Rural Outlook SUMMER 2017
The future of farming
BREXIT - 10 years on
The key to
not to sell? There is a middle path
Natural capital - making good stewardship pay
covered Our rural professionals are now also based in Haywards Heath
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Rural Outlook 2017
Contents 4 ECONOMY VS ECOLOGY? Is the balance right for the future of the rural economy?
6 10 POINTS TO NOTE FOR 2017 A summary of tax opportunities and issues
8 A TALE OF TWO MARKETS Demand remains good across all sectors but pricing is key
10 BREXIT - 10 YEARS ON What the future for farmers and landowners might look like
12 RESPONDING TO CHANGE How to meet the challenges ahead
14 NATURAL CAPITAL -
MAKING GOOD STEWARDSHIP PAY A summary of the Government’s views on the economics of the environment
16 TAKING THE PAIN OUT OF PLANNING Planning issues resolved
20 TO SELL OR NOT TO SELL? THERE IS A MIDDLE PATH
What suits your needs better – a Restrictive Covenant or an Overage Agreement?
22 ENVIRONMENTAL IMPACT ASSESSMENT CHANGES ARE YOU AFFECTED?
Advice from experts in this key area of planning delivery
24 RURAL BUSINESS 2030 Ross Murray, CLA President, outlines key research on Rural Investment
27 PORTFOLIO MANAGEMENT -
MAKING THE MOST OF MASTS The changing Telecommunications market
30 THE KEY TO STRESS-FREE LETTINGS How our Lettings Teams secure the best results for a wide range of clients
Economy vs Ecology? The debate is already warming up following the triggering of Article 50. How best to spend the ÂŁ3bn previously directed to farm support payments? Surely it is better spent on the NHS or perhaps entirely focused on ecological improvements? The debate rapidly risks becoming as emotive as that leading up to the repeal of the Corn Laws more than 170 years ago. The question that is not being properly aired is how much value we put on farming and food security. The simple answer - that we must operate within a world economy - fails to recognise some key facts. Food security is not simply ensuring we can feed ourselves. It is about improving market access, adding value to produce, meeting changing public demand, investing in modern farming techniques, increasing our trade balance and much, much more. Food security will also bring with it landscape and ecological security. Sadly, this is not appreciated by certain lobbying groups who smell blood. Have a look out of your train window when next travelling and see how much land is already not in production. This loss of agriculture does not benefit the ecology, let alone the social fabric of the countryside. The High Weald area has experienced a 34% decline in livestock numbers in as little as ten years. This picture is replicated throughout the country and is only going to speed up and spread unless we are very careful indeed. The impact on livestock farming is more apparent but it takes little imagination to see what will happen to less productive arable land if the full value of a viable agriculture economy is not recognised and supported. What is left is not simply derelict land, but also a fractured society. The British countryside is so magnificent because of the interplay over centuries between agriculture, forestry, rural business and those living and working in that environment. Make the countryside uneconomic to farm, unable to provide a living for rural workers, or too expensive to live in and the very countryside that everyone claims to value will be destroyed. The answer is not simply to maintain the status quo. I would, however, still argue that ÂŁ3bn is an appropriate sum to support such a key industry. To put this sum into context, the Public Accounts Committee report in 2015 identified ÂŁ3bn in Housing Benefit overpayments alone for one year. What is required is a considered approach to all aspects of the rural economy, how can this be achieved? For many farmers and landowners, the focus will be on the need to further diversify their businesses, often through grant of planning permission. Farmers have proved themselves adept at this, but further investment is increasingly being hampered by an ineffective planning system and a disastrous imbalance between economy and ecology. Take for example, the fact that the majority of Local Planning Authorities have failed to accept Permitted Development Rights for residential conversions of farm buildings, which is extremely frustrating.
Other applicants will be daunted by the increasing upfront costs now required in making an application. Demands for bat, newt and barn owl surveys and landscape assessments put such consents out of reach. For many, it is the time delay that causes issues. In one case, a farm conversion project was held up by over two years as ecological reports, and issues with the buildings conservation department, delayed the consent. In another case, planning delays meant the loss of a grant award. The impact on rural businesses is a major concern. For others on prime agricultural land, or in remoter areas, such diversification is either inappropriate or unfeasible. First and foremost, it must be recognised that modern farming and environmental management can go hand in hand. It should not be forgotten that the major reason for so little land going into mid or higher tier stewardship is not lack of interest, but rather a dysfunctional and overly complicated application process. For the marginal or upland farm it can readily be argued that allowing such farmers to make a living, and thus continue to farm, is far cheaper than allowing the land to fall out of production, given the inevitable impact on natural capital [see page 14] and the social infrastructure of the area. We must ensure that agricultural support payments remain in place for the time being. At the same time, there needs to be far greater investment in agricultural research and in developing new markets for core products. Donâ€™t then hamper this very industry by imposing scientifically questionable bans of chemicals such as neonicotinoids, and possibly Glyphosate. Instead, get the research right and improve best practice. Being able to live near your place of work is key. The Government recognises this, on one hand setting ambitious targets for new housing, but on the other hand allowing the planning system to become bogged down, frequently due to an imbalance again between economy and ecology; Wealden District Council has recently imposed an embargo on any more development, both within its own boundaries and its neighbours, for just such a reason. It is a question of balance. We need a modern system that will encourage investment in agriculture, will support diversification and will help rather than hinder farmers in protecting the environment. At present, the Government and the environmental lobbyists fail to appreciate the value of farming and agriculture, and the role it has and can play in maintaining a vibrant and sustainable rural economy.
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Rural Outlook 2017
Ten points to note for 2017
Water deregulation – not just a drop in the ocean
From April for the first time, businesses in England – including agriculture - will be able to choose which company supplies their water, ending the current regional monopoly. (Although purely residential properties are exempt and must continue with their regional supplier). Many more wholesalers and retailers are expected to enter the market to compete for your business. This means you can shop around for the best rates and customer service. Don’t miss this unprecedented opportunity to make savings or get a better deal.
Energy efficiency – the time to act is now
For those with either residential or commercial let property, now is the time to review your existing Energy Performance Certificates (EPCs) to establish the works required to achieve that all-important Band E (or higher) rating. Unless your property is Listed or otherwise exempt, from April 2018 for new tenancies or April 2020 for existing lets, it will be unlawful to let a property that does not achieve this rating. There are a number of cost-effective improvements that can improve your rating, and you will want to schedule any major works during a rental void or when other works are taking place. The good news is that an improved rating can have significant knock-on benefits for any subsequent applications to the Solar Feed-in Tariff or Renewable Heat Incentive.
Business rates – do you qualify for relief?
Following a revaluation of rateable values (RV), new business rates will be in effect from 1 April 2017 and in some cases, may increase considerably. Equestrian property, renewable energy schemes and farm diversification projects are examples of the types of property that have come under increased scrutiny as a result of the revaluation. Many businesses will want to check, challenge and appeal these values. As before, exemptions and reliefs are available. Agricultural land and buildings are an example of exempt property and Small Business Rate Relief is the main relief for properties with an RV under £12,000 (previously £6,000) and tapered relief up to £15,000 (previously £12,000). However, diversification out of agricultural production – for example, to equestrian use – will result in the loss of exemption. Just because you fall under the current Small Business Rate Relief cap does not mean you should ignore your revaluation. What goes up can come down, and you might well find you are faced with a rates burden in the future.
New Rural Development Funding applications welcome
A new swathe of RDPE (Rural Development Programme for England) funding is available for projects that create jobs and growth in the rural economy. The scope of eligibility is wide, although the paperwork can admittedly be onerous. £120 million is available through three new national calls for projects, which have been developed in collaboration with Local Enterprise Partnerships (LEPs) and will be open to support food processing, business development and tourism infrastructure projects for an initial period of 12 months. If you think your business has funding potential, contact us for an exploratory discussion.
Letting fees – talks to begin on clampdown
Following the Chancellor’s Autumn Statement, the Government has announced that the consultation on banning letting agents’ fees to tenants in England will take place during the spring of 2017. It is likely that a broad assessment will be made on the impacts and practical implications of a ban before it is implemented.
Public rights of way – should your local authority chip in?
