Rural Outlook SUMMER 2018
Deal or no deal Residential Development - donâ€™t lose out Speeding up the
The first stages in
Farming The New Telecoms Code - a help or a hindrance?
Valuation & Sales
Rights of Way
Fm Farm Management
Telecoms Residential Lettings
Grants & Subsidies
Estate Management Professional
Landlord & Tenant
Preparation for Sale
Agriculture Estate Agency
Father’s message still rings true
While entry into the Common Market is being discussed at a high level, farmers throughout the country seem to have developed an international awareness rarely noticeable before. From the anxiety being expressed, few will belittle the competition which may be experienced. “Although the full effects of this may not be apparent for several years, and there is always the golden hope of fresh markets, many farmers are wisely realising that there is little time to be lost in becoming more efficient producers.” No, I haven’t lost my marbles. This is a quote from an article written by my father in March 1962 in Farm and Country magazine. Over 50 years later it would seem that very little has changed. Here we are, concerned at what the future holds for the economy in a post-Brexit world and what trade deals might be available both with the European Union and across the wider world. In hindsight we now know that British agriculture was in fact just entering a period of massive growth and development. To what extent this was down to entry to the Common Market is for others to argue. I might, however, point out that the UK government was putting significant resource into the rural economy in particular. There were valuable agricultural development grants, which spawned the arrival of the concrete and steel portal-framed buildings. As an aside perhaps it is about time we stopped referring to these 50 year old structures as modern farm buildings! There were also substantial grants to modernise let residential property – remember this was a time when empty rural cottages were routinely demolished once vacant as uneconomic to repair. Perhaps more importantly, there was a well funded scientific research programme, which made huge advances in crop and animal production and breeding.
The world is clearly now a very different place in many ways. However, one lesson we can take from the past is that the rural economy is extraordinarily good at adapting to change and responding to new markets. Regrettably, many businesses will feel the pressure and it would be unrealistic to think there won’t be casualties, but frankly some are already struggling. Here in the High Weald, we are already seeing a drastic reduction in livestock numbers, as older farmers retire or cut back numbers. The other side of that coin, however, is that this same climate has created a very exciting opportunity for new farmers. A good example of this is the huge response that we received from young farmers applying to take on three livestock farms offered on long term tenancies by one of our clients. The enthusiasm remains strong. What we now need is robust leadership. DEFRA seems to recognise this and, encouragingly, refers to funding of innovative technologies, skills and business, training and research. Another key part of their latest strategy was to call for fairness in the supply chain. Hear hear! More fundamentally we need to see energetic negotiation and completion of trade deals across the globe. One big change from 50 years ago is the growth in diversification, be this holiday cottages, business units, wedding venues, pop festivals or indeed alternative cropping. The let cottage is no longer a burden but the mainstay to many rural farms and estates, attracting good rents. Here in the South East, most landowners and farmers will have some opportunity to grow their non-agricultural income. We are also in a period of housing growth, not dissimilar to the post war years but almost exclusively built by private developers, not local authorities. For some this will generate life changing sums of money. To bring my father’s article up to date, it is not solely about becoming a more efficient producer but looking to maximise revenue from the opportunities available. DEFRA needs to ensure that it supports growth financially and does not burden the rural economy with more red tape and bureaucracy.
Leo Hickish, Head of Professional Services
Leo Hickish • firstname.lastname@example.org • 01892 509281
Ten points to note for 2018
ENGLAND’S COASTAL PATH
The Coast Path initiative continues to roll out. Natural England is now visiting all those with interest in the affected land along the Eastbourne to Camber stretch of coastline that is likely to be affected by the proposals. The proposal for this stretch is expected to be finalised and published in winter 2018/19. Action will need to be taken to best protect your interests in this controversial scheme.
INHERITANCE TAX – PROTECTING THE FAMILY HOME
Whilst the existing nil-rate band for individuals remains at £325,000 until the end of the tax year ending in 2021, between now and then there is a gradual increase in the nil-rate band to allow extra relief from Inheritance Tax for a residence which is passed on death to a direct descendant. For the forthcoming tax year 2018/19 this additional amount is £125,000 for individuals. If a person downsizes or ceases to own a home on or after 8th July 2015, the additional nil-rate band can still apply, provided that the value in the residence has been transferred into assets of an equivalent value and passed on death to direct descendants. From 2020 the overall objective is to allow married couples with a family home to pass on assets of up to £1m to their children without incurring Inheritance Tax. Beware however, as at the same time the Government has launched a consultation into what they describe as simplification of Inheritance Tax.
BIOMASS FOR SANDWICH
The Kent Renewable Energy Project, based at Discovery Park, Sandwich, is set to begin production in 2018 and will require 240k tonnes of raw wood material per annum. It is expected that much of this wood will be sourced from under-managed broad leaved woodlands here in the South East. This presents a valuable opportunity for the owners of woodland to reconsider whether those often challenging broadleaf sites may now offer a significant source of harvestable income.
SIMPLIFYING COUNTRYSIDE STEWARDSHIP
New Countryside Stewardship (CS) offers have been introduced to boost biodiversity and help protect and enhance farmland and the countryside – as well as getting more farmers back into agri-environment schemes. This opened in January 2018 and now includes: Arable Offer, Lowland Grazing Offer, Upland Offer and Mixed Farming Offer. All aim to provide tailored options covering the full range of different farm types. Options include the popular nectar flower mix as under Entry Level Stewardship (ELS). Whereas the system before was overly bureaucratic we do believe this simplified scheme is worth another look as the application process has been streamlined. Useful funding is available including the Hedgerows and Boundaries Grant which can provide up to £10,000 of support.
CAN PLANNING POLICY CHANGES CUT THROUGH THE RED TAPE?
In March 2018 Central Government announced a consultation in favour of boosting the delivery of housing across the country alongside major changes to planning legislation. There is now a recognition that sites to meet local business and community needs in rural areas may have to be found outside of existing settlement boundaries, in areas which may not be well served by public transport. There is also the desire that 20% of all housing allocations should be from smaller sites, less than half a hectare. Further protection has been given to the Green Belt: where Local Authorities want to release this land, they must first consider previously developed land and then areas which are well served by public transport.
CONVERTING FARM BARNS TO DWELLINGS
We have reported on the opportunity to convert farm buildings to dwellings under Class Q permitted development rights before. Our experience is that an increasing number of such schemes are succeeding. Earlier this year the Government increased the number of units that could be converted per farm from 3 to 5 dwellings. Difficulties have to be overcome, especially for modern portal-framed structures, but provided that the concrete or steel structure is retained, it can be hidden by good design and distinctive sustainable housing created within its space.
ENERGY EFFICIENCY AND RESIDENTIAL LETTINGS
UPDATED BPS GREENING RULES
The greening rules change yet again. The 2018 rules include the following measures: •C omplete ban on the use of Plant Protection Products on Ecological Focus Area (EFA), Fallow Land, EFA Catch and Cover Crops, and EFA Nitrogen-fixing Crops. • Introduction of ‘mixed crops’ •E FA option for hedges is extended in definition to include trees in a line. •E FA buffer strips option is extended in definition to include field margins. •E FA catch crops must be maintained for a minimum of 8 weeks starting on 20 August 2018. These are only a selection of the increasingly complex and convoluted rules.
NEW WATER ABSTRACTION RULES
As we come out of one of the wettest winters for years, worrying about water abstraction may seem perverse. However, from January 2018 farmers have to apply for a water resource abstraction license from the Environment Agency where more than 20 cubic metres a day is abstracted for a previously exempt activity (i.e. drip irrigation and other forms of horticultural irrigation, abstractions that support SSSIs, water level management plans, environmental stewardship sites, water meadows and managed wetlands). The closing date of 31 December 2019 may seem a long way off but this valuable resource for your business may need to be argued for vigorously as the South East struggles to match demand with supply.
