Land of the living

'The good thing about farmers,' says Denise Wilkinson, head of Hewitson's agriculture and rural business team in Cambridge, 'is that they are always looking at ways to better themselves.'

Wilkinson's farming clients keep a close eye on their wills and their business structures and are constantly seeking new ways of making the business more cost effective and tax effective. 'Landowners rarely sell anything these days that doesn't have a clawback or overage provision put on it, and they are much more aware of any grants or stewardship agreements that are available,' she says.

Guy Hurst, partner in the property and agriculture team at Clarke Willmott, Southampton, shares Wilkinson's view that landowners are 'always looking for that extra' they can do on the estate. He admits that against the backdrop of the recession there will inevitably be some farming businesses that will not survive. But his practice has seen the transactional side of agricultural property picking up in recent months. 'We haven't seen the insolvencies everyone said were going to happen, and the banks are holding on. They are not repossessing as much as they did in the last recession.' The resilience of the industry, he says, is down to good management, and to 'people just getting on with the job and not being too flamboyant. A lot of estates are still looking to the future and will have their eyes on the next generation, whether this involves tax planning or buying up a new piece of land.'

Andrew Fearn, a private client partner at Langleys, Lincoln, says his firm had 'more than its fair share of purchases' of land throughout the course of 2009, despite the market for agricultural land being restricted, land sales being down and banking requirements becoming ever-more exacting.

Many of Fearn's farming clients are now seeking advice on business restructuring. While this is a sad signal of an industry under stress, 'it does mean that more and more agricultural businesses are prepared to change professional advisers', he says. 'They recognise that the added value which can be brought by finding the appropriate expertise is a major factor in the search for a successful relationship.'

Alex Megaw, a partner in the commercial litigation team at Davies Arnold Cooper, Manchester, has particular expertise in agricultural business. Several of his investor clients are talking about putting their money into land '“ forestry in particular '“ because of the tax advantages and promise of decent returns. Some are looking to enter into joint ventures with landowners to introduce investment into the farm, with the object of producing benefits for the farmer and profits for the investor. 'This is an exciting trend in the industry,' says Megaw.

Thinking strategically

Meanwhile, he says, farmers are being ever-more strategic in how they use their land. This often involves land that at some time in the future stands a realistic prospect of obtaining planning permission for uses other than agricultural '“ such as residential development.

One particularly prescient client obtained planning permission for several houses on five different areas on his land, on condition that they only be used by somebody farming that particular piece of land (known as an 'agricultural tie'). In this case, these individuals were his five sons. Over a period of 20 to 30 years, one by one these agricultural ties were released as the authorities realised that encroaching residential development necessitated it. 'The client was successful in turning a farm worth x pounds per acre as agricultural land into several farm houses and land worth much more,' says Megaw.

Such long-term objectives have a downside, he admits, in that this breaks up farms and allows encroachment of residential land, 'but for the individual farmer who has his family's welfare at heart, this is an excellent way of planning his future and theirs'.

Diversification continues to reap rewards for the more commercially savvy farmers and landowners. Anaerobic digestion (burning your own waste to generate power) continues to be a popular way of increasing efficiency. Gravel extraction, whereby farmers sell the gravel and use the hole to create a water reservoir, is also increasingly popular according to Hewitsons' Denise Wilkinson.

'Water security has long been a problem for farms and will be even more so in future, but with a gravel extraction licence you can take water in the summer and spring to water crops, whereas otherwise when there is a water shortage that right may be restricted,' she explains, adding that this is an area in which groups of landowners are increasingly banding together. Often one farmer will provide the land and rent it out to colleagues.

'It's not exactly a cooperative,' says Wilkinson, 'but it is innovative and it does involve thinking outside the box.'

Several of Wilkinson's clients are also selling off land for rural housing. 'The local authority is prepared to give planning permission if it is for affordable housing, as it means there may be more development in the longer term.

'Farmers don't make a huge profit from this, but they do get £30-40k per plot, and affordable housing benefits everybody, and potentially may persuade planners to let you have more development and hopefully unrestricted dwelling. You wouldn't get planning permission if affordable housing wasn't there first.'

Energy opportunities and risks

Many landowners also have a keen eye on opportunities in the renewable energy sector. Increasing numbers of wind farms are springing up throughout the countryside. For the UK generally this generates 'green power', while for the geographically well-placed farmer it generates profits. 'The fact is you'll receive more from a wind farm than from doing anything else with your land,' says Wilkinson.

Friends of Andrew Fearn own a hill farm in the Scottish borders. They have just had a number of wind turbines installed. 'They are going to get £10k per year for each turbine,' he says. 'The turbines have been erected on rough grazing land, so they are going to have additional income that didn't exist before. This will make a significant difference to their business.' While he recognises that arable farmers may have difficulties working their machinery around them, 'it is probably a small price to pay when you consider the benefits'.