Many are unaware that local authorities have an obligation to contribute to the cost of maintaining or replacing existing structures and equipment on public rights of way (PROW) such as stiles and gates, even if it is the landowner’s responsibility to maintain those items. The authority’s contribution has been quoted as 15% and 25% in recent experience. If you have a PROW on your land, there are several rules you need to be aware of. You have an obligation to keep the route visible and clear of obstructions. Intentionally obstructing a PROW is a criminal offence and the Highway Authority has the right to demand you remove any obstructions such as permanent or temporary fences, animal feeders, trees or hedgerows growing over the path, padlocked gates, barbed wire or encroaching crops other than grass.
Permitted Development Rights – the rules are changing
On 1 October 2017, changes come into force following reform of the Town and Country (General Permitted Development) Order 2015 (GPDO) to allow change of use of a building and any land within its curtilage from light industrial (B1c) use to residential (C3) use without the need for express planning consent. However, as with other changes of use under the GPDO, prior approval will still be required from the Local Planning Authority to assess issues such as noise, access and contamination. Conversions will be limited to buildings with a gross floor space of 500 sq m or less, and land within the curtilage of a listed building will be excluded.
Housing white paper fails to address fundamental issue
The government white paper ‘Fixing our broken housing market’, published in February, formally recognises that homes are now unaffordable to a record number of people and that those who can afford to buy must borrow sums that are increasingly disproportionate to their income. Surrey, Sussex and Kent include some of the most unaffordable areas to live in the UK. The lack of supply of new homes each year, compounded by decades of under-supply, is unsurprisingly identified as the primary cause. While this creates opportunities for landowners, as usual it fails to recognise that successive governments’ attitudes to housing continue to be unsustainable and open-ended. We believe they must address the continual annual increase in demand as this can clearly never be met in perpetuity by the complex process of supplying new homes, given the limitations of land availability.
Land Registration – why not?
Roughly 10% of UK land remains unregistered and, while the original deadline for voluntary registration of land has expired, reduced fees for this service are still available. Registering is relatively simple to do. There are many advantages including making your land more marketable and future transactions cheaper and easier, protecting your title under a government guarantee, reducing the risk of boundary disputes and defeating squatting claims. As always, we are here to help.
Stamp Duty and Capital Gains Tax changes
Recent changes to Stamp Duty have seen a 3% surcharge applied to second home ownership. Be aware that this can apply to those who have a part share or part-ownership in a farm or property, which includes residential property (including property held in a farming partnership). Capital Gains Tax remains high for disposals of residential property that does not qualify as the main home. Our message is that with careful planning it can be possible to mitigate these taxes so take advice from our experts first.
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Rural Outlook 2017
A tale of
two markets Despite cautious purchases, and the impact of Stamp Duty Land Tax, all sectors of the property market performed well last year. The outlook looks good, but the need to price sensitively and work with prospective purchasers remains key.
Residential The impact of the Stamp Duty Land Tax is now having an effect on the market with a distinct divide between properties up to around £1 million (£925,000 being the threshold at which the 10% Stamp Duty rate becomes payable) and those valued above this figure. Nonetheless, while some higher priced properties remain unsold, we have seen some very good sales of the best quality properties. In the South East generally, there was a shortage of properties coming onto the market in the first quarter of 2017, due in some degree to the uncertain climate post-Brexit, and this is maintaining prices at their current levels. There are signs that more people are considering moving but, recognising the costs involved, they are very particular in their requirements. Consequently, potential buyers are exercising caution with the offers they are prepared to submit. Another factor we hope is now behind us is the Southern Rail train strikes that dominated the headlines last year and depressed house prices on the Brighton Mainline, Mainline West and East routes by an average of 0.4%. However, we are pleased to note four stations along these routes bucked the trend, with Pulborough,
CASE STUDY 1 - STEYNING
Hove, Haywards Heath and Gatwick Airport reporting price increases of an average 0.05%1. We are still seeing London homeowners looking to move out to the country but many are experiencing some difficulties in selling their property due to the slowing of the market in the capital, which means chains build up and transactions inevitably take longer.
“...we have seen some very good sales of the best quality properties.” Energy-efficient contemporary home built with traditional materials Batcheller Monkhouse was appointed to sell ‘Sunningdale’, a modern country house built using traditional materials including flint walling and exposed oak framing set in 4.8 acres. The meticulously designed house includes many energy-efficient features such as a ground source heat pump that provides underfloor heating on all three floors, tripleglazed powder-coated aluminium windows and a heat recovery ventilation system. We advised the vendors on how to present the house to showcase its unique features, such as oak beams and limestone flooring, and produced high quality property particulars that included floor plans, site plans and professional photography. Well-located, close to the popular West Sussex town of Steyning close to the South Downs, the five-bedroom home attracted considerable interest when it was put on the market in the second half of 2016. It ultimately sold for a sum very close to its guide price of £2.35m.
Farmland While there was concern for farming incomes and the rearrangement of subsidies following the Brexit vote, the farmland market continued to be active in the South East throughout 2016 and into 2017, and there are signs it will continue to be equally buoyant for the remainder of the year. Significant factors affecting land prices include location, the capital tax advantages in owning farmland and the lower rate of Stamp Duty payable on mixed-use properties. Also, there is still a shortage of supply, particularly in the western part of the South East, keeping land prices strong. Typically, land prices averaged between £8,000 and £10,000 per acre with small parcels in areas of high demand achieving rather more. Interest often originates from neighbouring properties and land owners seeking to expand, as well as private investors looking at long-term opportunities for development. Our message is that landowners thinking of selling should hold their nerve as they will find market conditions continuing to be favourable, at least for the immediate future. As you will be aware, parts of the South East are blessed with greensand and chalky soils that together with our warmer climate has attracted the interest from purchasers wishing to establish vineyards. It has been found that these conditions can support the required grape varieties to produce sparkling wine of the highest quality. We have seen strong demand for land from both established vineyards looking to expand and new entrants to the market seeking to set up smaller ventures.
CASE STUDY 2 - THE SOUTH DOWNS
LAND PRICES PER ACRE Per acre: £15k
Grassland Grassland Woodland Woodland <10 acres <10 acres
© Batcheller Monkhouse Research
“...the farmland market continued to be active in the South East...”
Mixed farm including some fertile Greensand soil sold in lots to maximise value Danhill Farm lies in beautiful, undulating countryside with far-reaching views to both the North and South Downs from high parts of the farm, which lies on a Greensand ridge. It extends to some 301 acres and we carefully parcelled the farm into nine strategic lots and offered it for sale in its entirety or in individual lots for an overall guide price of around £3.35 million. Enormous interest was generated and the farm sold extremely well in the autumn of 2016.
Russell Parkes • email@example.com • 01798 872081 Rural Outlook 2017
BREXIT - 10 years on Article 50 was triggered on 29 March 2017. The United Kingdom has now embarked on the process to extricate itself from the far-reaching tentacles of the European Union. Now what? In this article, we gaze into our crystal ball and look ten years into the future to explore how five hypothetical farmers have adapted to this brave new world. Fast forward to 2027… In 2020 Britain left the EU. Agricultural subsidies were largely phased out by 2022. The reduced grant schemes still available consist of a basic environmental stewardship payment of £20 per acre for farmers delivering public goods such as access, visual amenity and environmental benefits.
Which scenario does your farming operation today most closely resemble?
Added to this, a capital grant scheme provides farmers and landowners with support for modernising British agriculture. However, farm profitability and rents have reduced dramatically with a drop in net farm incomes and while some farmers have adapted in a variety of ways to meet these challenges, some have not.
Clearly, as our hypothetical scenarios illustrate, this is a pivotal moment. The route each farmer chose to follow in 2017 was critical to their success (or otherwise) in years to come.
If you would like to discuss your estate management strategy with one of our experts, please contact Alex Wilks.
A mixed farm close to an urban centre with assorted let business buildings, cottages, fishing lakes and non-farming enterprises. The land is farmed in-hand. Farmer A saw which way the wind was blowing and has embraced diversification for some years. Much of the farm is contracted to a local arable farmer (Farmer C) with some livestock in-hand on the pasture areas. Most of Farmer A’s income comes from non-agricultural activity.
Farmer B runs a mixed farm. Times are tough and profitability is always an issue but, with his father now retired, Farmer B is determined to keep farming and support his family from the holding in the way his father had done before him.
Little has changed on the farm. Farmer A has continued to employ ‘the estate model’ with a family trust owning the land and the farming company operating the business. Each has to stand on its own merits and the individual profit centres are carefully watched by the farm bookkeeper, Mrs A.