The Government is due to make an announcement shortly, following consultation on how improvements to properties required from 1st April 2018 will be funded. It seems likely that if a landlord is unable to obtain a form of external funding they will be expected to fund the minimum work themselves. It is the Government’s intention, however, to introduce a cap of £2,500 per property to prevent, as they see it, landlords being exposed to excessive costs. Expenditure incurred prior to 1st October 2017 will not count towards this cap.
STAMP DUTY LAND TAX – BOOST FOR FIRST TIME BUYERS
In an effort to help deliver more new housing the rules on Stamp Duty Land Tax have been improved. First-time buyers no longer pay Stamp Duty on a property purchase of £300,000 or less, and a reduced rate on a property purchase of £500,000 or less. You are not eligible if you, or anyone else you are buying with, are not a first-time buyer. Any property purchase over £500,000 follows the rules for non first-time buyers regardless of the buyer’s status. We have seen the impact of this in the new homes sector where sales rates for properties in the range up to £500,000 remain very strong across the region. George Chapman
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Rural Outlook 2018
Brexit Deal or No Deal? Since the referendum result on 23 June 2016, farmers and growers have been wondering what Brexit means for their business. The question has still not been answered, although the picture is starting to emerge as the Government continues its negotiations with the EU, prepares consultation documents, and Ministers make speeches. Article 50 was triggered on 29 March 2017 which sets the date of the UK’s departure from the EU two years hence: 29 March 2019. ‘Sufficient progress’ was deemed to have been made in December 2017 with regards to Phase 1, which deals with citizens’ rights, the Irish border and the financial settlement. The EU has since agreed the terms of the Brexit transition period although various issues remain to be resolved. The EU has long held the objective to conclude exit negotiations by November 2018 to begin the ratification process before the UK leaves the EU. This leaves a very a short timescale to agree trade arrangements as well as to deal with outstanding contentious issues including the Irish border and the treatment of Gibraltar.
World Trade Organisation The majority of the world has signed up to the WTO which specifies that members must offer each other ‘Most Favoured Nation’ (MFN) deals. Members commit not to raise tariffs beyond a certain maximum level, although individual tariffs vary significantly between different sectors and products. Whilst the average MFN tariff on goods levied by the EU is 5.3%, the EU has particularly protectionist policies with regards to agricultural products. Examples are shown in the following bar chart.
Effects on farming Possible effects on farming include:
• Trade barriers
• Farm labour/immigration
• L oss of Basic Payment Scheme and other EU funded schemes
•F ree trade deals with other countries, possibly reducing standards and price of food
A green Brexit The government has recently produced a command paper for consultation titled ‘Health and Harmony: the future for food, farming and the environment in a Green Brexit’. Michael Gove has previously accused the Common Agricultural Policy of being ‘a failure – environmentally damaging and socially unjust’. It is in this context that the command paper aims to shift agricultural policy away from direct payments, and towards a ‘better and richer environment in England’. The Health and Harmony paper confirms that across all farm types, 61% of farm business income came from direct payments over
EU TARIFFS ON SELECTED AGRICULTURAL PRODUCE (2015) 100%
KEY FRESH/CHILLED CATTLE CARCASSES FRESH/CHILLED LAMB CARCASSES FRESH/CHILLED CHICKEN
MILK & CREAM, FAT 3-6% FRESH/CHILLED POTATOES WHEAT BARLEY
For a list of EU import tariff rates visit the AHDB Horizon report at https://ahdb.org.uk/documents/Horizon_Brexit_Analysis_Report-Oct2016.pdf © Agriculture and Horticulture Development Board 2018
the period 2014/15 to 2016/17, with grazing livestock and mixed farms most dependent. It further acknowledges that most farms make losses from the agricultural side of their business, where direct payments, diversification and agri-environment schemes are excluded.
Changes to Common Agricultural Policy
perform relatively well in any event, the outlook for other sectors is less positive. Other than the ‘evolution’ scenario, where direct payments are maintained at current levels and there is limited change to the existing EU trade relationship, a number of sectors including cereals, lowland sheep and beef will have significantly reduced levels of income.
For 2018, Basic Payment Scheme (BPS) applications will be as normal. During the transition period, it is expected that BPS will be on the same basis as now, but possibly with some simplifications. From 1 January 2021, we will enter the ‘agricultural transition period’ where the Government is committed to pay the same level of ‘funding’ for the sector until the end of this Parliament (5 May 2022 or sooner). Deductions will apply to area payments in order to ‘support farmers to prepare for change’ and to fund new environment schemes. The command paper considers various options to reduce existing CAP payments during the agricultural transition period. We believe that some form of capping is likely. But whichever option is adopted, the Government ‘envisage that further payment reductions would be applied…until the payments have been phased out completely’.
“Whilst dairy and pig sectors would perform relatively well in any event, the outlook for other sectors is less positive.”
Public money for public goods The Government intends to replace the Common Agricultural Policy with a new system which pays ‘public money for public goods’. A new environmental land management system will be the cornerstone of this policy which could include animal welfare, promoting agricultural productivity, public access and supporting rural and upland resilience.
The bottom line? The Agricultural and Horticultural Development Board (AHDB) has carried out a great deal of research on the possible impact to farms depending on different Brexit scenarios, although admittedly before the Health and Harmony consultation paper was produced. The AHDB has assessed these scenarios against the existing base line of farm business income. Whilst dairy and pig sectors would
Conclusion Much depends on the future trading relationship. In the ‘implementation period’ between March 2019 to December 2020, a continuing weak £/€ exchange rate and tariff free access could mean farm profitability will be maintained. In the ‘agricultural transition period’, say from December 2020 to 5 May 2022, support will switch from direct subsidy to environmental support. It remains to be seen how this will play out in the farming sector, but now is not too soon to revisit your farming business plan and to start thinking about how the inevitable loss of direct payments will affect your farming business. Farming has always readily adapted to change and will no doubt do so again this time.
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Rural Outlook 2018
Making your way through the
first stages of farming Now may seem a strange time to encourage new entrants into farming, but for many the opportunities are really starting to open out. Starting out in farming is difficult for anyone, and their first steps will usually be trying to find some ground to rent or graze. Finding that first piece of ground can be hard unless perhaps you are already well known in the farming community and have the right connections.
So to help with those first steps, the National Fresh Start Enterprise Centre has a land partnership scheme which matches landowners in specific areas with graziers and farmers. More locally, there is a similar scheme called Restocking the High Weald in which Lucy Carnaghan effectively match-makes suitable graziers to landowners. If you are looking to start in farming, or expand your current business, it is important to show interest with land agents and other professionals in the area. Large amounts of land are let privately to local farmers who have approached professionals such as Batcheller Monkhouse privately. With impending changes to farm support payments post-Brexit we predict more land becoming available. This may imply falling agricultural income but new blood may well see ways to succeed and expand, perhaps focusing on direct sales of meat and other produce.
The first step Agreeing a grazing licence is the usual way of farming your first piece of land. These are often done on what is fondly known as a gentleman’s agreement, being verbal. That is all fine all the time nothing goes wrong. Sadly life is not always that simple. We strongly recommend to both parties a written contract setting out the terms of occupation. Any written agreement would typically
cover: the type of land occupation - i.e. lease or licence - length of term, level of rent and details of a rent review, basic payment scheme, insurance, what land and buildings are included and perhaps the most contentious - the repairs and obligations, which cover buildings, fences, trees and the condition/use of the ground. The form of agreement is very important in these situations and often a point that gets confused and muddled. There are differences between a licence and a tenancy which are important when considering complications or inspections from the Rural Payments Agency, and with regard to the landlord’s tax position. A grazing licence is simply an agreement for a farmer to come on to the land and take the grazing. That is all – there is no right to claim the Basic Payment Scheme, carry out repairs/maintenance, spray, top or fertilise the land. All of the “management” must be carried out by the landlord or licensor.