Of course it isn't all plain sailing with wind farms '“ plans are regularly challenged by residents who are concerned about their noise levels and unsightliness. Wilkinson says this is putting a remarkable number of farming clients off.

Diversification, then, can be a mixed blessing. Perhaps none more so than industrial composting, according to Alex Megaw. One of just two lawyers in the country who deal with the issues of composting, he predicts increasing numbers of challenges in this area in the coming months.

While composting is being promoted by the government as a 'green' initiative, Megaw warns that there are huge inherent risks. 'Anyone thinking of turning over their land to a composting site should take great care.' Composting on an industrial scale, he explains, produces toxins that are 'harmful '“ even fatal '“ to humans and animals. It pollutes the ground by leeching and affects crops and watercourses, and it is notably harmful to cattle, producing early abortion.' This can be a problem not only for the farmers running the sites, he says, but also neighbouring farms to which the toxins can spread.

Megaw has been involved in a flurry of recent cases challenging the planning authorities' decisions to allow these sites. The Environment Agency, he says, are 'aware of the issues but loathe to counter government policy'.

The agency, which had primary responsibility for enforcing restrictions on composting sites, is now leaving it to the planning authorities to regulate. Yet these authorities, he says, 'do not have the necessary knowledge or expertise in this area, and many don't even understand that the responsibility has been placed on them; so it is an accident waiting to happen'.

In some cases, his objections to the planning aspects of regulating sites have been upheld and planning permission has been overturned. But he is in no doubt that this issue will really take off in 2010. 'It's the equivalent of foot and mouth disease over again.'

Coastal path controversy

The industry is facing more well-publicised problems too. Landowners along the coast are concerned about the potential effect on business of the Marine and Coastal Access Act (see Solicitors Journal 153/43, 17 November 2009) which received Royal Assent on 12 November. The Act will create a complete coastal path around England, which will force many landowners to open parts of their land to the public. Tensions are mounting over the issue, and confrontation is expected.

Sarah Slade, national access adviser at the Country Land and Business Association, says the problems relate not just to the introduction of four metre-wide paths, calling into question whether farmers will need to put up electric fences or warning signs, but also to 'spreading room', a term which describes the area on both sides of the path from the sea to the nearest inland obstacle. 'If people are able to walk through your entire field, it is then impossible to separate off livestock from people,' says Slade. 'This leads to not being able to use that land at all. I think it is likely there will be circumstances in which this will happen.'

Of course it all depends on where Natural England puts the route, and what restrictions they apply. Parks and gardens are exempt, but the definition of such is unclear '“ questions remains as to whether golf courses, campsites and other similar grounds will be included in the definition.

'We don't think it is appropriate that rights of access should be taken through such businesses,' says Slade, 'particularly as there is no compensation payable. It is important that landowners can carry on their business as they did before.' Despite vigorous lobbying by the agricultural industry trade groups, concessions have so far been few and far between; although landowners do have a right of appeal to the independent planning inspectorate.

Natural England will draw up a scheme on how it is to be implemented by April 2010, but it will then take up to ten years to determine exactly where the path will go. Clients are concerned in particular in relation to their obligations and liabilities, says Denise

Wilkinson. There is little clarity currently as to where landowners have an obligation to maintain the footpaths, and their liabilities for the people using them. They could be subjected to liabilities under the Animals Act, as well as other health and safety legislation, but these have not been made clear. The potential cost to landowners of all of this is a major sticking point.

The South West, Weymouth in particular, which will be home to the sailing sports during the Olympics, is first in line for coastal access as the government is keen to get this in place for 2012. 'While this is a laudable effort, it could mean the coastal path being rushed through and imposed on people without being nailed down, still with lack of clarity as to what landowners' liabilities are,' says Wilkinson.

'Landowners have got to get involved in the process,' warns Slade. 'They have got to think about possible routes and spreading areas, and alternative routes if needed, and any restrictions or exclusions that might apply. They must not ignore the process that is going on, as it won't favour people that don't get involved.'

Guy Hurst offers a different perspective. 'It's easy to be negative about the Act,' he says, 'but if you look back at the Countryside and Rights of Way Act, it was the same thing back then: people were worrying that the countryside would be overrun with ramblers, and we had all this scaremongering about people coming onto your land and tripping over your stone wall. But it's not actually been a real problem. It is just a question of common sense.

'Until the Act is in place and is seen to be working, people will say 'oh, it's a disaster'. But with a bit of planning and working together, this could be a useful area.'

The Coastal Access Act is arguably one of the most significant pieces of legislation for rural communities, but, as with so many radical legislative changes, given the chance, it could deliver some positive change.