Unwavering in his desire to carry on earning his livelihood from the holding, Farmer B has failed to meet the last six payments on his mortgage. He still runs a mixed farming system, employing most of his own labour supplemented by some casual labour from elsewhere. Farmer B is unable to further refinance the holding and will be selling half the land in the spring to clear his debts.
Cottage rentals and business units continue to flourish, as does the farmer’s fishing lake. Farmer A works with his son on the holding and the pair have made the most of the recent Capital Grant schemes to modernise those farm buildings that are still used for agriculture. They have converted some more of their older farm buildings to business and storage units.
Farmer C lives at Home Farm, his son has just left agricultural college and needs to be made a partner in the business. They contract farm a further 500 acres for farmer A. The farm is moderately profitable but challenging at the present time.
Farmer D’s in-hand farm consists mostly of sheep and beef with some rented pasture. The farm struggles to be profitable but provides a home and livelihood for Farmer D and his family.
Farmer E is a 60 year old farm tenant who enjoys moderate profitability. There’s no money for any luxuries but he covers the basic necessities. He is sad his family aren’t interested in farming but plans on continuing for the foreseeable future.
Farmer C’s son now runs the farm although his father still works part-time. The business has increased over the past ten years, with 4,000 acres on a variety of Farm Business Tenancy Agreements and Contract Farming Agreements, together with their base at Home Farm. They are now contract farmers for Farmers A and D.
Farmer D enjoys living on the holding but his son is now working successfully in London in the financial sector. Farmer D works in the local town part-time and part-time on his holding where he has an extensive beef herd. His wife runs a B&B in the converted buildings, and they have a small number of commercial lettings.
Farmer E is giving up his tenancy – the hard physical work is too much for him now – having negotiated a reasonable settlement with the landlord. He and his wife have bought a cottage by the sea in Bournemouth, and the couple plan to enjoy a well-deserved retirement together.
The pair have taken full advantage of a radical decrease in farm rents over the past few years and with the help of a new Capital Grant Scheme, have modernised their holding to enable rapid expansion, making the most of available opportunities. Their business model is to increase to 10,000 acres within the next ten years, growing a variety of crops to meet market conditions.
Half the farm has been converted to arable and is contract-farmed by Farmer C. Farmer D plans to retire next year but will continue running his prized beef herd parttime while continuing to operate a farming business through the contract farming services of Farmer C. He is using the new Capital Grant Scheme to convert another stable block into additional bed and breakfast accommodation within the South Downs National Park. The business remains viable and needs less input from Farmer D and his wife on a day-to-day basis.
Alex Wilks • firstname.lastname@example.org • 01798 877520 Rural Outlook 2017
Responding to change The challenges facing farmers have never been more apparent coming into the political negotiations surrounding Brexit, with particular concerns over trade deals and subsidy payments. When you add into the mix the issues surrounding changeable weather patterns, increased demand on food production and the push to manage land environmentally, you can see why the industry as a whole needs to come together to instigate change. Farmers have long been used to weathering the storm of fluctuating commodity prices in an industry that is governed by the effects of a world market. Although trade negotiations have started with other countries, the ongoing trade relationship with the EU is at present unknown. 60% of all agricultural exports are exported to the EU across all sectors. If UK exports are to be subject to World Trade Organisation tariffs, this could have a significant impact on the export market. Many farm businesses rely on payments from the Common Agricultural Policy, whether from direct or environment payments. It has become a stable source of income in all farming budgets that can often determine whether the business makes a profit or not. Although the government has promised to honour the £3 billion a year farmers receive under the present CAP until it ends in 2020, there is no guarantee that these subsidies will be replaced under a new UK farming policy. Although 2020 and the formal divide from Europe may seem a long way off, the need to analyse the profitability of individual farming enterprises has never been more critical. If they haven’t already done so, farmers need to in effect become business analysts. They can no longer bury their heads in the sand hoping that they will somehow ‘muddle through’, even though they may have got away with this in the past. Today, more than ever before, each enterprise must be able to stand alone and generate sufficient income to allow for reinvestment in the business as well as making a profit. To achieve
this, benchmarking and budgeting exercises are vital in highlighting which activities are financially viable, those which currently are not but have the potential to be, and those which are simply a drain on limited resources. Identifying why a farm might not be performing to the best of its ability will become critical to its very survival. Looking at farming incomes in the South East specifically, we may have the highest land values but with average farm income of £26,624, rank second lowest (and well below the national average). This is largely because of the typically poor soil quality in comparison to other areas of the country where high value specialist crops can be grown. In the East of England the average farm income is £51,110. For this reason, farmers in the South East must be able to stay ahead of the game to spot and seize opportunities whenever they arise, whether this is through unique marketing of products or by farm diversification. Historically, farmers have been very good at diversifying farming income and, here in the South East of England, there is significant potential in a variety of enterprises thanks to our location, climate and access to markets. It is becoming increasingly apparent to us that farmers are moving away from ventures that require significant capital investment such as building conversions. In our experience, the enterprises that prove to be most successful tend to be those that creatively exploit either a particular skill or personal interest of the landowner. That is exactly what these Batcheller Monkhouse clients have done, with considerable success.
Average farm business income £
North East & Yorkshire/Humber
East of England
South East (and London)
England national average
THE MUSIC FESTIVAL
One of our clients owns a traditional estate consisting of a large house and historic park. In the centre of the estate, surrounded by woodland, is a Listed walled garden which was overgrown and crumbling. The family had long recognised the importance of diversification and explored several ways to generate additional income streams – letting property, running a racing yard and a farming enterprise, with more recent investment in holiday accommodation. However, they had never exploited the untapped potential of the walled garden. July 2015 saw the inaugural Walled Garden Musicfest at Brightling Park. Now a three-day festival that in 2016 attracted an enthusiastic crowd of 1,500 people who enjoyed sets from performers including Marc Almond, Go West, the Tom Robinson Band, Steve Harley and Chris Difford of Squeeze. In only its second year of running the music festival provides a useful source of income to the estate and continues to grow in popularity. The July 2017 festival has attracted names such as Howard Jones, Toploader, Beverley Craven, the Thompson Twins’ Tom Bailey and up-andcoming bands Embrace and Talk in Code, and looks set to grow still further. With its ‘buy local’ policy, the festival also helps other rural businesses who provide services such as catering, security and taxis to festival-goers. An enterprise such as this is confined to a single long weekend and therefore results in minimal disruption to normal mainline estate and farm operations.
We helped one farming client to capitalise on the current glamping craze by first helping to secure planning permission for two shepherd’s huts on their land and then obtaining grant aid through the LEADER scheme for rural projects in England. Part of the Rural Development Programme for England (RDPE), funding is open to local businesses, communities, farmers, foresters and land managers who must apply for it through Local Action Groups (LAGs). Grants range from £2,500 up to £50,000 and all money is 40% match-funded.
THE SHEPHERD’S HUTS
Looking to create an additional income stream to supplement farming income, our client invites guests to “enjoy a unique back to nature experience where camping meets boutique hotel.” The Shepherd’s huts are set apart from others on the market by providing an array of thoughtful extras within the rental price. These include welcome treats on arrival, a choice of breakfasts, BBQ, linen and towels, logs for the wood burner, wellies, and a selection of books, board games and kids’ activity packs.
THE COOKERY SCHOOL
Another farming client recognised the potential of an underused barn to house a cookery school business to supplement farming income. They had a personal interest in this specialist area and identified a gap in the market. With our help, the landowner secured planning consent to extend the barn’s size by 53% (see ‘Taking the pain out of planning’ on page 16) to provide demonstration areas, a formal communal dining area, kitchens and other facilities. In an example of the synergies that can be created between a farm and farm business, the cookery school will use selected farm produce in dishes created by its students. As an added benefit, the venture will provide part-time employment for local people. While it is still early days our client intends to run day courses for private individuals, cookery parties and team-building days for businesses, for which there appears to be an appetite. In summary, analysis of the farming business is vital and unless the projected return on investment is sufficiently robust it may be time to consider alternatives that better suit your farm, available assets and skillset. You may find it helpful to talk to one of experts here at Batcheller Monkhouse who will evaluate the situation dispassionately and give you the benefit of their commercial experience.