Farm business tenancies A tenancy agreement differs from a licence in that it is the tenant who has exclusive occupation of the land. The tenant is therefore eligible to claim the Basic Payment Scheme and takes on all of the management of the land, the growing crop and repairs - effectively looking after and farming it as if it were his own.
When dealing with disputes, there are often a myriad of arrangements between a landlord and tenant that either don’t reflect the original agreement discussed or which affect larger issues such as occupation rights for capital taxation or subsidy schemes. In reality, though, how often does the land for licences and tenancies become available? The opportunities are there but quite often land is let privately through professional contacts. This highlights how important it is for a potential tenant or grazier to network with other landowners and professionals. The Heathfield and South of England Shows are great examples of places to meet up with professionals. The atmosphere is relaxed and it is a great time to explain what you are trying to achieve, what you farm and where you’re based. Batcheller Monkhouse does a lot of matching land with tenants, especially on the smaller pieces which are not marketed. We also work very hard with prospective landlords to allay any fears or concerns they have. In some circumstances areas of land have been unmanaged for some time. Sometimes a larger, established farmer does not want the hassle of getting a piece of land back into management. But for a young farmer who wants to increase his sheep flock from 60 to 70 or just run 20 ewes, a licence or tenancy on that land could make a big difference.
“We strongly recommend to both parties a written contract setting out the terms of occupation.” The farming base Once a new entrant is more established, he or she will want to develop a farming base. There are many advantages for them in owning at least a small parcel of land. This helps to establish them and can provide a springboard for even greater success in the future. At the very least this will provide an asset to help raise funds against for future expansion.
Buying this first piece of land may create opportunities there to invest in new buildings and, in time, even providing the ground on which to seek planning consent for a dwelling. For any farmer, being on site improves animal husbandry and the efficiency of the business. Batcheller Monkhouse achieved this for one farmer near Horsham, who had a large grazing enterprise. He secured a five acre field and within five years has made a successful case for a new dwelling to support the outdoor pig enterprise on this small acreage.
A successful outcome Another example of this is Peter Morgan, who with his wife started farming on small areas of grazing land with some ewes. He was not from a farming family but his wife worked on a dairy farm. He started with a couple of fields which they rented from someone found by a friend. In 2005/06, he had managed to grow the business to buy a 90 acre block with some buildings on it as the foundation of his farm. He had a secondary business as a qualified engineer making steering mechanisms for boats, and this gave the regular income the banks wanted to see before he bought the land. He is now farming about 400 acres at Bodle Street Green near Hailsham, and has just built a four bedroom house on site. He farms sheep, cattle and free range chickens. Batcheller Monkhouse wrote the agricultural justification for Mr Morgan’s farmhouse. There was a strong argument because the Morgans needed accommodation on site for animal husbandry and biosecurity reasons, primarily as a result of calf rearing and having chickens. Batcheller Monkhouse also put together an AMC application for a loan which enabled the Morgans to build their house.
Opportunities are there In conclusion, there are good opportunities for new entrants to farming, albeit predominantly through means of tenancies and licences. It is essential to both landlord and tenant to ensure such agreements are correctly documented. Once established, further expansion, through longer term agreements or establishing a base on owned land, is very feasible.
CASE STUDY NEW ENTRANT FARM OPPORTUNITY
Blocks of land with buildings do come up for sale. It is important to think about the location, what you are buying and whether you will have the ability to expand from your base. There is no point in buying a small block of buildings and five acres if it is not located near to other land you farm, or you won’t have the potential to expand and take on further land surrounding that base. Funding your purchase is not easy either, but most high street banks - such as Lloyds, Barclays and NatWest – have agricultural managers. There are also agricultural lenders such as the Agricultural Mortgage Corporation (AMC) which specialise in rural funding and will lend for up to 30 years at reasonable rates. Any lender will want to see an established business which has a clear ability to make repayments. To get established, many will have a secondary job alongside farming which can often be taking into consideration when looking at funding options. This may be providing specific contracting services on other farms - which will contribute to profitability as well as make use of any item of equipment purchased for the farm.
A perfect example of the opportunities that do arise is that of nearly 500 acres of farmland on one of the estates under our management. As we go to print the Brickhouse Estate, in East Sussex, is offering an extensive area of farmland with good buildings and residential accommodation in up to three lots. Whilst interest is sought from a wide sector in offering this in three smaller lots with housing and under a 10 year Farm Business Tenancy, the Trustees seek to encourage new entrants and young farmers in particular.
Charlotte Pearson-Wood • email@example.com • 01892 509280 Rural Outlook 2018
Diversification for dummies Thinking of diversifying? DON’T. Or not at least until you have considered the simple principles of how to make it a success. The countryside is littered with examples of failed diversification enterprises. Rusty organic flour mills and sausage machines lie gathering dust across the countryside, so where did it go so wrong? Often the reason is explained by a simple statistic that was reported by a large firm of agricultural accountants some years ago: the top performing 25% of farms have the least diversification. Why? Well to make a worthwhile profit of say £50,000 making those organic frankfurters is very difficult. However, if you take your eye off the ball managing a 1,000 acre farm, £50,000, will vanish before you can say sausages. Having said that, the time is right for diversification. Brexit will undoubtedly scare a lot of people off farming, and many others will be scratching their heads thinking how their core farming business can survive the Brexit process. If the answer is it can, they will want to create a business model of what can work – and diversification could be a significant result of that process. So despite my slightly exaggerated foreboding at the start of this article, don’t think that diversification can’t work at the moment. Brexit may well be the opening you need. The example of others is important, too. I still see a lot of very successful diversification projects. I recently met someone who wants to turn a machinery store into a bunk house for holiday accommodation. That person has the right attitude and the right building in the right place. There are plenty of examples like this of diversification being done really well.
“Think, too, about whether you are prepared for diversification.” But there are a lot of bad examples, too – and some of them arise from such simple mistakes as running a holiday cottages business when just letting the cottages out would make just as much money with far less hassle. Your business may be one of those which the statistics show is making a lot of income off its farm diversification project. It’s true that these can save an ailing business, but they can also just mask one. So a first principle should be to make an existing business work well rather than let it continue failing. Think, too, about whether you are prepared for diversification. An estate whose main business is property investment may not be geared up for trading. Letting out an old barn to a local business
looking for space may be a much easier option than starting a flour mill, for example. It will bring in an income straight away for an absolutely minimal effort whereas the mill will have to sell an awful lot of flour to make any worthwhile income. Unless you have a family member with an enthusiasm for selling lots of organic flour at every farmers’ market in the area and beyond, it’s probably not a good idea.
“...don’t think that diversification can’t work at the moment. Brexit may well be the opening you need.” Farms, on the other hand, are used to trading, and some of the best examples of diversification I know are farms where one sibling does the farming and another does the sausage making. Both do what they do very well and the overall business is a much bigger success as a result. But even farms should be wary of passing fashions. Vineyards are all the rage in the South East, but look behind those smart rows of vines, and the reasons for their success become a bit clearer. One large local vineyard – one of the first to make it in the current rush for wine production – designed everything around a visitors centre, so the wine sales were almost secondary to the visitor income. I don’t know of any commercial farmers who have changed over to a vineyard to save their business. Planting vineyards is mainly for those who have already made a lot of money and can afford the lifestyle choice of not having anything to sell for the first few years. There are other pitfalls in diversification, too. Planning has become easier, but watch out if you are in a national park or Area of Outstanding Natural Beauty. It can be very difficult in these areas to have a fundamental change of use from a rural business to commercial lets. Accounting is often tricky, with some running their diversified business through the main farm without good management accounts. So a shoot can appear to be doing very well, but the accounts do not show the additional costs of the gamekeeper living in a cottage on the farm or using a Land Rover. Running management accounts, preparing them well and working out the real costs to the business are all essential. I am not arguing diversification is a bad thing: of course not, simply that a little thought and consideration should be given beforehand to avoid the pitfalls and give your project the best chance of success.
