South West Rural Newsletter

reviewSouth West Rural

spring 2012

chestertonhumberts.com

Welcome to the Spring edition of the South West Rural Review, which demonstrates that amongst the continual reports of economic gloom, the outlook for the agricultural sector remains more positive.

This has been demonstrated in the farmland market, which has gone from strength to strength over the last year. However, the review of the Single Payment Scheme brings uncertainty to the subsidy system.

The Localism Bill is also due to shake up the planning system considerably. This will have an impact on many landowners and so to add to our expertise, at the end of 2011 we were very lucky to welcome

both Colin Tebb and Hannah Twells to the team.

Colin Tebb is a chartered town planner and is able to help with routine planning advice including applications, appeals and enforcement action. He is also able to advise clients on, as well as identify, new opportunities that the Localism Bill throws up.

Hannah Twells joins us having worked in the renewables sector and has particular expertise in advising on potential wind turbine sites.

We hope that you will find the articles of interest and, if there are issues that you wish to discuss further, please feel free to contact us.

This EditionTauntonMansfield House, Silver StreetTaunton, Somerset TA1 3DN

T: 01823 331234F: 01823 332034E: [email protected]

Truro40 Lemon StreetTruro, Cornwall TR1 2NS

T: 01726 77565E: [email protected]

Honiton105 High StreetHoniton, Devon EX14 1PE


Salisbury37 Castle StreetSalisbury, Wiltshire SP1 1TT

T: 01722 342393E:[email protected]

Honiton

Taunton

Truro

Salisbury


Throughout 2011 farmland values continued to climb both nationally and, in particular, across the South West. According to the RICS Land Price Survey, Grade 3 arable land rose by an average of 11% during the year. During the current turbulent economic times, demand has outstripped supply with purchasers viewing land as a relatively safe asset when compared with other investments both within the eurozone and further afield.

As ever, there is a wide range of buyers. However, commercial farmers, keen to expand, account for about 60% of the market. It is anticipated that during 2012, this demand will continue to underpin land values and, in our opinion, is likely to generate a further small increase in values. The strengthening of commodity

prices has also helped generate a steep increase in achievable rents.

These improved returns have encouraged both pension funds and private investors to re-enter the market. Investors are now willing to purchase vacant possession farms with a view to letting them out on long term farm business tenancies. Often, investors are keen to purchase privately and we have seen a marked increase in private deals (where the farm is not brought to the open market) and these now account for about 25% of all sales nationally. Lifestyle buyers have also re-emerged following the difficulties of 2009 and 2010 but have become more selective.

Due to the changing demands of buyers, the chosen method of sale has

now become of paramount importance. Prior to marketing, serious consideration has to be given to the various methods available, i.e. whether to sell by auction, private treaty or informal tender. Over the course of 2011, by taking careful consideration of the likely purchaser into account, Chesterton Humberts achieved an excellent record of success using all three methods of sale. For example, the sale of Park Farm (a commercial holding located in a local hotspot) was sold in lots by auction and achieved an average land value of £11,300 per acre.

However, elsewhere, in order to protect client confidentiality and to encourage investor buyers, parcels of arable land were sold extremely successfully by informal tender. For more traditional

Farmland Report: Land Prices Continue to Risedavid hebditch


ABOVE IMAGE: Halsdown Farm, Waterrow,

Taunton – a 112 acre ringfenced livestock and

arable farm with period farmhouse, further

detached farmhouse and 3 letting cottages,

currently available at £1.85m

LEFT IMAGE: Hamatethy.

For a free and confidentialmarketing appraisal please contact David Hebditch

With commodity prices remaining fairly

volatile, rising input costs and general

economic gloom, one bright spot is

that the cost of borrowing remains low.

The Bank of England’s base rate has

remained unchanged at 0.5% since 2009,

in spite of inflation rates staying above the

Government’s target level. Although there

has been intense speculation from the

pundits, it remains anybody’s guess when

this situation will change.

Much has been made about the lack of

availability of credit in the press, but over

the last year, lending to the agricultural

sector seems to have remained strong.

Continuing demand for land and the drive

to invest in machinery and equipment

before the changes to the capital allowance

regime in March has helped fuel the

continuing demand for farm finance.

The need to have adequate slurry storage

to meet the NVZ deadlines has also

added to this, together with the drive to

ensure renewable energy schemes beat

the reductions in the Feed-in Tariffs. For

the most part, lending has kept up with

this demand subject to the viability of

the business and the serviceability of the

proposition.