Charlotte Pearson-Wood • email@example.com • 01892 509280 Rural Outlook 2017
Natural capital Making good stewardship pay You may be familiar with the term ‘natural capital’, referring to the UK’s stock of natural assets, essentially the environment – our forests, rivers, land and sea. Farmers and landowners have always understood their value. The Government more formally now recognise this. As part of its 2015 manifesto commitment, the Government established a Natural Capital Committee with the intention of applying hard economic numbers to the environment’s value and ensuring resources are directed where they are most needed. To this end, the committee is in the process of developing what we believe to be the first 25-year environmental plan for the UK. Whilst many are sceptical that this is an over-complication of what, for those engaged in land management is obvious, this initiative is gaining momentum and must be taken seriously. Indeed it may well create valuable new opportunities. The Country Landowners’ Association (CLA) has conducted considerable research into the rural economy (see feature on page 24), exploring ways to achieve the ‘perfect natural world’ scenario and, importantly, how this can be funded. While more than half (52%) of landowners currently invest in their natural capital, they tend to be motivated by their sense of stewardship rather than any expectation of gain. Delivering better environmental outcomes could open up untapped potential by creating commercial opportunities for landowning rural businesses. Looking ahead, publicly funded schemes are likely to remain the primary source of funding for investment in natural capital. However, the CLA argues that by government and land-based businesses working together we can avoid the bureaucratic, inflexible schemes of the past. Its vision is that by taking a commercial approach and establishing natural capital as a marketable service, by 2030 private and public investment in natural capital will be seen as a profitable part of being a rural business.
“Increasing biodiversity in the soil has beneficial effects across the whole farm.” Taking arable margins as an example, infield margins can support ecosystems and agricultural production by creating habitats for beneficial pollinators and pest-eating insects and birds. Making an investment case for these changes should form an important part of food, farming and environmental policy post-Brexit. The same hard-nosed approach can be applied to ponds and wetlands. Storing water can reduce flood risk while also creating a valuable water source in times of drought. When designed well, they can also reduce the loss of soil from fields. On average, UK landowners invest some £13bn each year in the rural economy nationwide and the CLA calculates that every £1 spent on targeted natural capital schemes delivers a £25 return in natural capital benefits1.
“A nation that destroys its soil destroys itself.” Time-bomb Farm management and advisory company Sentry gives a practical illustration of how taking a commercial approach to natural capital can maximise its value. The company has a Farm Business Tenancy on a large arable farm at Blackstone, West Sussex where the manager has introduced a Regenerative Agriculture model to bring sustainability and longevity to the farming operation. It is an often-overlooked fact that soil is a farm’s biggest and most important resource, yet 2016 marked the start of what it terms “a horrendous time-bomb”: that most of our arable soils have only 50 harvests remaining. Depletion of organic matter, erosion by water and wind, and loss of soil biodiversity are the key reasons for this – and common farming practices exacerbate the problem. The Sentry acreage is now farmed to tackle these issues headon. Sentry is focusing on cover crops, low disturbance drills, long rotations and drainage to put soil health at the centre of all decisions. Working with Batcheller Monkhouse suitable modifications to the Farm Business Tenancy were secured to support this valuable work. Mike Purnell of Sentry explains, “I am trying to provide a good home for the soil fauna to live in and to work with nature rather than fighting it. Drainage is one issue that I am finding has been overlooked on the heavy Weald clay but I am involved in restoration plans on all my farms. Hand in hand with this is balancing the nutrient composition of the soils.” He aims to achieve this by increasing water infiltration, water holding capacity and extending the work window. Most clay is high in Magnesium, which causes drainage issues, as well as restricting plant access to other nutrients such as Phosphate. Mike Purnell’s reasoning is that, “This methodical approach to problem-solving will result in a soil where the biology will flourish, which will mean inputs can be cut and margins improved.” To keep soil biology healthy a crop must always be growing on it. Sentry grows spring crops to help control grassweeds. Over winter it grows cover crops to stop erosion, reduce leaching of nutrients and keep soil structure with actively growing roots that also store the sun’s energy for the following spring’s crops. Cover crops also produce organic matter and help the dry soil in spring. Mike Purnell reports, “As wet as spring 2016 was, I had no issue drilling and harvest results were pleasing. Increasing biodiversity in the soil has beneficial effects across the whole farm. The only thing that stops most people doing it is a negative mindset.” While soil health may have been neglected in modern farming practices, its importance has long been recognised. As far back as February 1937, pressing State Governors for uniform soil conservation laws2, US President Franklin Roosevelt remarked, “A nation that destroys its soil destroys itself.” 2
1 Rural Business 2030 report – CLA - 6.12.16 http://www.presidency.ucsb.edu/ws/?pid=15373
Improving farming returns Most agricultural research today takes place away from farms, in universities and research centres but a new initiative, Innovative Farmers, gives farmers the opportunity to conduct research on their own farms. The not-for-profit network, backed by LEAF, the Soil Association, Innovation for Agriculture and The Prince’s Charities, supports working farmers carrying out practical on-farm research. Farmers collaborate to test and develop new tools and techniques in field laboratories with the aim of improving farming returns while at the same time enhancing the flora, fauna and countryside. As landowners will be only too well aware, there are of course many barriers to investment: planning authorities, funding issues and restrictive regulations. Post-Brexit, we are living in uncertain times with no clear idea how long funding from the Rural Payments Agency will continue, whether in the form of the Basic Payments Scheme or agri-environment stewardship. Batcheller Monkhouse can help you surmount these challenges. Our dedicated planning team can guide you through obstacles while, as an authorised AMC agent, we can help you secure funding and advise on regulations. It remains to be seen whether delivering environmental benefits will result in future Government funding, private sector investment or a combination of the two. However, the Government is committed to investing in the country’s natural capital. And, in our experience, it is usually the case that working with nature rather than against it will ultimately deliver the best returns and be the most sustainable course of action.
Chris Tipping • firstname.lastname@example.org • 01444 412402 Rural Outlook 2017
Taking the pain out of
oxbourne Epping Forest
Basildon Castle Point
The housing shortage in the UK looks likely to continue its dominance of headlines this year. The planning LONDON system is often blamed for delaying housebuilding which has contributed to spiralling house prices and a shortage of affordable homes. Southend-on-Sea
Maidstone Swale Maldon Broxbourne
Chiltern Tonbridge & Malling Three Rivers
Castle Point Southend-on-Sea South Bucks Castle Point
LONDON Tunbridge Wells Slough
Windsor & Maidenhead
Wokingham Reading -
Tunbridge Runnymede Wells
Swale Epsom & Ewell
Tonbridge & Malling
Rushmoor Reigate & Banstead
Tunbridge Wells -
Horsham Battle Mid Sussex
Hastings Rother Wealden
Havant Adur Arun
Brighton & Hove
0-4 year housing land supply 4-4.9 year housing land supply 5+ year housing land supply
0-4 year housing land supply 4-4.9 year housing land supply 5+ year housing land supply
Map demonstrating 5 year housing land supply for LPAs across Kent, Sussex and Surrey. NB. This data changes regularly and can be unreliable due to varying methods of calculations across authorities. It is based on the most up to date information that we could obtain from the LPAs in 2017.
The government has previously suggested it aimed to see one million homes built by the end of the current parliament. Achieving that target would entail immediately building at least 200,000 new homes a year â€“ a level of housebuilding not seen in England since 1989 (Currently, the UK builds around 170,000 new homes annually). That pledge has of course been cut short by the recent announcement of a general election having been called, but it is unlikely that the overriding issue of housing need across the country is going to have any less force moving forward into a new administration. The blame for the shortage is often laid at the plannersâ€™ door but, whatever the reasons for the shortage, the consequences have seen rising prices in London, the South East and some other parts of the country. We are now at a point where over 40% of Local Planning Authorities do not have a plan that meets projected growth in households in their area. For example, the Arun District in West Sussex has a five-year housing land supply shortfall amounting to over 4,000 homes. Or, looking at it another way, just 2.1 years supply rather than the required 5-year minimum. This year we have prepared a visual to demonstrate all the opportunities available to make representations to the Local Plan process.
“As a planning team, we regularly make representations on behalf of our clients.”
with an otherwise acceptable scheme in a location they do not want, have reduced weight given to their policy to fall back on as a defence. Those policies guiding housing supply are held to be out of date if there is no demonstrable 5-year supply, meaning little weight can be afforded to them in decision making. Many Local Authorities across the South East are struggling with housing supply and racing to get a Local Plan in place to ensure they are not faced with such a scenario. This can open a window for landowners or developers under the right circumstances and with the right advice to make a speculative application ahead of allocation. This represents the shorter-term route to development. It is not necessarily the most straight forward process and often it involves navigating the appeal process, but if successful it can offer an opportunity to bypass the lengthy Local Plan allocation process.
