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Driving game, profits, revenue and tractors on landed estates

26 January 2016

"Buy land, they ain’t making any more of it" – So said the author Mark Twain.

But if you are an owner of a landed estate you are probably having to make a lot more of the land you have, to stave off adverse and well-documented economic pressures affecting farming businesses.

What is a landed estate?

Did you know that there are 59,688 hectares of farmland in Surrey? If you have ever visited the Surrey County Show, then you will know something of the variety of farming and rural businesses in the county.

Landed estates are rural family businesses, comprising land, farming and other income producing assets, such as cottages and let farms and they are an important part of Surrey’s fabric.

Surprisingly for some perhaps, a landed estate is often a hotbed of business innovation, experience and passion by those who own and run them.

They have to think about people (owners, tenants, estate workers), land (mountain, moor, arable, grazing, woods), assets (minerals, post mineral extraction sites, game, buildings) and how to use local expertise and artisan crafts, all to help generate income.

The traditional source of income on any landed estate is farming and rental income from property, plus joint initiatives such as tenants selling produce on the estate.

Furnace Place Estate mills and flakes its own crops into flours, muesli mixes, porridges and cake mixes.

Imbhams Farm Granary was set up to work alongside Furnace Place Estate’s crops, making award-winning products sold at local markets and food events.

Coverwood Farm not only has livestock, but are artisan meat producers, run the Coverwood Opera and have 'The Fillet and Bean', a mobile professional kitchen offering catering for events.

Many run shoots, zoos, children’s play areas and of course many offer wedding and film sets.

A responsibility to the area

Did you know that there are 3,193 people employed both full and part time in agriculture in Surrey?

Landed estate owners feel the responsibility of their position, but landed estates are not charities (though some are owned by charities) and can’t give employment without income and profit, although many estate owners are great philanthropists.

So whilst an estate owner will look to reduce costs, they won’t want to damage the local economy and jobs.

Last year, I worked on a purchase of a Jacobean palace which really brought home the pressures of owning heritage property.

The history can be a source of attraction to visitors and income, but also a drain on resources, and this was highlighted by the loss of Clandon Park to a fire in April last year.

Nature and nurture

Mother Nature also plays a big role.

The chalky soil type of South East England lends itself to winemaking and is blessed with some wonderful vineyards, such as Denbies Wine Estate in Dorking, where over 60 percent of its agricultural land is set over to growing vines and other diversified activities, not to mention Greyfriars and High Clandon Vineyards, all of whom have made the move to wine production.

Conversely she wreaked havoc with the flooding at the end of 2015 and gave many estate owners massive headaches dealing with public safety, public access to property and potential dangers from large livestock.

Increasing revenue through new income streams is only fettered by the asset types on a landed estate, government rules and funding; revenue comes from ingenuity, investment in the estate and its people.

What three issues should landed estate owners address in 2016?

  1. Firstly I can’t stress strongly enough the need to review your assets on the estate and their practical and tax uses as it can often generate fresh ideas for diversification. Are all the buildings being used to their full potential? Could there be an income stream from an asset otherwise not considered? Are there adjoining businesses with whom the estate could partner? We have advised estates recently on utilising forestry for tax planning, aiming to make use of tax reliefs for commercial woodland, and on land use and occupation by family members for a possible claim for entrepreneur’s relief in relation to a sale for development.
  2. Is the ownership structure of the estate and its assets correct and the land held in the most tax efficient manner? Does it cater for and prepare for the next generation running the business? Is there risk in the current structure? What if the business was to find its way into the hands of a non-family member? We advise on pre-nuptial and post-nuptial agreements for members of landed estate families, as well as tax planning and best structure for assets to be organised and held for a family.
  3. Are all the tenancies and commercial arrangements including third parties correctly documented and regulated? Is the estate protected if the tenant fails to pay the rent or perform its obligations and is the correct form and type of lease or licence being used? We regularly advise on the creation of family farming partnerships to prevent future disagreements about ownership of assets. 

This article was written by Jonathan Thompson, and first appeared on www.surreylife.co.uk on 25 January 2016; it is reproduced here with kind permission.

For more information, please contact Jonathan on +44 (0)1483 255295 or email on jonathan.thompson@crsblaw.com.