Lending margins may have crept up over

the last year but the cost of borrowing

remains very low when compared to where

it has been over the last 10 years. Over the

last 9 months, the increased margins have

been offset for new buildings, capital items

and machinery where certain lenders, such

as the AMC, have had access to funding

from the European Investment Bank. This

has enabled money to be borrowed with a

0.8% discount over the first 10 years of the

loan.

Farmers across the South West region have

taken advantage of this to fund a range

of items such as new buildings, upgrades

to milking parlour equipment, robotic

milkers, wind turbines, slurry stores and

farm machinery.

For the most part therefore, agriculture

certainly seems to have been bucking the

general trend over the last 12 months.

There appears to be no reason for the

appetite to lend diminishing. However, it

must be stressed that key to all propositions

remains serviceability of both existing and

proposed commitments.

Lending to Agriculture: Is it Bucking the Trend?

holdings, private treaty may well suit buyer and seller alike – as was demonstrated by the sale of Hamatethy in Cornwall (542 acres) which sold in excess of its guide price of £4 million.

Chesterton Humberts has an established and experienced team operating across the South West, supported by a national and international network of offices which can generate demand from local, regional and national buyers.

caroline lawrence

t: 01823 348290 m: 07968 216655 e: [email protected]


The Single Payment Scheme (SPS) as we have known it over the past years is set to continue until the end of 2013, when it is due to be replaced by a new ‘Basic Payment Scheme’ from 2014 onwards. As the current proposals for the new scheme have now had time to be aired, it would seem a good time to consider some of the potential practical implications of the current proposals.

Firstly, under the new scheme it is proposed that all existing SPS entitlements will be cancelled with new entitlements granted against eligible land occupied in the first year of the

scheme. However, entitlements will only be granted to those who activated at least one SPS entitlement against eligible land in 2011. This has several potential implications: firstly, for those ‘new entrants’ into farming, who did not activate entitlements in 2011 (such as Landlords taking land back ‘in hand’ from Tenants), or those purchasing a farm or land for the first time; and secondly, for business which may have undergone significant restructuring between 2011 and the end of 2013.

A potential solution is provided by the fact that the right to establish

entitlements in 2014 may be passed on (becoming known as the ‘golden ticket’), albeit to one party only. Accordingly, those first time purchasers of land and farms must take care to ensure it is a contractual term of the sale that this right shall be passed from vendor to the purchaser. Where a farm or land is sold in lots to different purchasers, there will still be an issue because the right may be passed on to one party only.

Secondly, there have been concerns raised about proposed ‘greening’ requirements which may form part of the new scheme.

Single Farm Payment: the Next Chapter?jack mitchell


It has also been proposed that payments will be capped for businesses receiving a payment in excess of €150,000. However, the effects of capping may not be too significant as it is proposed that salaried labour may be deducted before capping is applied, as can any ‘greening element’ of the payment.

In addition, further clarification is being sought on ‘active farmers’ – payments will only be made to those satisfying the ‘active farmer test’. This means that there must be ‘agricultural activity’ carried out on the land, i.e. positive land management. A further condition of the active farmer test looks likely to focus on

income. Receipts from direct payments must amount to at least 5% of receipts from ‘non agricultural activities’. This may create difficulties for diversified businesses, such as rural estates, where there may be significant property-based income from residential, commercial and holiday letting property for example; or where a farm business has diversified, such as retail or renewable energy schemes. One solution to this could be to split sectors of the business into separate entities. However, this may have wider administration and taxation implications. It must also be considered that regulating such a policy is likely to be very difficult, and the need to supply

information could be very intrusive for all businesses involved.

It can be seen that there are currently a wide range of proposals under consideration. Theoretically, we are just under two years away from the introduction of a new scheme but in reality, these proposals represent the very first stage of a long process of negotiations over CAP reform. Indeed, many feel that a new scheme will not be in place until at least January 2015, with the SPS continuing for an extra year. Nevertheless, farming businesses must not lose sight of the implications of CAP reform.

permanent pasture maintenance Those areas of pasture which are five years old will be designated as permanent, and a minimum of 95% of this area will have to be maintained as such. This is clearly restrictive and may arguably have implications for capital and rental values of land going forward.