Landowners can look at strategic promotion through the Local Plan initially. The Local Plan is produced by the Local Planning Authority (LPA) and contains all the policies the authority uses to guide their development decisions. It states where land will be developed, what for and in what quantity. Land is allocated in the Local Plan expressly for certain uses – not only housing, although this is the key use for which most look to secure allocations. A Call for Sites is issued at the initial evidence gathering stage as LPAs seek information about potential development sites to assess as part of their Strategic Housing and Economic Land Availability Assessment (SHELAA). As a planning team, we regularly make these representations on behalf of our clients. The SHELAA eventually feeds into the Local Plan when the LPA comes to identifying specific sites for housing and economic uses. As the Local Plan goes through its many stages of drafting and consultation, there are opportunities for us as planning agents to make further representations to promote our clients’ land. Once a parcel of land is included in the Local Plan as an allocated site for local housing, it doesn’t guarantee planning permission but means the principle of development has been accepted and permission will hinge more on circumstantial or scheme-specific factors. Local plan allocation represents the longer term strategic promotion of land for development. It is a process that developers and planning consultants are heavily involved in. LPAs are required to demonstrate a five-year supply of housing to meet their identified needs. Those that cannot are in a more vulnerable position where housing is concerned and, if faced
The Government white paper, ‘Fixing our broken housing market’, released on 7 February 2017 sets out an emerging range of aspirations to increase housebuilding, and to support policy around development. One of the measures set out in the white paper is to make a standardised calculation for measuring LPAs’ ObjectivelyAssessed Need (OAN) for consistency. This would make it easier to compare authorities and evaluate their performance. Another proposed measure is to add a 20% buffer to the OAN in LPAs that demonstrate significant persistent under-delivery of housing. This will force them to identify further sites, speeding up delivery. Now is the time to assess the deliverability of your land.
ISSUES AND OPTIONS PREFERRED OPTIONS
SUBMISSION VERSION SUBMIT PLAN TO PLANNING INSPECTORATE EIP (EXAMINATION IN PUBLIC) INSPECTORS MODIFICATIONS
SHLAA/SHELAA - CALL FOR SITES
LOCAL PLAN ADOPTED
Continued on next page... Rural Outlook 2017
Taking the pain out of planning. Continued... In our experience, the burning questions most landowners have are: • How can I release value?
• Is there any potential to develop my land or buildings?
• How can I make my land and property work harder for me?
• Where do I start?
Batcheller Monkhouse planning and development team provide services not only in large scale strategic promotion but also smaller developments including rural diversification projects. The examples featured illustrate some recent diversification projects and smaller rural proposals, which demonstrate the wide range of opportunities available at all levels for landowners to maximise the value of their land and property through creative thinking and good planning advice.
sensitive handling. Situated in the Green Belt and near a Listed farm house, parts of the 17th century barn had been relocated from Sussex to a new site in Surrey. We had to carefully consider how the scheme would impact upon the setting of the neighbouring Listed buildings, in particular the scale and siting of a significant extension. While planning policy restrictions normally limit extensions to no more than 50% of the original floor space, in this case, we were able to negotiate a 53% increase to the building on the basis of the requirements of the cookery school to provide demonstration areas, a formal communal dining area and kitchens.
Cooking up opportunities for farm diversification Surrey (Tandridge District Council)
An application to convert and extend a traditional barn on a working farm to create a cookery school required especially
EGG PRODUCTION ENTERPRISE
Hatching a plan to get egg venture off the ground (Wealden District Council)
We were approached to help secure permission for a new agricultural worker’s dwelling for an egg production business working in combination with a neighbouring fruit farm. As one of the few exceptions to the presumption against new residential development in rural areas, such dwellings require significant justification. Firstly, there must be a functional requirement for a worker to be housed on the site for the agricultural enterprise. This is most commonly demanded by livestock farming with the need to be on site around-the-clock to oversee animals and troubleshoot at key times like lambing and calving. In this case, our client operated a high-end organic egg production farm, which required his constant presence.
One of the ways we were able to maximise the extension was by lowering the roof and ensuring the porch area was not enclosed so it could be excluded from the volume calculation. This venture has created employment for local people and opened up possibilities for further farm diversification. We are currently progressing other schemes including holiday accommodation to run in conjunction with the cookery school.
Secondly, there is usually a requirement to demonstrate that the enterprise underpinning the need for a worker’s dwelling is viable and likely to continue to warrant the grant of permanent planning permission. The functional and financial test has long been the dual requirement in justifying rural worker’s dwellings. The financial test is no longer expressly required by the National Planning Policy Framework and many cases have attempted to argue that it should not be a mandatory element of any planning case for these types of dwellings. However, many LPA’s continue to require demonstration of a financial test for the associated rural enterprise. The council will often ask that a legal agreement is entered into to tie the land being farmed to the dwelling. In addition, there will almost always be a condition imposed that restricts occupancy of the dwelling to someone working in agriculture and their dependents. A series of temporary permissions had been granted for a mobile home but our client was prevented from gaining permanent permission by his failure to pass the financial test due to a to a temporary dip in accounts. Batcheller Monkhouse made the agricultural case for our client’s need to be on site around-the-clock and the financial test of viability. A final obstacle was put in the way with the legal agreement given the split landownership. Ultimately, permission was granted for a permanent dwelling, allowing our client and his young family to move out of their mobile home and enjoy a better standard of living.
RESIDENTIAL PERMITTED DEVELOPMENT
Identifying opportunities to secure an uplift in the value of land and property prior to sale Cranleigh (Waverley Borough Council)
The permitted development regime allows for a certain amount of development to take place without the need for express planning permission. There is still a requirement to secure authorisation from the Council but this is a more streamlined process. Our client came to our estate agency office in Pulborough to discuss selling his dairy farm as he was approaching retirement and wanted to scale down operations.
He had no idea that his land and buildings might have development potential, and that he could obtain a far greater return if he was able to secure planning consent before putting the estate on the market. We assessed the site, which comprised a number of agricultural buildings, two of which we considered would be suitable candidates for conversion under Class Q of Part 3 of the Town and Country Planning (General Permitted Development) Order 2015 (as amended) which allows for the change of use of an agricultural building to a residential dwelling. These were an old ammunitions store erected in WW2 and kept for use on the farm, and a functional, purpose-built building used as a milking parlour and dairy. Both were granted consent as independent dwellings. Our client had chosen to create living space within another of his barns. Technically, he needed planning permission to live in the barn but had been living there for long enough that we could make a case that his use of the barn was now lawful. We provided sufficient evidence to demonstrate this and secured a Certificate of Lawful Existing Use, regularising his use of the barn. This is a good example of how Batcheller Monkhouse can identify opportunities to secure an uplift in the value of land and property prior to sale.
Giving legs to a scheme with commercial and community benefits Kent (Maidstone Borough Council)
Our client runs commercial stables, a riding school and some holiday lets on a farm at the top of the North Downs and in an Area of Outstanding Natural Beauty. Existing planning conditions restricted the use of the sand school and stables to private use and those staying in the holiday lets but, over time, the riding school has become established on a more commercial basis and our client wanted to regularise the situation by applying to remove the original conditions. We would normally have sought to obtain a Certificate of Lawful Use given the length of operation but could not fully demonstrate the required ten years’ continuous use. Furthermore, our client, who provides dedicated riding lessons for the disabled among many other classes, was frequently forced to cancel classes due to windy and wet weather so sought permission for a large indoor arena with a viewing
area and café. While it is normally relatively straightforward to obtain planning permission for buildings for equestrian use, the landscape impact on the AONB was a key concern for the LPA, as was the potential increase in traffic movements due to the site’s location on a narrow lane that could only accommodate one-way traffic. The arena was carefully sited to minimise landscape issues and, to allay concerns about traffic generation, conditions were offered to restrict the use of the arena and café to members only, with no external competitions allowed. We made the case that keeping horses and riding are activities synonymous with the countryside, and showed the riding school was well-loved and used by its neighbours and members. The venture will create additional part-time employment opportunities for the local community in addition to a number of existing jobs generated by the business. Ultimately, there were no objections to the scheme with 40 letters of support, and Permission was granted. This is a good example of a scheme that secured both commercial and community benefits.
email@example.com 01892 509287
firstname.lastname@example.org 01892 509287
Rural Outlook 2017
To sell or not to sell? There is a middle path In a farmer’s life, there are occasionally times when it is tempting to sell some or all of your land to release much-needed capital. Perhaps you need to free up funds to invest in essential machinery or a potentially lucrative business opportunity. Raising equity through a mortgage may suit but is not always appropriate.You may, for example, want to clear debt to wind down for retirement.