IDENTIFY YOUR CURRENT BUSINESS
The primary business of many estates is investment. Moving into trading business, for example a farm shop or vineyard, is not just a new project but a fundamental change to the business activity. Most farms, by contrast, are trading businesses and can be more flexible about what forms of diversification to consider. Think about what you want to achieve and how it can fit best into your current business.
Think about concentrating time and skill, could one family member concentrate on the letting of those redundant pig sties whilst another concentrates on making the existing business run at it’s best? Many of the most successful farms split the management team’s (or family’s) skills and abilities according to individual flair.
DO WHAT YOU DO WELL
Make sure the current business is working at 100%. Diversification tends not to fix an already struggling business. It should add to your strengths, but will also exaggerate any existing faults. There’s no point making £50,000 per year on sausages if the pig business is losing the same amount.
Once you are running that exciting new venture, make sure it adds to your quality of life as well as the bottom line. Be honest and have a good set of management accounts separating the various enterprises. Fully cost that worker’s cottage, your management time and those hidden extras so you can see clearly how well the enterprises are doing. If bed and breakfasting is making less than letting out that cottage would, then don’t be afraid to think again.
Choose a project which will fit in with the current business and add to it, which can be managed alongside it and plays on your strengths. If your aim is to increase income then take the easy steps first: for example, let out those redundant buildings before you send granny out to run the organic flour mill.
Alex Wilks • firstname.lastname@example.org • 01798 877520 Rural Outlook 2018
Ensuring landowners donâ€™t lose out
in housing projects With the Government seeking to build 300,000 new homes per year across the country, landowners and developers alike are looking to promote more sites for residential development. There is a notable lack of supply of suitable sites at present, with strong demand from house builders and promotion companies across the South East. How best to tap into this market? Even when dealing with a straightforward planning application the costs involved in securing a planning consent can be expensive. If the immediate prospect for development is less certain for a larger scheme or is a longer-term prospect, a gradual approach of promoting the site through the local development plan often has to be taken. Once formally allocated this is then followed with a formal planning application. More in-depth work on the myriad issues then has to be addressed in any such case, ranging from environmental studies to highways analysis. In many instances landowners are looking to minimise the risk and the cost of this exercise by reaching an agreement with a developer or promoter as well as using the experience and knowledge of a development partner. Batcheller Monkhouse is currently working with over 50 landowners in the promotion of their agricultural land for development. This is normally under the terms of either an option agreement or more commonly a promotion agreement.
KEY REQUIREMENTS TO SECURING BEST VALUE The Market Value will be determined at the time that planning permission is obtained and so we need to protect against a drop in future land values by: Inserting a minimum land value clause into the agreement. However, attention needs to be paid to how this figure is determined. Often developers will wish to agree this on a net developable acreage basis, which will significantly reduce the acreage of the site and therefore the value of the site.
In most cases planning and promotion costs will be deducted from the Market Value of the site. However, there can be significant costs associated with obtaining a planning permission and therefore a suitable cap should be set at the outset.
Setting a minimum number of units or minimum housing density in the agreement is a useful tool to ensure that the developer is maximising the value of the site, to the ownerâ€™s advantage.
The order that items will be deducted from the open Market Value should be agreed in advance. If the developerâ€™s share is say 15% then whether this is deduced from the gross value or net value after costs will make a significant difference to the financial return to the landowner.
House builder or promotion company? Under an option agreement, the landowner typically gives the developer the right to buy the land, either at a fixed price or by reference to a formula such as a percentage of market value on the grant of planning. The developer will typically pay an option fee on signing the agreement, and then take on the costs and responsibility of securing a suitable planning consent. Under a promotion agreement a specialist land promoter would be instructed to pursue a suitable planning permission and would cover the costs of the process. Crucially the promoter does not have the right to buy the land once planning has been obtained. Instead, it would be marketed for sale by the owner on the open market with the promoter entitled to a set percentage of the sale proceeds together with agreed costs as and when the land is sold.
The method of assessing development value must be agreed in advance, preferably relying on both comparable land transactions and fully costed residual valuations. In the case of the latter it is essential that the house builder is required to provide full data and costings on the scheme.
Recoverable costs and professional fees should also be subject to a cap. Once planning permission has been obtained, any legal or surveying fees that were incurred by the landowner prior to the signing of the agreement will be payable. If the housing development never obtains planning, then the house builder will be responsible for paying these fees and the landowner will not be out of pocket. If there is a suitable cap on fees before the signing of the agreement, then the landowner can ensure that they know what all the deductions will be at the conclusion of the project.
Selling the development site on the open market is a major advantage of a promotion agreement as both the land promoter and the landowner are incentivised to maximise the sale price. In one case, where Batcheller Monkhouse sold two thirds of a large scheme on the open market, our clients received 25% more per acre than the owners of the other part of the site whose land was acquired by a house builder under an option agreement.
Securing the right terms The structure of any agreement can vary significantly and we are frequently being called in to advise on poorly worded agreements once the planning permission has already been obtained. In these circumstances it is our role to negotiate the open market value for the site. However, an agreement can allow for significant deductions to be made from the site value. A poorly worded agreement can create significant uncertainty and make the task of agreeing the value almost impossible. Given that an option agreement can run for a 15 to 20-year period, how do we go about guaranteeing our client a degree of certainty concerning the amount received once planning has been obtained?
Who protects the interests of the landowner? Schemes often run for up to 10 to 15 years, so how does the landowner ensure that the developer is progressing with the planning promotion and application diligently? We always recommend that the landowner retains an independent planning and development consultant; a role we routinely undertake and are greatly experienced in. The landowner’s consultant’s duty is to monitor process, to engage in the design and progression of the scheme and to ensure that the developer is meeting all necessary planning targets. This is in both parties’ best interests as it ensures that, other than the inevitable discussions on value, there are no disagreements and both parties are happy with the final outcome. Fees for the consultant need to be negotiated as part of the agreement, as they should be payable by the developer. This is an essential part of our role in any such project.
THE FINAL PIECE OF THE JIGSAW
Further protection An overage clause is an additional piece of security in any agreement, ensuring that the landowner benefits from any future planning application on the site. Say a house builder has made a successful planning application for 150 units and the landowner sells them the site at the agreed price. The landowner does not want to find that the house builder has submitted a second application for an additional 50 units on the same site and the landowner has had no benefit from this.
“An overage clause is an additional piece of security in any agreement” Time for action Most planning authorities are struggling to identify, allocate and deliver a sufficient amount of land to meet Government targets. At last, however, after years of prevarication, more rigorous steps are being taken. One is tempted to wonder whether this is as a direct response to the increasingly vocal statements from The Rt Hon Sanjid Javed MP, Secretary of State responsible for housing and planning. Now is the time to act. With the right form of agreement and professional engagement throughout, landowners should reap the dividends of a successful conclusion to the planning process and best value on the open market.
The successful delivery of new homes can be a long and complex process. We first reported on our role in forming a consortium of land owners for a large residential development at Tenterden in the 2013 edition of Rural Outlook. We were then engaged in the planning process, with consent eventually secured for 250 dwellings. These houses are now being built and our New Homes team is working with the housebuilder in the sale of the finished article.
The Batcheller Monkhouse Land and New Homes Department provides a specialist and focused service to our developer clients throughout the South East. The team is run by Julie Carver. She has 28 years’ experience in the housing industry, including 15 years dedicated to New Homes throughout the South East. The team works closely with our planning and development teams to maximise the potential from sites from as few as a single dwelling up to our largest current site of over 1,000 dwellings. Our expertise and local knowledge, often engaged in sites from the very beginning, means that we provide advice from the very early stages, right through to the launch of the new development. Through our extensive market research we are able to advise on pricing, demand and specification, enabling an informed decision before a site is acquired to ensure maximum return for both developer and landowner. Oliver Robinson
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Rural Outlook 2018
Government tries to speed up the
Over the years, much Government effort has gone into trying to speed up the planning process and make it more efficient with one aim in mind – building more homes. The Housing and Planning Act 2016 sought to boost house building by introducing a new planning consent called Permission in Principle (PIP). Furthermore the latest revisions to the National Planning Policy Framework (NPPF) announced in early March 2018 seek to further refine policy to better assist in facilitating more housing delivery. Some of the changes introduced are designed to separate the decision making on issues of principle - such as land use, location, and amount of development - from technical detail such as what the buildings will look like. The aim is to give certainty up front that the principles of a plan are acceptable before developers and landowners have to spend on costly technical matters. A PIP must be followed by an application to agree the technical details of the scheme before the applicant has full planning permission and work can start on site. Currently, outline planning permission gives applicants some certainty, subject to later agreement of reserved matters. However, with outline permission, a Local Planning Authority (LPA) needs more clarity up front on the technical details before they can issue planning permission. This comes at a cost to applicants, who are asked to invest in technical detail early on, without any guarantee of success. PIP can be designated by the LPA or Neighbourhood Plan forum through qualifying documents. A PIP can also arise through the
brownfield register or can be granted following an application made by a developer. As of 1st June 2018, if there is a site on the brownfield register or one elsewhere which the LPA is likely to consider as an acceptable location for development, either the landowner or his/her agent can apply for a PIP on up to 10 housing units. This could be a much better process for our clients, particularly smaller developers and private individuals. PIPs will remain valid for different time periods: a designated PIP will lapse after five years and a PIP that has been granted following an application will lapse after three years.
PRACTICAL IMPLICATIONS OF PIPS GOING FORWARD: • Speeds up the planning process • Reduces risk for developers/applicants •G ives developers the confidence to invest in the technical detail of a scheme • Reduces burden on small developers
In practical terms there are concerns about LPA resources and their ability to administer PIPs. LPAs have to go back and review allocated sites, which will involve vast amounts of work. Similarly, the ability of LPAs and Neighbourhood Plans to assess housing density levels. This could result in schemes which have a much lower density on a site than that which could be reasonably achieved.
10,000 homes. There are becoming an increasingly popular approach to help Local Planning Authorities (LPAs) meet their significant housing targets, especially in areas where there has been substantial under-delivery for many years. They are particularly useful in heavily constrained green belt areas where an authority can choose to address most of their housing provision in a single site, so that only one large release of green belt land is required rather than many across the district.
Not only this, but where PIPs arise from brownfield registers, viability may be a concern for developers given the unforeseen constraints that may arise from brownfield land, such as contamination mitigation. For those of our clients that have brownfield sites which may be suitable for inclusion within a brownfield register, or which could be suitable for an application for a PIP, this does provide a low cost alternative for increasing the development potential of their land.
“The aim is to give certainty up front that the principles of a plan are acceptable”
Garden towns and villages provide the big numbers The idea of garden cities is nothing new: Letchworth Garden City was built from 1903 and Welwyn Garden City was built from 1920. The Government has spent more than £300 million on what it called the first “proper” garden city in nearly a century at Ebbsfleet in Kent. Otterpool Park has now been designated as a garden town in Shepway with about 12,000 units due to come forward over the next decade. In December last year, the Government published draft regulations to amend the New Towns Act 1981. Garden towns and cities featured heavily in the autumn budget, and a new prospectus has been published inviting expressions of interest from areas wanting to bring forward a garden town. In 2017, the Government allocated funding to a further 10 garden towns and 14 garden villages across England to help fast track projects. The aim is to provide large scale housing projects via sustainable new developments designed in a holistic way.
They can address infrastructure in a much more efficient way, designing developments around new infrastructure rather than being constrained by old transport and development patterns, many of which have been in place since before the car. The key constraint is of course the time it takes to bring forward development on this scale, and the forward funding of the infrastructure upgrades (often required before the development of any housing) can cause issues and delays. Meanwhile, many LPAs will be falling further behind with their housing delivery so they remain open to speculative applications in areas they would not usually consider suitable or sustainable.
A garden town is a development of more than 10,000 homes. Garden villages are smaller settlements of between 1,500 and
SOUTH EAST GARDEN VILLAGE PROPOSALS
No decision made/Garden Villages & Towns ruled out
Broxbourne Epping Forest
Identified at Issues and Options stage
Basildon Castle Point South Bucks
Identified as Preferred Option
Adopted Development Plan Strategy/ Key Site Identified
Windsor & Maidenhead Reading -
Spelthorne Bracknell Forest
Epsom & Ewell
Rushmoor Reigate & Banstead
Tonbridge & Malling Maidstone
Brighton & Hove
The image opposite shows a plan of the South East with areas that are considering garden towns/ villages. This type of development can offer huge opportunities for major landowners or consortiums of landowners who think their land may be in a location suitable for a new garden village/town. Batcheller Monkhouse is already working with a consortium of landowners to promote a site for a new garden town and many more are likely to come forward across the South East in coming years. This makes land promotion and representations to emerging Local Plans increasingly important.
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Rural Outlook 2018
Planning Case Studies The Planning team at Batcheller Monkhouse advises clients in an extraordinary range of work, from smaller scale conversions to major diversification projects and strategic land allocations. The following chart is a simple graphic representation of current instructions which helps to illustrate this. Such a wide range of work and experience ensures we can assist our clients in pretty much any projects under consideration.
GREEN BELT (VSC CASE): B2 FLOORSPACE IN THE GREEN BELT IN SURREY Planning permission was secured for 800sqm of bespoke B2 floorspace and 3,000sqm of associated external storage space Green Belt: Very Special Circumstances Cases in the Surrey Green Belt to provide premises for a fencing contractor operation. We undertook extensive research to support a sequential assessment demonstrating a lack of alternative sites for the business to relocate to. This formed part of the overall â€œVery Special Circumstancesâ€? case required for such development if located within the Green Belt.
Expert Witness Neighbourhood Plan Representations
EDUCATION: VYNERS SCHOOL, ICKENHAM We have provided extensive planning consultancy advice on two school expansion projects in the London Borough of Hillingdon. At Vyners School, Ickenham, a comprehensive reworking of the existing school site was proposed to assist in providing accommodation and additional sports facilities for the schools increasing student body. The school is located in the Metropolitan Green Belt and adjacent to an area of protected woodland. We provided specialist planning advice including sequential site testing and establishment of a very special circumstances case to support the proposal.
Urban & Rural Regeneration
Feasibility Studies, Appraisals & Capacity Studies
Image source: Callison RTKL
Strategic Planning and Land Promotion
STRATEGIC PLANNING AND SITE PROMOTION: SITE ALLOCATION FOR 1,000 UNITS We have been successful in obtaining a draft allocation for 1,000 units on a site in Hellingly within the Draft Local Plan. We are currently working with a development partner and the Council to secure an allocation on this site in the submission version of the Local Plan.
PLANNING APPLICATIONS AND APPEALS: CONVERSION OF RURAL BUILDING TO A DWELLING IN THE GREEN BELT IN KENT We have secured planning permission at appeal for the conversion of an existing rural building to a single dwelling in the Green Belt. Class Q permitted development rights could not be relied on because the site was also located in an AONB. Concerns raised by the Local Planning Authority about the level of work required to convert the building and impact upon surrounding protected trees were dismissed by the Inspector. The appeal was allowed and a partial award of costs against the LPA awarded.
anning Applications and Appeals
PERMITTED DEVELOPMENT: CLASS Q “FALL BACK” CASE Local Plan Representations
Removal & Variation of Planning Conditions
We utilised ‘Class Q’ permitted development rights (conversion from agricultural to residential) as a fall-back policy argument to justify the demolition of a single storey wagon house with a new dwelling comprising 2 storeys and a new wing. We worked closely with the Council to ensure a successful outcome despite a number of particularly restrictive constraints within the authority relating to the protection of the Ashdown Forest SPA/SAC.
