Digging into rural land sales
Legal advice on buying rural land
In many ways, selling rural land is the same as for other types of land. Ideally the seller should consult an agent to advise on its value and how to market it. A solicitor will then deal with the necessary legal documents to actually transfer the land. However, there are various issues specific to rural sites.
If the land is being used for agricultural purposes and the seller receives EU Basic Payment Scheme Entitlements they are likely to want to sell them with the land. The sale documents must therefore deal with this properly or the entitlements may not be validly transferred. However, if a buyer does not intend to use the land for agricultural purposes it is important that it does not unintentionally warrant compliance with various conditions relating to the entitlements that it cannot actually meet and result in a claim by the seller against the buyer for lost payments.
If the land being sold is undeveloped, the seller might want to include overage, also known as ‘claw-back’, in the sale terms, to enable it to share in any potential increase in the value of the land if it is developed in future. Overage is notoriously complicated and needs to be drafted very carefully to ensure it takes effect in the particular circumstances the parties intend. Given the complexity, overage can significantly delay negotiations and there is no guarantee it will ever become payable. The parties should therefore each take separate independent advice from a land agent and a solicitor as to whether overage should actually be agreed and, if so, the specific terms for it.
It is also common to see rural land that has development potential dealt with by way of an option agreement or a conditional contract. Under an option agreement, it is for the buyer to decide whether or not it actually wants to complete the purchase at some future point. Under a conditional contract, the buyer is obliged to complete the purchase if specific conditions are met. Both option and conditional contracts usually relate to the obtaining of planning permission for development of the land.
Increasingly, Longmores deals with promotion agreements for rural land. This is where a ‘promoter’ applies for planning permission for the seller’s land and then markets it for sale with the benefit of that planning permission. The promoter will fund the costs involved in obtaining planning permission in return for a share of the sale proceeds. Under these agreements the promoter does not actually buy the land but instead finds a buyer. As such, promotion agreements are generally viewed as collaborative and positive for landowners. N
The content of this article is general information only, legal advice should always be sought in relation to specific circumstances.
‘While similar to other types of land, there are issues specific to selling rural land’
ABOVE:If the land is used for agriculture and the seller receives EU funding, this is likely to be sold on too