The problem is that with rising land prices, once the land has gone it has probably gone forever, so you do not want to sell it too cheaply. I have never met a landowner who bemoaned the fact that the previous generation bought some land, but countless who regretted their parents having sold land. You may be deterred from selling a block of land without planning consent by the understandable fear of being short-changed should a developer gain permission to build a housing estate on it, causing it to rocket in value a relatively short time later. However, there is a way of effectively ‘hedging your bets’ to guard against this opportunity cost by structuring the deal in such a way that you share in the windfall should your purchaser secure planning permission in the future. This can be done by either implementing a restrictive covenant or, more commonly, through imposing Overage provisions – in other words, the recovery of a set percentage of any uplift in value over a specific time frame into the future. Both routes can achieve the same end result but our general guidance is that, if future
CASE STUDY - THE SOUTH COAST
development is an acceptable outcome, then this is best served by an Overage Agreement. However, the exact percentage and time period needs to be very carefully considered as imposing too high a percentage may stifle development. A Restrictive Covenant is more suitable when looking to prohibit development, although whether the circumstances are such that a Restrictive Covenant would be enforceable is another question altogether. In many cases, on outlying land for example, such a covenant may not protect you. Overage Agreements appeal to many of our clients who have land they have no intention of building on now but that could potentially be developed in the future. While not as valuable as land for which planning consent has already been granted, the very possibility of planning permission being obtained can also give rise to a premium. For example, we recently handled the sale of land at Catsfield, a village in East Sussex. The ten-acre parcel was bordered on three sides by residential development and roads. The Local Plan leaned heavily towards other sites as being more likely to be considered for development but, given its position on the edge of the village, we believed it had good long-term potential. Our client, a family trust, did not want the burden of managing the land or tenants so decided to sell up, subject to an Overage Agreement (sometimes referred to as an ‘anti-embarrassment clause’). This means our seller will still have a vested interest in the land and if there is any residential development during the agreed period, in this case 25 years, they will receive a defined share of the increased value.
“Raising equity through a mortgage may suit but is not always appropriate”
Hindsight is a wonderful thing Ten years ago, we were asked by an elderly client to advise on the disposal of approximately 100 acres on the south coast. Funds were needed for their retirement. Despite extensive land promotion at that time there was no prospect of development. Nevertheless, we strongly recommended the imposition of an Overage provision. The sale went ahead including a 30% Overage payment. Like so many other Districts, the Local Planning Authority got into severe difficulties in delivering sufficient housing. The result, unlocked by the new owners, was firstly planning permission for 300 dwellings and, subsequently, a sale. The Overage was honoured and a substantial “claw back” secured. A successful conclusion for both parties.
Clarity is critical As with any legal agreement, particularly one that is designed to remain in force for many years, it is vital to ensure the wording of provisions is clear and unambiguous. The main points to clarify at the outset are:
Length of term
This is traditionally 25 years but can be longer or shorter depending on the wishes of the parties. If we know that the local authority is about to undertake a Green Belt review or implement a Local Plan that will cover a longer period, it may be sensible to structure the term to match the same period. Trustees may also wish to secure greater protection.
Trigger for the Overage clause
Typically the trigger would be commencement of development, implementation of a planning permission or sale with the benefit of planning. Beware conditions that restrict payment until completion of the development. Whichever route is chosen, the wording of the agreement should make it clear what will trigger the payment. Demonstrating the importance of this, we know of a case (Renewal Leeds v Lowry Properties Limited) where a landowner sold land for 84 houses with payment due when the last house was built. The developer halted construction after building 80 houses – four short of the trigger for the overage clause – and refused to complete the remaining units. The case went to court and, fortunately, the judge ruled in favour of the previous landowner.
Timing of the Overage payment
Payment can either be made in a one-off payment or staggered payments with each phase of building work.
Payments are typically calculated as a percentage of the uplift in value between existing land value and the value of land with planning permission in place. In our experience, this percentage can vary from 20% to 50% depending on the seller’s (or their agent’s) negotiation skills. While a high percentage may initially seem appealing, if it is too high it could deter developers from promoting the site. The key is to strike the balance between protecting the seller’s long-term interests and making the clause so onerous that it discourages the buyer from investing in an expensive planning process. Another factor to bear in mind is that if the amount is too burdensome it may negatively affect the initial sale price.
The Overage Agreement must set out whether the purchaser’s costs in securing a planning permission are to be deductible. It is, in our opinion, generally best to avoid such an imposition.
Definition of Overage
What development will trigger an Overage Payment? This is again open to negotiation and might be as simple as a change of use. It might otherwise be quite specific – in one sale we negotiated, Overage only becomes payable where planning is secured for more than two residential dwellings.
Oliver Robinson • email@example.com • 01892 509286 Rural Outlook 2017
Environmental Impact Assessment changes –
are you affected? If, as a landowner, you are looking to use your land for an intensive livestock operation, to host a renewable energy project such as a solar farm or undertake a large-scale development project, you will probably need to involve yourself in Environmental Impact Assessment (or EIA).
New EIA Regulations are due to come into force by 16th May 2017 and include a number of changes likely to affect major development proposals which are not yet the subject of a submitted planning application. The most significant changes are:
Changes to the screening and scoping phases of the EIA where the need for and scope of the EIA is determined.
The list of effects to be assessed is to be extended to include population and human health; biodiversity; land, soil, water, air and climate; material assets; and cultural heritage.
Batcheller Monkhouse Skills Screening and scoping requests Full EIA coordination service drawing on a database of tried and tested environmental specialists Preparation of Environmental Statements and Non-Technical Summaries Socio-Economic Assessments Health Impact Assessments Peer review of Environmental Statements
“...we can ensure that planning authorities carry out their duties correctly...” Batcheller Monkhouse’s EIA team is unusual in combining planning expertise with specialist environmental knowledge. This means we take a pragmatic approach to balancing the two priorities of commercial viability and environmental protection. In addition, we check that planning authorities carry out their duties correctly in relation to EIA procedures to ensure a robust permission at the end of the process.
Planning authorities will be required to ensure that mitigation measures are actually implemented and monitoring put in place. This will effectively extend the life of the EIA beyond decision-making and give the requirements teeth.
A planning authority’s determination of an EIA planning application needs to be based on information that is up-to-date at the time the decision is made. This would seem to be a reasonable expectation but could prove problematic and potentially costly, given many surveys have a limited shelf-life and the determination period for EIA developments can often be protracted.
Environmental Statements must be prepared by ‘a person who is competent to do so’. The draft regulations deliberately do not define who this would be beyond proposing that the EIA report must contain “the name of the person who prepared the EIA report, details of that person’s competence do so (for example the person’s qualifications or experience) and a statement signed by the developer that he/she thinks the person is competent to do so.”
The guidelines explain, “We have not sought to define ‘competent’ any further, both because it is considered to be a sufficiently clear term, but also because it is likely to depend on the individual circumstance of each case.” However, membership of a professional body such as the Institute of Environmental Management and Assessment (IEMA) is one incontrovertible way to prove the competence of the individual preparing the EIA. Not only is Batcheller Monkhouse a corporate member of IEMA but our EIA team comprises practitioner and affiliate members. This is important to establish at the start of a project as planning is a lengthy process and you do not want to discover a year down the line that your ‘expert’ is not considered to have the necessary experience or professional qualifications.
CASE STUDY 1 - SOMERSET
Quarry redevelopment in Somerset Our client purchased a 45-hectare, fully-worked quarry and secured planning permission for 150 holiday homes, a spa, restaurant and activity lake. This was no mean feat. The site was described as “one of Europe’s most environmentallysensitive sites” featuring high quality habitats including a cave system and Sites of Special Scientific Interest. Wanting to ensure the scheme was both commercially-viable and environmentally sensitive given its historic location, a variety of expert consultants were commissioned to consider the full range of impacts required by the EIA. The creation of around 100 jobs in a rural area was an important consideration in the local authority’s deliberations. The site will shortly be under construction and is due to open in 2019.
