Agriculture Newsletter – Autumn 2017
Welcome to the Autumn 2017 Agriculture Newsletter
One of the things that really attracted me to agricultural law was the diversity in the kind of work that term covers. From a property aspect alone, the team regularly deals with anything and everything from dividing a site up for promotion and ultimately development to purchasing a listed medieval manor house and moat to granting a succession tenancy to a second generation farmer of arable land in the Marches. Outside of property the team comprises expertise from employment to health and safety; from litigation to corporate reorganisation; from immigration to tax strategy and trust composition.
I hope you enjoy this quarter’s newsletter and please don’t hesitate to contact any of the team for further information. We all wish you all the best for Christmas and the New Year.
Agricultural workers and our Right to Work App
Right to work checks can be a huge pain point for employers, agencies and HR teams dealing with agricultural workers. Employers must carry out right to work checks on employees, regardless of nationality. This applies to all workers, whether full or part time. If you do not do the checks, or do them incorrectly, then you could face a civil penalty of £20,000 per worker, loss of your sponsor licence if you have one, closure of your business and criminal sanctions if any of your staff knew the person was working illegally.
Despite the best intentions, many employers and HR staff get this wrong. This can mean that they will not have a defence or statutory excuse if any employees are working illegally, or if they become illegal. This can happen if, for example, their status changes or their visa expires.
The problem is, firstly, many compliance staff, perhaps understandably, do not know all of the relevant immigration rules and Guidance. There are different rules, for example, for EU staff, non-EU staff and family members. Then there are special rules for Croatian nationals and others, and a great many exceptional cases. The complexity and number of exceptions is only going to increase as we approach Brexit and ‘Implementation Period’ for post-Brexit Immigration Rules. A second problem is that, where ongoing checks are required, for example, for visas, these can be missed or carried out too late. Thirdly, there are very often record-keeping and document retention issues. Since 2014, right to work records must be kept in a prescribed form, ready for Home Office audits, and retained for two years after termination of employment.
Therefore, to help employers with these challenges, we have developed our “right to work” app. This has three key benefits. Firstly, it is a simple way to carry out a check and establish a statutory excuse, all you need is access to an iPhone. You can also use an Android phone, or a tablet. You download the app from the Apple Store or Google Play. There’s no need to change your HR systems, or for expensive software integrations. There’s no training required. When you are considering taking on a new employee, you just:
- enter their details in response to the questions on the app;
- follow the ‘yes’ or ‘no’ steps it gives you;
- using the phone’s camera, you take the new employee’s picture and a picture of their right to work documents.
The App then confirms, on the basis of this information
- whether they have a right to work;
- whether that right expires and if so when; and
- if continuing right to works are needed, it confirms the relevant dates and then sends alerts to your nominated HR staff so that they are notThis means you do not need access to a photocopier or scanner. There’s an almost instant decision, so you can employ staff faster. And you have clear evidence that the right to work check was properly carried out. The second benefit is that there is no risk of lost paper records. It is a completely paper-free and Cloud-based service. The information captured is stored securely on our firm’s dedicated server which means you are 100% compliant in your data protection duties. It works off-line – if you lose your internet connection the app will save and transmit the data when you’re back online. The third benefit is it means you can easily comply with Home Office Audits. The information is stored and presented with exactly what’s required to meet Home Office standards. The records are available immediately at any time to your nominated personnel, through a secure login. And the evidence captured proves that the company is compliant and gives you a complete audit trail.
During the launch period we are offering free trial. As an employer you can test the app with your HR staff for a month for no charge. We are very keen to help employers in the agricultural sector succeed with immigration compliance and right to work checks are key. If you have any questions, please do not hesitate to get in touch.
Grazing Licences – A note for landowners
Landowners often let their land on a short term basis for the grazing of animals. The landowner usually receives a payment from the animal owner for the grazing period, which is typically from May to October each year. Whilst such arrangements are frequently organised on an informal basis, the landowner could find themselves in a difficult position if there is no record of what has been agreed.
