Legal Considerations for Diversification in Farming

A few years ago, I took my children to watch some cows being milked whilst staying on a farm on the Isle of Man, and it occurred to me that even smaller farms are now diversifying in some way, with everything from the creation of solar farms, to providing bed and breakfast or ‘stay on a farm’ accommodation.

The value of embracing diversification in farming is a means of increasing the ability of farms and estates to weather the current pressures on farm incomes, and maximising opportunities to generate income from non-agricultural assets and enterprises. This is especially important at present, given the economic uncertainty surrounding the eventual outcome of Brexit on the farming industry.

Also, an increasing number of farming families have used diversification as a practical means of allowing different  generations within the family to develop their own interests, ideas or businesses within the ‘umbrella’ of a single farm, even where those businesses  do not lie in farming itself.

There have been cases of farms having their traditional farming income supplemented with diversification projects ran by younger members of the family into cookery, wedding and events organisation, and glamping. This is in addition to the renting out of farm buildings to tenants for business use unconnected with the farm itself, or diversification into renewable energy supplies, such as solar farming.

Diversification therefore not only allows farms to be more resilient by adding additional income streams, but it can also allow members of the family, who might not otherwise do so, to return to bring their interests into the family farm umbrella after college, university or other time away.

Whatever the proposed diversification, it is always advisable to seek professional legal advice on the proposals in order to ensure that structures and entities are set up correctly and that any tax implications and/or planning requirements have been considered.  From a property law perspective, you will need, for example, to consider whether you wish to let out a farm building or field without security of tenure, which would otherwise be conferred on a business tenant by the Landlord and Tenant Act 1954. This can apply even to a simple field let out to a riding school for the purposes of its business. Failure to serve a statutory notice on the tenant, and to obtain from the tenant the necessary form of declaration prior to occupation, might prevent you from taking back the premises at the end of the term without paying compensation to the tenant under the Act.

Similarly, in letting out residential premises you will need to comply with the regulations governing rent deposits and requiring smoke detectors to be fitted on each floor of a property, for example. There may also be issues of company or partnership law to consider.

Woodfines’ agricultural team can help with any aspect of your farming business, including any issues of proposed diversification, property aspects, company and commercial issues, and estate planning.

For further information or advice on this subject, please contact Charlotte Benjamin, Head of Agriculture at Woodfines Solicitors, on 01234 270600 or email: cbenjamin@woodfines.co.uk