CASE STUDY 2 - ESSEX Housing development in Essex Our client wanted to build a medium scale housing development on a plot of farmland in an area where recreational pressure on a nearby wildlife site was a concern. We were commissioned to coordinate an EIA and prepare an Environmental Statement to identify the environmental effects and consider suitable mitigation to enable the development to go ahead.
Clare Bartlett • firstname.lastname@example.org • 01798 877555 Rural Outlook 2017
Rural Business 2030, a report based on extensive CLA member research into their investment potential in the economy, was published at the inaugural CLA Rural Business Conference in December last year. It showed that landowning businesses across England and Wales are currently investing more than £13 billion per annum, with the potential for increased investment in the future. We are delighted to refer to this valuable work and the summary of the key points as now discussed by CLA President Ross Murry. It is a huge testament to the rural economy, which comprises of 650,000 businesses, and employs 3.4 million people in England and Wales, that such a massive investment is being made. In terms of gross value, it adds £229 billion to the national economy of England alone. Those in the South East of England are among the largest investors, accounting for £2.2 billion of the total, and impressively, this has seen a 68% increase in investment by rural landowning businesses since 2012.
© CLA (Country Land & Business Association) 2016.
This investment is crucial to the UK as a whole, but the CLA feels that for a long time, the rural pound has been ignored. Speaking at the CLA’s Rural Business Conference last December, CLA President Ross Murray said: “For far too long Government policy has allowed a focus on business support and infrastructure spending in our towns and cities to undermine the focus needed on promoting growth and investment in our countryside. Businesses based on rural land are vibrant, full of entrepreneurial energy and looking to the future. There are great opportunities for these small family businesses to boost the rural economy in the years ahead, and they are up for the challenge, but they face an uphill struggle if Government doesn’t start doing more to champion this type of rural investment.” Though farming remains the greatest generator of income for landowning rural businesses (52%), the report showed a positive trend for diversification. In the South East, commercial and residential properties are more popular investments than in any other region - 16% of rural businesses in this area said that the highest proportion of their income came from commercial property, double the national average. What was particularly exciting about the CLA’s research was that the findings displayed a passion for innovation and diversification in landowning businesses – and a healthy level of resilience. The report revealed that planning issues are the biggest barrier to future investment, but that in spite of these barriers, 56% of landowning businesses in the South East surveyed said they are considering making future investments in residential properties, and 52% in commercial properties. To encourage economic growth – economic models showed that rural investment could reach £16 billion by 2020, £5.5 billion being in the South - it is vital that government policy gives long term certainty for those investing in rural businesses. The CLA’s research shows that many landowning businesses in the South East are custodians of long-established family enterprises, with nearly nine tenths of businesses having been in family ownership for more than 20 years, and it is important that these businesses are protected for future generations.
“...it is important that businesses are protected for future generations...” WHAT HAS BEEN INVESTED IN
“Businesses based on rural land are vibrant, full of entrepreneurial energy and looking to the future.” The importance of diversification Since the release of Rural Business 2030, the Government has announced its post-Brexit Industrial Strategy, with oblique references to the rural economy – possibly not something to inspire those running, or wishing to run, businesses in the countryside. On a more positive note, the Government has also released its muchanticipated Housing White Paper and Rural Planning Review. Both of these value the rural pound. The Government has acknowledged the importance of getting rural landowners on board to provide affordable housing in communities, and this should be welcomed by those who wish to let property on their land – or build property to rent. The Rural Planning Review is also a positive step forward for those looking to other avenues to diversify their income – for example, permission for building poly-tunnels will be more readily granted by local authorities. Legislation such as this is vital to future-proof the agricultural sector, and related rural industries. Aside from farming, the CLA’s research indicated that, on average, landowning rural businesses undertake four different business activities. These were hugely diverse, from equestrian businesses, forestry, holiday lets and domestic housing, to music festivals, catering, and renewable energy generation.
BARRIERS TO INVESTMENT
Continued on next page... Rural Outlook 2017
CLA Diversity. Continued... Investing in change One area that has seen dramatic change in the last decade is the regulation surrounding renewable energy. Significant progress has been made, with nearly one tenth of total energy being delivered by renewable sources – and nearly 25% of all electricity. This is a good start, but it is now time to look to the future, and further investment is necessary if the UK is to reach its 2020 commitments under the Renewable Energy Incentive. Even after this date, the UK Government committed in its most recent carbon budget to reducing UK carbon emissions from their 1990 level by 57% before 2032. Currently, it is not on track to do so. The importance of landowners in transforming the energy market is one that CLA President Ross Murray feels strongly about. Speaking at the CLA Rural Business Conference, he announced that “It falls to us, the landowning rural business sector, to establish a longterm plan for investment in energy generation.” This sector has clear appeal for rural businesses, which are uniquely positioned in having the land to invest. Nearly half of respondents to the CLA’s Rural Business 2030 survey had invested in some form of energy diversification, and 33% of respondents expected to invest in renewable energy, for both financial reasons and through a general sense of stewardship for the environment.
So what are the ways in which rural businesses can contribute to energy decarbonisation?
They can increase their self sufficiency through investment in demand reduction measures, and self generation of low carbon heat and power
They can invest in renewable technology to provide heat and power to others, particularly important in rural areas which may be off-grid
They can invest in the production of fuels, feedstock, and raw materials from agriculture and forestry
“The importance of landowners in transforming the energy market is one that CLA President Ross Murray feels strongly about.”
Support must be put in place to deal with increased demand for heating and electricity. Rural landowners can help with this in many ways – for example, through district heating. Access to the gas grid in rural locations can be limited, leaving properties to rely on expensive, carbon-heavy fuel sources such as oil or liquefied gas. District heating systems, where heat is generated centrally and distributed via a network, is both environmentally friendly (in that it decarbonises heating in existing and new developments), and can be more cost effective than multiple smaller systems in individual properties. It is also possible to make use of the ‘Smart Grid’: a new way of organising the UK’s energy supply. It involves making better use of data to provide innovative supply models, and adopting technology such as battery storage. Rural businesses are ideally placed to embrace the smart grid and harness business opportunities, with many having already invested in renewables. Even for those who have not consciously invested in renewable energy, agriculture and forestry are already sources of bio-energy. Biomass, for example, offers a natural and renewable source of heat right on peoples’ doorsteps. Establishing a bio-energy policy contributes to energy targets, and supports agricultural productivity whilst addressing long-term environmental objectives, which is vital. In particular, there is significant opportunity for anaerobic digestion within UK agriculture. The result of these investments is a more efficient energy supply, which could save consumers £8 billion by 2030. This actively benefits the economy and environment as a whole whilst putting rural businesses first.
Download the CLA’s Rural Business 2030 report at www.cla.org.uk/ruralbusiness2030
Ross Murray • email@example.com • 020 7235 0511
Portfolio management – making the most
If you have more than one telecom mast on your land or property, you don’t just have telecom masts – you have a portfolio. And that is great news when it comes to striking a good deal with network operators as it gives you greater bargaining power. But you need to ensure your portfolio is wellmanaged to maximise your returns and protect your core business – whether that’s farming, running a school or hospital, supplying a utility or managing a theme park. Masts can be a very useful source of additional income – as long as they do not disrupt your core business. Police forces, for example, whose primary focus is preserving a secure environment, cannot allow unvetted individuals to traipse through their buildings at will, so must have an agreement with the operator that contains provisions to restrict access. Water companies will want to ensure water remains potable and may wish to include the right to insist on checks to prevent anyone with a contagious disease infecting the water supply. Similarly, maintaining hygiene standards will be the overriding priority for hospital trusts and food processors. Meanwhile, schools and colleges will primarily be concerned with child protection issues arising from uncontrolled access by individuals outside the community.
CASE STUDY EFFECTS ON RENTS OF NETWORK CONSOLIDATION - TYPICAL PORTFOLIO £300k
01 Oct 2003
01 Oct 2007
01 Oct 2013
Rent Roll (£ pa) Rent Roll (assume 34 Ags) (£ pa) © Batcheller Monkhouse Research
Continued on next page... Rural Outlook 2017
Portfolio management - making the most of masts. Continued... It is vital that the legal agreements drawn up contain measures to ensure that the property or land owner’s core business can continue uninterrupted. Batcheller Monkhouse has considerable expertise drafting agreements on behalf of landowners to protect their interests. While each agreement is bespoke, typically they will contain provisions to protect the client’s core business, safeguard and maintain the value of the income stream, shield clients from the impact of further network consolidation and protect them from the impact of the new Code.