Under a written Grazing Licence, the licensee will be bound by a number of obligations, including the payment of the licence fee and restrictions as to what can be done on the land to protect it from harm. Further, appropriate rights are also granted to the licensee which also serves to safeguard the landowner from any future adverse possession claims by the licensee. These claims can be very messy and a landowner certainly does not want to find themselves in the midst of one!
Therefore, it is advisable that a written licence is entered into which should be for a term of less than a year and contain a clause which states that the animal owner is to remove animals at the end of the licence for a period of at least a few days before any renewal arrangement is entered into.
As the use of the land by the animal owner is as a licensee, they do not enjoy exclusive possession and therefore are not considered to be in possession of the land. Importantly, as the landowner is deemed to remain in occupation under a Grazing Licence, from an inheritance tax perspective, the land in most cases will start qualifying for Agricultural Property Relief only after the landowner owning it for 2 years subject to the licence, whereas if the land is tenanted, you have to wait 7 years. Other tax benefits include the fact that a grazing fee counts as trade income rather than property income.
The landowner can also continue to receive payments under the Basic Payment Scheme due to their perceived continued occupation. This means that it is prudent for the landowner to include a clause in the agreement for the licensee to comply with the provisions of any grant scheme affecting the land and/or any cross compliance rules to protect these payments. However, in doing so, the landowner must be careful that the obligations on the licensee do not stray too far as if they are required to carry out activities such as repair fences and other acts of good husbandry, the licence may be considered more akin to a tenancy.
Where the grazing of the land or any part of it is being used for a non-agricultural business purpose then a formal lease is the better way to go as the occupation may constitute a business tenancy under the Landlord and Tenant Act 1954 (LTA 1954). This means that the tenant could acquire security of tenure and the landowner could find it very difficult to gain possession of the land. To avoid creating security of tenure, the landowner must ensure that the tenancy is explicitly “contracted out” of part II of the LTA 1954.
Alternatively, if the land is being used in connection with a trade or business then an agreement relating to grazing may create a Farm Business Tenancy (FBT). The land or part of the land must be farmed for the purposes of a trade or business throughout the term. “Farming” includes the carrying on of an agricultural activity and the definition of agriculture in section 38 (1) ATA 1995 includes grazing as an agricultural activity. The tenancy must be primarily or wholly agricultural in nature.
Where the grazing involves horses, other problems can arise for the landowner. Horses are not considered livestock unless they are being kept for farm work or meat and therefore the grazing of horses is not an “agricultural activity” which falls within the scope of a FBT. Grazing must be completely separate from the land on which the yard and facilities of any wider commercial operations are sited (such as a riding school or livery). Any non-agricultural activities taking place on the grazing area will negate the FBT and it is likely that a business tenancy has been created under the LTA 1954. This could be disastrous for the landowner who had planned to use the land for development purposes in the near future.
Given the risks involved, it is vital that a landowner asks the pertinent questions at the outset as to the purpose for the grazing of the land and any associated business for which this serves. It is important to take appropriate advice when deciding the most suitable arrangement for granting grazing rights and to ensure the agreement is made in writing.
Avoiding pitfalls when selling agricultural land
Masood Ahmed, solicitor within the agricultural property team explains how you can avoid some of the keys pitfalls to ensure that the sale of your agricultural land is cost-effective and efficient.
The sale of any property can be a stressful time but the sale of agricultural land can quickly put you on the road to a long and costly journey. However, with plenty of preparation, and the right team in place, the process can be cost-effective and efficient.
Establishing proof of ownership is the first thing a buyer’s solicitor will do to ensure that the seller owns the land. This can be done almost immediately if the title is registered at the Land Registry, or take significantly longer if the title is unregistered. To avoid the pitfall of unregistered land, the seller’s solicitor can check the registration of the land before the Property is put on the market and, if the title is unregistered, the solicitor can make a registration application to the Land Registry before a sale is agreed. This will prevent further delays as, with unregistered land, there is more risk of title issues becoming known at a later stage in the sale process.