ENVIRONMENTAL IMPACT ASSESSMENT: PRESTON HALL FARM, BEXHILL We were instructed to coordinate the Environmental Impact Assessment (EIA) and the Environmental Statement, as well as prepare the socio-economic assessment, for a 139 Enviromental Impact Assessments dwelling development forming part of a strategic allocation to the north of Bexhill.
Legal Agreements Conservation including & Listed Developer Buildings Contributions
Certificate of Lawfulness
CERTIFICATES OF LAWFULNESS: ESTABLISH LAWFUL BREACH OF AOC CONDITIONS We have used lawful development certificates as the basis to remove agricultural occupancy conditions, regularise existing uses, breaches of planning conditions and unauthorised works. We obtained a certificate to regularise an unlawful dwelling, which combined with two Class Q applications doubled the value of the site for the landowner, with very little upfront costs required.
Rural Outlook 2018
The Development Process Securing planning permission for a new homes residential scheme is a long and complex process, but the rewards can be very attractive. Whilst we have taken some sites from draft allocation to sale within two years, a more usual time frame is three to five years. One of Batcheller Monkhouse’s greatest strengths is that we can provide advice and expertise throughout the process, ensuring continuity and consistency, and of course professional expertise. The following flow chart will lead you through the maze of decisions to be taken, whether you wish to keep the project in-hand or bring in a development partner to fund the scheme and shoulder the risk.
LAND OWNER APPROACHES BATCHELLER MONKHOUSE
PRIVATELY FUNDED SCHEME
Site is promoted through Local or Neighbourhood Plan
DEVELOPMENT SITE REQUIRING EXTERNAL INVESTMENT
HARRIET RICHARDSON, SENIOR PLANNER “Promoting a site through the Local Plan or Neighbourhood Plan process significantly increases the chances of securing an allocation on the site for future development.”
Planning Application (Outline/Full or PIP)
Secure Development Partner via Option Agreement or Land promotion
KIRSTY CASTLE, ASSOCIATE
CLAIRE BARTLETT, PARTNER
CHRIS TIPPING, PARTNER
“Our experienced team of Chartered Town Planners can manage the planning process through all stages from first design concepts to start of work on site”.
“Our EIA specialists can screen development against EIA regulations, prepare screening/ scoping requests and manage the process of preparing an Environmental Statement at the appropriate stages”.
“Appointing the right development partner is critical. Well resourced, they will be prepared to risk their money to cover all your planning and appeal costs. Negotiating the terms of the agreement at the outset is key.”
PLANNING PERMISSION SECURED FOR DEVELOPMENT OF SITE
Tax advice prior to sale
LEO HICKISH, PARTNER
New Homes department JULIE CARVER, ASSOCIATE “Advice on pricing, demand and specification, enabling an informed decision before a site is purchased.”
“Structuring any deal is key to help mitigate against Capital Gains Tax and, longer term, issues of Inheritance Tax. VAT may also apply and can erode profits unless carefully planned for. This all needs to be considered from day one, to ensure the optimal outcome.”
Valuation and Agency OLIVER ROBINSON, PARTNER “Bespoke advice and guidance on the marketing and sale of a development site to a reputable firm of housebuilders.”
Environmental Impact Assessments and Agriculture An Environmental Impact Assessment (EIA) is the assessment of the environmental consequences of a proposed development project. It ensures that the environmental effects of a project are taken into account before a decision to grant planning permission is made. EIAs generally apply to housing schemes and more urban forms of development. A development of 100 houses, for example, would almost certainly trigger an EIA. But since May 2017, agriculture has been subject to new EIA regulations under a European Union directive. On 16 May 2017 the amended Environmental Impact Assessment (Agriculture) regulations came into effect. These regulations protect rural land in England that is uncultivated or semi natural. Uncultivated land continues to be defined as land which has not been cultivated in the last 15 years. However, uncertainty remains regarding the interpretation of the words semi natural. Guidance suggests that it is “land that hasn’t been intensively farmed, such as unimproved grassland or lowland heath”. This is arguably difficult for a farmer to interpret and in practice the focus has been on the definition of whether cultivation has occurred in the last 15 years.
THE KIND OF CHANGES WHICH MIGHT CAUSE DAMAGE TO SEMI NATURAL OR UNCULTIVATED LAND ARE: • increasing productivity of land for agriculture; • r estoring semi natural grassland or semi natural heathland; •a ltering field boundaries or adding new fences that are over four kilometres long, or two kilometres long in protected areas such as a national park; •m oving or redistributing significant quantities of earth; and • c hanging rural land of over two hectares, or less if of regional significance. Farmers will almost certainly be unaware that the regulations have been introduced. If, for example, they want to alter a field boundary, they will not realise they have to submit a screening request to Natural England under the new regulations. There is no reason they should be aware, especially as the process can be expensive. Changing a field boundary and the other changes in the list above fall outside of planning controls, and the EIA regulations are therefore designed to provide environmental protection which is otherwise lacking. It is possible that any one of these changes could harm a protected species such as a rare mouse, and farmers could be fined for that. Where any of these changes are proposed, you must apply for a screening decision from Natural England to determine whether
your project requires an EIA. Completing the screening process notifies Natural England that a farmer or land manager is seeking to carry out work which may be covered by the EIA regulations. The land is then assessed and a decision is provided within 35 days. The screening process provides for agricultural projects that do not significantly affect the environment or landscape to be completed, while at the same time ensuring protection for land with special environmental, historic or cultural importance. If a project does require an EIA, then you will need permission, known as a “consent decision” to carry out the works. To apply for a consent decision, an environmental assessment report will be needed which considers the effects of your proposal on certain aspects of the environment, such as ecology, landscape and climate change. EIA regulations are part of cross compliance, the rules farmers and land managers must follow if they claim for the Basic Payment Scheme, a Stewardship Scheme or the English Woodland Grant Scheme. Failure to follow EIA regulations could affect your payments. Where an EIA is needed, the regulations require that the resultant environmental statement be prepared by a competent expert. Not only is Batcheller Monkhouse a corporate member of the Institute of Environmental Management and Assessment but our EIA team comprises experienced practitioner and associate members. Many farmers will be thinking of responding to the Government drive to build houses. On a big development of say 1,000 houses, a screening request would be required. This asks the local planning authority whether what you intend to do needs an EIA. If it does, then you submit a scoping request so that, for example, if the site is near a site of special scientific interest and has some archaeology underneath, the procedure sets out which topics have to be considered. These can include anything from traffic, air quality and noise to human health, a more recent consideration which could ask how the development will encourage people to exercise daily. I have recently worked on over 25 EIA’s and there have been large problems with each one. But I have never come across an EIA which stops a development. There are always ways of working round the problems. I dealt with one large housing scheme which had some field mice nearby. The ecologist said there was no way the scheme would work without taking out about 100 houses. But that would have had a financial impact on the client, so we found a way round that by the ecologist recreating a field mouse environment on the other side of a hedge.
Clare Bartlett • email@example.com • 01798 877555 Rural Outlook 2018
Residential and Farmland markets remain strong Brexit and the political climate at home continue to influence the farms and farmland market.
having trust in their agent; because they know their market place and have a team and resources capable of carrying out the task with the belief and determination that a sale will be achieved at the best possible price.
Inevitably, this has spread uncertainty, although those wishing to purchase land more often than not are buying for the long term, perhaps for future generations, and are less concerned about short term market fluctuations. Whilst there is talk nationally of a correction in land prices, this has not proved to be the case from our experience in Sussex and Surrey. This, coupled with the fact that there is rarely much land available, relatively speaking, has resulted in Batcheller Monkhouse finding land prices remaining stable.
A good example of the above is the sale of Court Lodge Farm, Burwash, with 84 acres, a dilapidated bungalow with an AOC and range of farmbuildings; this exchanged contracts in October, within 11 days of being launched to the market.
In the rural residential sector, Batcheller Monkhouse deals with everything from small, semi detached ex-farm cottages right up to country houses. In the West Sussex and Surrey area, we found that in the early part of last year, there was an increase in buyers, and a number of properties which had been on the market for a while have now sold. This was followed by a slight slow-down through the summer, when there was an increase in supply, and buyers were spoilt for choice. But they seemed a bit reluctant to commit, which was quite unusual for the time of year. Since then the market has picked up across all sectors, but the focus remains on ensuring properties are robustly marketed and all leads pursued.
Farmland values hold firm Examples of sales in West Sussex last summer include Codmore Hill Farm, near Pulborough, which extended to approximately 142.5 acres of arable and pasture land, and benefited from a modern agricultural barn for which there was permitted development for residential conversion. This was offered for sale as a whole or in three lots at an overall price guide of around £1.8 million. Lively interest was created and it sold as a whole. Similarly, Field Farm at Dial Post, which was a well farmed 130 acre block of pasture and arable land, created considerable interest and sold as a whole. The price guide in this instance was £1.1 million. In general terms, prices achieved this year in West Sussex through Batcheller Monkhouse have ranged anywhere from £8,500 to £15,000 per acre depending on many factors such as location, size, quality, planning potential, and of course, local demand. In East Sussex, it was a varied and interesting year for the Batcheller Monkhouse Battle office with a wide range of land parcels, buildings (with and without consent) and farms coming to the market, and more importantly being sold. Pasture on Pevensey Marshes is always popular and some 39.85 acres abutting the Waterlots Stream sold to a local buyer and 35 acres of woodland changed hands in Ashburnham at around £5,500 per acre.
Revenue from farm buildings Other sales included Tyler Barn at Wartling, Oak Tree Farm near Hailsham and Holly Barn at Punnetts Town, all being redundant farm buildings of varying ages, with consent to replace or convert to residential use, with small acreages. The latter was one of several barns locally where the new Class Q Permitted Development rights unlocked the potential for residential conversion.
Swift result secured through expert agency One of the essential ingredients for a successful sale is clients
“Batcheller Monkhouse deals with everything from small, semi detached ex-farm cottages right up to country houses.” The vendors wanted a sale in a tight time frame. We knew this type of property would create quite a stir in the market and felt confident that a figure above £1 million was achievable. Naturally the best method of obtaining the highest price is to create competitive interest from buyers. So we advised the client to begin marketing by quoting a guide price in excess of £900,000. With our marketing techniques of the internet, social media and telephoning “hot” buyers, 17 viewings took place and multiple offers were received. The clients are relocating their animal sanctuary to Norfolk and were absolutely delighted with the result.
Strong market for small country estates At the beginning of the year Beech Mill at Battle completed with a guide price of £2.5 million. This stunningly located country estate with a spacious house and secondary oast house was set in 75 acres with a good range of outbuildings all overlooking two large and stocked Hammer Ponds. The property had been in our client’s possession for more than 30 years. Another sale of long held property - this time 68 years - was about 33 acres of pasture at Crowhurst, which sold in two lots with a guide price of £265,000 for the whole.
London buyers turning to the country again At the back end of 2017 there were several good sales. What we have noted is that, because the London market has slowed down, buyers from London selling their properties are keen to hold on to their buyers and move quite swiftly to a purchase and go forwards to exchange and completion. Londoners are beginning to look at the countryside again because values have not increased in the rural market by anything like as much as they have in London. An example of this is a property called Cousens at Rudgwick near Horsham in West Sussex. This is a five bedroom Grade II listed detached family house with 1.5 acres. It includes a garden and a paddock. Cousens was on the market during last summer and did not find a buyer until later in the year but still sold at a figure approaching the guide price of £1.4 million.
LAND PRICES PER ACRE
Marketing the right lots On a slightly different tack, we had an example of how lotting can produce a successful sale in the residential market. This was Blakes Farm at Maplehurst near Horsham, a residential farm which created interest, but where it had proved quite difficult to find the right buyer. Blakes Farm was originally offered as a whole - a barn conversion with about 47 acres. Subsequently it was put into three lots consisting of the house with 4 acres; the paddock and stables; and about 38 acres of farmland and woodland. Sales were swiftly agreed on all three lots. At the cottage end of the market, a couple of interesting period semi-detached houses have recently been put up for sale and are attracting early interest. These are numbers 1 and 2 Pond Cottages at Plaistow in West Sussex: one has a guide price of £425,000 and the other a guide of £525,000. In general, residential market values were reasonably steady during last year. High Stamp Duty costs had been putting buyers off but there was almost a point at which they decided they could not put their lives on hold any more and had to bite the bullet. This year has started off with a good deal of activity in the rural residential market, but it remains to be seen how the market will unfold through the year.
Per acre: £15k
Grassland Grassland Woodland Woodland <10 acres <10 acres
© Batcheller Monkhouse Research
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Rural Outlook 2018
With more and more legislation piling on to residential landlords and their agents, Batcheller Monkhouse is in the best position to help.
That strength is particularly relevant at the moment when there is a lot of talk about unprofessional behaviour amongst letting agents and the need for the industry to be regulated by a Government body. Currently, anyone can set up as a lettings agent in a back garage with a computer and a website. We are well ahead of the competition. Firstly all of our offices have experienced and Association of Residential Letting Agents (ARLA) qualified staff, which ensures they have a confident knowledge of the latest changes in legislation, compliance and best practice. This gives the best possible service and protection to our landlords. We are members of the property ombudsman scheme and the Tenancy Deposit Scheme, ensuring deposits are protected. Finally, we are already regulated by the Royal Institution of Chartered Surveyors. I would still support the establishment of a new Government body to regulate the lettings industry as there are too many rogue agents out there. We have to connect with landlords and tenants on a personal basis. We have to manage the expectations of landlords who may be petrified about handing over a million pound house to
an agent. The flip side of that is that the tenant has to know what the agent is doing: they have to be happy that they are renting a property in good order and expertly managed. The key to these relationships is flexibility. I mentioned earlier that we are experienced in new legislation, and there is a lot more of it now than there used to be. For example, from October 2019, there is likely to be a Government ban on tenancy fees charged by letting agents. These will be passed on to landlords who will undoubtedly seek to protect themselves by seeking higher rents. Landlords will respond in the same way to attempts by the Government to bring in compulsory testing this year on fixed wiring for light switches, plugs and sockets. Portable appliance testing should be done as a matter of course as part of the electrical installation condition report. But there is not a legal requirement yet for fixed wiring, even though a tenant who suffered an electric shock could sue their landlord. Landlords will have to pay for the testing, and this may further increase pressure on rents. It is the market
however that will decide, but here one would expect well presented and managed properties to secure the best rents and retain good tenants for longer. Another charge faced by landlords is for the renewal of their Energy Performance Certificates (EPCs), the cost of which varies from £75 upwards. EPCs were introduced in 2007 and were due to last for 10 years, so many will have to be renewed this year. As well as renewal, new EPC regulations came into force from 1st April 2018. These bring the minimum level of an EPC up to an “E” rating from the current “F” rating. Many older properties may not be able to reach the new minimum – if they are listed, for example. In these circumstances, they can apply for an exemption on a Government website. County councils will police the new regulations, and any EPC below the “E” rating, whether at expiry or at renewal of a tenancy, will have to be assessed and works will be required as necessary. All properties must comply by 2020. The new EPC rules may require expenditure. But by careful selection of this and some other commercial improvements, the rental return on a property may well improve. Warm and well equipped houses let faster, achieve higher rents and keep tenants longer - increasing the net return to the landlord. One point worth bearing in mind is that without an EPC, a landlord’s notice to quit may be ineffective. Away from legislation, the lettings market itself is set for some big changes. Figures from ARLA show that by 2025, 60% of renters will be aged between 20 and 36. They won’t be able to buy so will prefer the flexibility of renting. To give tenants greater security, there are plans for three year tenancies.