Looming revenue threat Ah, the Code. The legislation applicable to telecommunication apparatus dates back to the Telecommunications Act 1984, which granted mobile phone operators statutory protection or ‘Code Powers’. The Code applies to a person providing an electronic communications network (there about 119 of these operators) and would include any mobile phone operator, Airwave or Arqiva. The Code could potentially be bad news for landlords with masts on their property. In essence, the Code is designed to protect the public and enable them to have access to a mobile phone network. That duty to the public outweighs any relationship that those operators might have with the owner of the site. These Code Powers are currently being reviewed by Parliament and are set to be enacted during the middle part of 2017. It is envisaged that any new law will not apply to third party structures where the landlord owns the infrastructure (for instance, the radio tower itself). However, the new code will apply to all greenfield sites and any telecommunication apparatus located on rooftops. Fortunately, the majority of the provisions of the new Code will not be retrospective. Where the new Code does apply, it is proposed that operators are given far greater rights to upgrade and share their apparatus and to assign their agreements. In each case, there will be no ability for the landlord to charge a rent or make such activities dependent on the payment of a commercial consideration. The ability to remove an operator with code protection from a site is also envisaged to take longer under the new Code provisions by the introduction of a minimum 18-month notice period. Another, perhaps the most dramatic and unexpected change, is the way rents are to be calculated. Currently, mobile phone operators can be charged a market rent to install their apparatus on land or
a building. However, the operators are lobbying hard for this to be changed to a rent assuming a “no scheme world” – in other words, a rent calculated under Compulsory Purchase principles where only the existing use of the site can be valued. In theory, at least, this could have a dramatic impact, reducing most rents. We are told that the new law will not be retrospective, so there is a degree of urgency in getting terms incorporated into a new agreement as quickly as possible and before the new legislation comes into force in spring/summer 2017. Other specific clauses that Batcheller Monkhouse have managed to agree relate primarily to the agreement of terms that restrict the operator seeking to terminate their agreements under the current Code and then immediately applying for a new agreement under the proposed new Code under more beneficial (to the operator) terms. One of the principal measures taken relates to the land or property owner requiring that for the operator to serve a valid Notice to Quit, they must fully vacate the site and reinstate it to the owner’s reasonable standard before the Notice to Quit expiry date. This should help ensure that the operator only serves a Notice to Quit for valid operational reasons, rather than to reduce the rent payable or secure more favourable terms.
Current Rent (per annum)
Rent Review Mechanism
1 January 07
RPI/ Upwards only
31 December 10
31 May 14
RPI/ Upwards only
24 June 25
Say 1 March 17
RPI/ Upwards only
1 March 32
O2 and Vodafone only
“In these uncertain times, many property and land owners are turning to Batcheller Monkhouse for expert portfolio management.”
Repercussions of network consolidation You may be aware that over recent years, mobile phone operators have been sharing their network infrastructure across the UK to deliver cost efficiencies. Existing sites have been redeveloped and new sites built that enable the sites’ use not only by the original tenant but also by their new network partners. The operator then decommissioned any sites that might provide very similar or duplicate radio coverage. The network operators have formed the following joint venture companies: • MBNL (Mobile Broadband Network Ltd) for EE (formerly T-Mobile and Orange, whose assets are now owned by EE) and H3g (branded ‘Three’)
In these uncertain times, many property and land owners are turning to Batcheller Monkhouse for expert portfolio management. They know we:
Have a thorough understanding of the marketplace - the procedures, their concerns as landlords and what operators expect
• CTIL (Cornerstone Telecommunications Infrastructure Ltd) for Telefónica (branded ‘O2’) and Vodafone. MBNL and CTIL manage the respective combined portfolios of sites and oversee the sharing of sites and their development. The acquisition of Airwave Solutions, the largest private operator of a public safety network in the world, by Motorola Solutions was completed on 19 February 2016. Prior to this, in December 2015, the Home Office had announced that EE and Motorola Solutions would together provide the emergency services with a more affordable and capable Emergency Services Network (ESN). Offering more flexibility than the old system, the new service is optimistically hoping to replace the existing system from mid-2017 as the current contracts awarded to Airwave expire. It is too early to forecast what effect this will all have on any telecom agreements with Airwave, but it is likely that the majority of Airwave sites will be decommissioned soon after EE have proved that the new ESN is ready. The last few years have been characterised by operators approaching their landlords to reduce the levels of rent; to increase their equipment rights; to change the rent review mechanism to Market Value (upwards and downwards) only; and, to have the right to share the site with its network partner without payment. These demands were made alongside a threat that the operator would terminate their agreement if they were not met. With the benefit of hindsight, most of these threats were hollow and, in our opinion, put an unwarranted strain on landlord/tenant relationships at a time when much-needed investment in the networks was required to keep up with the public’s insatiable appetite for capacity and coverage. Encouragingly, more recently, some operators appear to be seeking to build better relationships with their landlords as they turn their attention to equipment upgrades before the, as yet unknown, impact of the new Code takes effect.
Enjoy a track record of negotiating robust agreements based on knowledge of the market, the operators involved and rental levels
Hold the largest rent database of any landlord’s agent, giving us the inside track on rental trends
Will free them to focus on their core business, secure in the knowledge their portfolio is in the best hands
Tom Bodley Scott • firstname.lastname@example.org • 01892 509280 Rural Outlook 2017
The key to
stress-free Lettings Despite major changes in the Lettings Industry and increased pressure on landlords and agents alike in the form of growing legislation, our Lettings departments continue to thrive. With offices in Haywards Heath, Pulborough, Tunbridge Wells and Battle, we keep our landlords abreast of all the recent changes and ensure they and their properties are fully compliant, ensuring continuous occupancy and happy tenants.
With tighter penalties on agents and landlords for failing to conduct satisfactory Right to Rent checks, changes to mandatory electrical obligations and ensuring only properties with satisfactory EPC ratings are let, it has been an extremely busy time. All our lettings managers are ARLA-qualified so we are at the forefront of changes in the industry and can advise our landlords accordingly. As members of ARLA, we are also fully compliant with the most recent change â€“ the requirement for all agents to have a Client Money Protection Scheme in place.
In 2018, new rules will come into force ensuring that all let residential property meets higher Energy Performance standards. This may seem daunting to many, but having looked very carefully at the rules and regulations, we are able to advise on which properties will need to be improved and which improvements are most economically viable. Indeed, there is good evidence to show that in many instances improvements such as installing an energy-efficient boiler can not only meet the required overall standard but also offer a good return on investment, through increasing the rental value. Not infrequently far cheaper modifications achieve the desired result, such as modern room thermostats or even replacing light bulbs. Batcheller Monkhouseâ€™s experience spans a wide range of properties from town houses and apartments to country cottages, farmhouse and manors. We have particular Twelve Oaks expertise in managing properties on rural farms and estates where the landlordâ€™s priority is not necessarily about securing the maximum rent. We understand the specific requirements that managing these types of properties demands. For example, with a shoot or livestock enterprise a tenant with a dog may not be appropriate, nor someone unhappy with country sports. We are also well used to the specific legal, rental and management requirements of older regulated tenancies, agricultural property and long leasehold property; specialist areas that are frequently misunderstood by some general agents. Our experienced lettings team has a wealth of knowledge of both the industry and local area. We offer a fully personalised service and ensure you deal with the same person in relation to all aspects of the lettings process. This also benefits your Beech Estate tenants as they can be sure they are dealing with someone knowledgeable about legal requirements and the history of the property, which typically leads to smoother running, longer term tenancies. We can also call upon the assistance of our many colleagues, from land agents and planners to valuers and estate agents. Ours is a truly comprehensive service.
A tailored service We tailor our services to your specific requirements. As a well-established team we have good contacts with reliable local contractors which ensures the highest level of service. However, if you have specific contractors you are familiar with, we are more than happy to deal with them on your behalf. For all these reasons, when instructing Batcheller Monkhouse to let your property, you can be confident your investment is in safe hands.
Clare Sheffield â€˘ email@example.com â€˘ 01424 236145 Rural Outlook 2017