After establishing proof of ownership, the buyer’s solicitor will raise pre-contract enquiries to seek further information in connection with the property. For agricultural land, these enquires can be extensive and the replies take a long time to put together. In order to avoid delays during the sale process, the seller can put together information relating to the following beforehand
- Environmental/countryside stewardship agreements
- Restrictive covenants (for instance limiting the use of land for certain activities, such as residential)
- Existence of sporting rights
- Crop and yield records
- Livestock statistics
- Water abstraction licence; drainage plans
- Accurate boundary information
As part of the preparation, it is also advisable that you contact any lenders that hold a charge over the land (if applicable) and obtain details in connection with the redemption of the charge and whether they have any particular requirements. If requested, your solicitor can do this for you. This again is something that can be done before the conveying process formally starts.
Another key pitfall to avoid is the uncertainty over whether the land is being sold with the benefit of a tenancy or licence or with vacant possession. It is important that you provide your solicitor at the earliest possible opportunity copies of any tenancy agreements and licences. In turn, your solicitor will be able to advise you on how you can achieve vacant possession in time for completion or provide the relevant documents to the buyer’s solicitor. Vacant possession also means leaving the land clean and tidy, as anything left behind becomes the property of the buyer.
For any sale, you will require a core team of key advisors. This will include your solicitor, accountant and selling agent. The sale of agricultural land is a specialist area and it is important that you choose a firm that is experienced in the sale of rural land. Meeting your accountant before you decide to put the land on sale and discussing any tax savings to be made can also avoid delays during the sale process.
Finally, a selling agent experienced in farm sales will be able to agree clear heads of terms and establish timescales at an early stage.
What is an Agricultural Tie
An Agricultural Restriction is a condition imposed by a Planning Authority, when granting planning consent for the building of a dwelling, usually in an area where otherwise development would not be allowed. They usually require that ‘the occupation of the property is limited to a person solely or mainly employed, or last employed, in the locality in agriculture as section 336(i) of the Town and Country Planning Act 1990, or in forestry (including any dependents of such a person residing with him) or a widow or widower of such a person’.
Properties with such a tie can be difficult to sell and often only do at a discounted price. The existence of a ties is perceived to be a barrier or because the impact of a tie is not understood. The effect on property value is negative and a generally accepted rule of thumb is that value drops by circa 30%, with the general perception being that the smaller the parcel of land, the greater the discount.
There are a number of routes for removal of these ties, but each depends on the type of document which creates the restriction. Two of the most common ways in which an occupancy condition can be lifted:
Full Planning Application
Key to the process is being able to demonstrate that there is no longer any requirement for agricultural work on the holding or anytime in the foreseeable future (by undertaking a survey of the existing need of the holding in the context of the local area).
This can be illustrated by marketing the property for sale at market value for say 12 months. If there is no interest from anyone who would comply with the condition, an application can be submitted, with all supporting information, to request the Agricultural Restriction be lifted on the basis that there is no need on the holding or in the locality.
Lawful Development Certificate (LDC) Application
An alternative route that could be adopted is to make an application for a Certificate of Lawful Use under Section 191 of the Town and Country Planning Act 1990. This section allows an Applicant to obtain a certificate confirming that the use of the land in breach of the planning permission is lawful. In order to obtain the certificate, the Applicant must show there has been a breach of the planning permission for at least 10 years (without any breaks) and there is no current enforcement notice in force.
If you are considering purchasing a property with an agricultural tie or are reviewing your options if you own a property with an agricultural tie, it is important to obtain clear advice on the options available.
Should you require any further clarification or advice on the above please do not hesitate to contact Freeths Solicitors Rural Property Team.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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