Flexibility for the occupation of houses

A Court of Appeal decision suggests there is now more flexibility for the occupation of houses subject to an agricultural occupancy restriction than previously thought. 

This could have implications on those who may now qualify to legally live in such a property and in turn have a positive impact on its value.

The appeal in the case of Shortt v Secretary of State (2015) concerned the meaning of “dependants” in an agricultural occupancy condition attached to a planning permission of the property in which the Shortt family lived. 

The condition stated: “The occupation of the dwelling shall be limited to persons employed or last employed solely or mainly and locally in agriculture as defined by Section 290(1) of the Town and Country Planning Act, 1971, or in forestry and the dependants (which shall be taken to include a widow or widower) of such persons.”

The farm was run by Mrs Shortt, but her husband had an independent business which in practice supported the farm. In reality Mrs Shortt spent less than a day per week on the farm which had never made a profit. 

It was therefore questioned whether the family’s occupation of the property complied with the agricultural occupancy condition, as the husband and children were not financially dependent on Mrs Shortt as an agricultural worker.

However, the Planning Court and Court of Appeal decided the family’s occupation did comply with the agricultural occupancy condition.  This was on the basis that the reference to dependency in the planning condition did not have to mean financial dependency - the support provided to the family as a wife and mother meant that the agricultural occupancy condition was complied with.

On the face of it this may open up the possibility of properties subject to such a condition being sold on the open market to a much wider cohort of society than has been the case before, which in turn may increase the value of these properties. 

Conventionally it has been considered that because of the occupancy restriction, such a property would be worth about 30 per cent less than a similar property without such a restriction. This level of discount may now be brought into question.

However, this could be a double edged sword as in some instances the owners of such properties look to get the tie lifted on the grounds there is no longer any demand for the property subject to the tie.  But if the potential qualifying occupiers of the property are now rather more widely cast, it may be increasingly difficult to prove that demand no longer exists.

We will have to wait and see how the market interprets this new case law before we can detect its full impact on the type of people legally living in agriculturally tied property and the value of the property itself.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Banks keen to lend to farmers

Banks are still keen to lend to farmers although the process of getting loans approved can still be quite tortuous as anyone who has recently tried to arrange a loan will be well aware.

However from my recent experience either valuing farms for banks or in helping farmers make loan applications for the Agricultural Mortgage Corporation (AMC), it is clear that competition between all the High Street banks is fierce and we often see “bidding wars” as each bank looks to undercut the other’s cost of borrowing.

The reason banks are keen to lend to farmers is because they generally have a very strong capital base which has been bolstered in recent years by the rise in farmland values. For example in this area we have seen the average value of land rise from around £3000 per acre in 2006 to around £7500 per acre today which is in stark contrast to the residential property market. However revenue returns on farms have not always matched the rise in capital values and this can be the stumbling block, with most banks now more concerned with the serviceability of borrowing than the loan to value ratio.

But in general this is good news for farmers as is the fact that some lending institutions such as the AMC have recently secured additional funding from the European Investment Bank (EIB) which means that for certain loans they can offer discounts on their standard margins of 0.8% which is a significant figure in these days of historically low interest rates.

Such discounts are unfortunately not available for the purchase of land or the restructuring of borrowing but they are available for investment in buildings and other equipment. Therefore if anyone is thinking of carrying out such work they should not only contact their existing bank manager but also consider contacting their local AMC agent to see if they can help.
  As AMC agents and valuers, my firm Carter Jonas, like many others is experienced in helping farmers and landowners through the often complicated process of convincing the bank’s credit team that the applicant is a worthy of taking up the proposed loan and in my experience it is the “early bird” that often catches the worm. Therefore if you think you may have a project that would attract the EIB funding farmers are advised to contact their local AMC agent or call me for free initial advice.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk