership Agreement will set out the relations between parties carrying on a business together. Unlike other business agreements, the nature of a partnership is often a personal as well as a commercial relationship covering issues such as capital contributions, income payments, profit/loss distribution, voting rights, dispute resolution procedures and what is to happen on the retirement or death of a partner.
Why Have a Partnership Agreement?
- Tax Purposes - A correctly drafted agreement will ensure that partnership property is dealt with in the most tax efficient manner. Identifying what land is partnership property as opposed to the personal property of individual partners is critical but often overlooked. Agricultural land owned and used by the partnership should be eligible for 100% Business Property Relief (BPR) while land made available by one of the partners will only attract 50% BPR relief for Inheritance Tax purposes.
- Dispute Avoidance - As the financial value in partnership land increases so does the potential for family disputes which could easily be avoided with an agreement.
- Greater Protection - There have been a string of avoidable cases where family members have won a share in a farm based on alleged promises or assurances.
- Succession Planning - An Agreement helps to determine the process when a partnership comes to an end or a partner leaves for whatever reason.
A Partnership Agreement can help give you certainty, direction, peace of mind and help you avoid costly disputes and tax bills in the future.
* John will be on hand at the Battens stand by the main ring to offer legal advice at the Melplash Show taking place at The West Bay Show grounds, Bridport on Thursday 27th August 2015.