“To give tenants greater security, there are plans for three year tenancies.”
Tenants we deal with from the middle and upper end of the market will pay more rent for a high specification property. At the top end, this is usually four bedrooms and upwards with carpets, curtains, a lot of fittings, a swimming pool and perhaps a tennis court. These typically fetch anything between £2,000 and £4,000 a month.
“I would still support the establishment of a new government body to regulate the lettings industry as there are too many rogue agents out there.” Customers are telling us that there is a shortage of these good quality residential lettings on the market. Our experience is that there is a lot of property out there which is run down and dilapidated. We advised one last year who was receiving £850 a month rent and he redecorated and put in a new kitchen. Now, he is getting £1,165 a month, offering a 15% return on the investment in improvements. The Class Q Permitted Development rights may create opportunities to convert larger agricultural buildings to residential dwellings to meet this growing demand from the let. In the last four years, we have seen more farmers do this as they are squeezed on their income from farming. The key to a successful letting enterprise is attention to detail, a strong working relationship with owners and the ability to provide tenants with a reliable and efficient management service. Professionalism is everything.
Jane Poile • firstname.lastname@example.org • 01444 415151 Rural Outlook 2018
The New Telecoms Code – A Help or Hindrance? Many farmers and landowners agree to electronic communications operators, such as mobile phone companies, installing aerials and other equipment on the roofs of their buildings or erecting masts on their land. This can provide a useful source of income. But the new Electronic Communications Code contained in the Digital Economy Act 2017 and introduced on 28 December 2017, is likely to reduce landlords’ income from these agreements and leave them with less control over their properties. The new Code is supposed to make it cheaper for operators to operate networks so they can plough that money back into developing more sites for UK PLC. Cynics would say that it is going to be the network operators’ shareholders rather than the public who benefit from any savings – and rent was not a great cost compared to the operators’ overall expenditure anyway. Yet under the new Code, operators are seeking to reduce mast rents from an average of £6,000 a year to just £500. The reason why rents could fall is because valuations now have to disregard the fact that the land will be used for running a network: instead, it will be based on existing use values, which could be much lower. As part of the reform of the old Code, the Government were put under pressure by the operators to allow them to upgrade and share telecoms kit to provide more widespread network coverage. This they allowed, so long as certain specific conditions are met – meaning, landowners may now not be able to benefit financially from upgrades or multiple operators sharing their site.
“...it is important that businesses are protected for future generations...” Aside from the lack of any financial benefit, landowners will also face various practical challenges if operators choose to exercise these rights such as the loss of control over building works; poorer security and access provisions; and, difficulty in removing the operators from their property. Many argue that the old system worked. No one wanted to go to court and so engaged in brokering a deal under the old Code. The landlord got some rent which turned him into a willing landlord happy to have the operators on his property. The new Code risks
turning them into reluctant landlords who will do whatever they can not to have the operators on their property. The result will be that landlords and operators won’t be able to reach agreement so the courts will have to impose them, leading to a lot of expense and bad feeling. The new Code only applies to agreements made after 28 December 2017. The Code is not retrospective, but there are some transitional provisions for existing agreements. If you have an existing lease, the rent will usually continue at the current level. But if your lease has ended or is coming up for renewal, the new Code will be used by operators to lever rents down. The new Code introduced sweeping changes to the law giving licensed operators the ability to apply to a Court to seek a specific right. Interestingly, there is no right to “add” equipment, which may give landlords room to negotiate for more rent. However, new rights to connect to a power supply; interfere with or obstruct an access route; and to lop trees have been added. The Code covers telecoms apparatus belonging to “licensed operators” – those operators granted a license by OFCOM. Apparatus can be above ground (a phone mast) or below ground (a BT fibre).
Where an operator wants to, say, erect a telecom mast in a field, a notice under Paragraph 20 of the new Code is served giving the landlord 28 days to agree terms. If terms cannot be agreed, the operator can apply to the court to impose an agreement. Batcheller Monkhouse is currently involved with a case where we had agreed a rent for a green field site at £7,000pa under the old Code. But since the new Code was introduced, that offer has been reduced to £500pa. With any incentive to agree to such a sum now lost, the landlord may bring forward his intentions to develop the land for another use such as erecting a shed or laying a hard standing. This way, any application to the court to force an agreement on the landowner is likely to fail. The definition of “land” is significant under the new Code, as the new Code can only apply to “land”. Although “land” includes land and buildings, it does not include electronic communications apparatus which is defined as including “other structures or things designed or adapted for use in connection with the provision of an electronic communications network.” This might mean that some agreements relating to apparatus on adapted water towers, grain silos or other structures on farmland cannot be Code agreements and so be outside the rent control.
As was hinted at earlier in this article, the new Code does not entirely give the operators all that they need as can be illustrated in some of the following main changes:
Upgrading or site sharing
Landowners could restrict upgrading or sharing or allow it subject to the payment of money or a share of the site share income.
Landowners cannot prevent or limit upgrading or sharing or impose any conditions (including a requirement to pay money). However, operators only have the right to upgrade or share if any change that arises has “no adverse impact, or no more than a minimal adverse impact, on its appearance” and that such works “imposes no additional burden” on the owner. An additional burden includes anything that “has an additional adverse effect on the other party’s enjoyment of the land” or “causes additional loss, damage or expense to that party”.
Consideration (i.e. rent)
Market rents could take into account the fact that the land was used as a telecom site.
Market rents must assume: “that the right …does not relate to the provision or use of an electronic communications network”.
Landowners could seek compensation but rarely did as rent effectively covered not only the “price of agreement” but all heads of claim
Faced with the prospects of a lower consideration, landowners are likely to claim compensation for their loss, as they are entitled to do. Typical heads of claim will be: • land taken: this will vary between each site (such as between farmland/woodland, farmyard/car park etc); • injurious affection – this allows a landowner to claim for any drop in value to his retained property (say to a house within sight of the mast); •d isturbance – this ought to cover the landowners time and trouble in dealing with access requests, which at say five requests a year per operator could equate to well over £2,500 per annum; and • fees.
Complex provisions for the removal of apparatus.
Landowners must now give the operator 18 months notice to remove equipment, which is applicable only in certain instances, the main being where the owner intends to redevelop the property.
Continued on next page... Rural Outlook 2018
The New Telecoms Code. continued...
Summary 1. What are the operators likely to do? Operators are clearly concerned about undoing all their recent drives to foster better landlord/tenant relationships. However, the new Code gives them the tool to upset that relationship. Against the background of the pressure to roll out new technologies, operators will need to tread carefully in the way they use the new legislation to achieve that. 2. What are the landowners likely to want? To protect income, owners are likely to:
• r ely on the current ambiguities of the new Code to argue why the operators might not be entitled to everything they think they are. This is likely to centre on arguments relating to the adding, upgrading and sharing equipment. Owners may then offer to grant “Code Plus” rights in exchange for a sensible rent and;
•n egotiate as high an element for compensation as is possible. Evidence will need to be examined on the effect of radio masts on the value of adjoining property, and the cost of administering and supervising each access request.
To protect their property, owners may try and prevent a new Code agreement being granted by either preventing the apparatus coming onto the land altogether as a result of their intention to redevelop or by allowing the apparatus to be installed onto something other than “land”. Either way, owners are likely to put the operators to task to prove the “Access Test” in that:
• t he prejudice caused to the landowner is capable of being adequately compensated for by money; and
• the public benefit outweighs the prejudice to the landowner.
There are few landowners who want to be a barrier to mobile phone connectivity. However, landowners do have a sense of what is fair and reasonable. The answer to the question “The New Telecoms Code – A Help or Hindrance?” and its objective to help the roll out of new technologies for 5G does depend on the operators not getting too heavy handed. Unfortunately, with only a few months into the new regime, we are not full of optimism.
Tom Bodley Scott • email@example.com • 01892 509280
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