Some may consider ‘ripping up’ pasture in light of this proposal, but care must be taken to consider the implications of this – where it has been down for fifteen years or more (or is the subject of a wide range of designations), an Environmental Impact Assessment is required.

diversity of croppingIt is proposed that all holdings with 3ha or more of arable land must have a mixture of at least three crop types, with each type covering a minimum of 5% of the holding, and a maximum of 70%.

This may create a wide range of issues. For example, for livestock farmers only cropping maize, or arable farmers operating

intensively over a small acreage, or those businesses concentrating solely on one crop.

Those affected may have to make some arrangements for the business management control of more diversely cropped land under the scheme. For example, the rental of neighbouring land which could then be contract farmed back by the neighbouring farmer.

ecological focus areasA further proposal is for a minimum of 7% of holdings to be environmentally managed. Although this 7% will include features such as hedges and ditches, and is likely to include areas managed under environmental agreements such as Entry Level Stewardship, the true advantages versus the practical implications don’t seem to have been considered.

Proposed Greening Requirements


The much anticipated Localism Bill, which contains the National Planning Policy Framework is intended for release in April 2012. This will condense over 1,000 pages of planning policy into a single document of 52 pages with the intention of simplifying the planning system.

One of its main objectives is to devolve more power to the local community and perhaps the three most important key changes proposed as far as the rural sector is concerned will be:

neighbourhood plans:

The major proposal is for Neighbourhood Plans to be introduced to allow communities to come together through a local parish council or neighbourhood forum and agree where they think new houses, businesses and shops should go. These plans can be very simple and concise, or go into considerable detail. The draft Bill indicates that Parish and Town Councils will be able to use a Neighbourhood Development Order to grant full or outline planning permission in areas where they most want to see

new homes and businesses, making it easier and quicker for development to go ahead. At this stage, it is unclear quite how this fundamental aspect of the Bill will be implemented by Councils.

community right to build:

The Community Right to Build is a similar set of proposals that would give local communities the power to decide what is built in their area. The new powers would mean that where developments for new houses, community facilities or shops have the agreement of the local area through a ‘community referendum’, and meet a minimum criterion, communities will not need to go through the normal planning application process. It will be for communities to identify suitable land, sources of finance and secure support for their proposals, and new powers will mean that community organisations would be able to take forward new local developments without the need to go through the normal planning application process.

s

To further strengthen the role of local communities in planning, the Bill will introduce a new requirement for developers to consult local communities before submitting planning applications for certain developments.

Unfortunately, despite it being less than one month before it becomes Statute, the draft Bill still fails to explain quite how these fundamental reforms to the planning system will be implemented.

Chesterton Humberts will endeavour to keep you updated, but in the meantime, we would suggest that landowners consider discreetly discussing with their local Parish or Town Council how they see local decisions being made and how they (the landowner) might become involved, and ‘assist’ Parish or Town Councils in achieving their objectives for new homes and other community facilities.

The Planning System: Update on the Localism Billcolin tebb

LEFT IMAGE: Grade II listed farmhouse where permission was secured to extend and carry out restoration work. RIGHT IMAGE: Former stables

where permission was granted to convert to a residential use


Meet the Team

Dates for the Diary

royal cornwall show

cereals honiton show the dairy show

game fair gillingham & shaftesbury show

7th - 9th June 2012

13th & 14th June 2012 2nd August 2012 3rd October 2012

20th – 22nd July 2012 15th August 2012

Chesterton Humberts will be exhibiting at shows throughout the country and particularly two of the principal shows in the rural sector during 2012.

The Showground, Wadebridge

Boothby Heath, Lincoln Honiton Showground, Stockers Farm Bath and West Showground

Belvoir Castle, Nr Grantham Turnpike Showground, Motcombe

David Hebditch

David Pardoe

Neil Gladwin Caroline LawrenceHead of Rural

Director

Director Associate Director

01823 [email protected]

Hannah TwellsGraduate Land Agent



Colin Tebb John Dawe-LaneChartered Planning Consultant Associate



Marie HandelAssociate Director


Kate ThomasLand Agent


Jack MitchellAssistant Land Agent




TAUNTON

SALISBURY


Our South West Rural Offices

Honiton105 High StreetHoniton, Devon EX14 1PE


Salisbury37 Castle StreetSalisbury, Wiltshire SP1 1TT

T: 01722 342393E:[email protected]

TauntonMansfield House, Silver StreetTaunton, Somerset TA1 3DN


Truro40 Lemon StreetTruro, Cornwall TR1 2NS

T: 01726 77565E: [email protected]

Documents

South West Rural Newsletter