Agricultural Valuations

A Practical Guide

Jeremy Moody, Nick Millard

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781317194286
• Edition: 5
• Topic: Business
• Subtopic: Real Estate
• Index: Business

Agricultural Valuations: A Practical Guide has long been the standard text for students and professionals working on agricultural valuations. Taking a practical approach, it covers all the relevant techniques and legislation necessary to correctly value farms, assess farm rents, carry out arbitrations, inventories and records of condition, including valuation clauses on sales of farms, livestock, soils, management agreements, valuation in court proceedings and a glossary of useful information.

In this fifth edition, Gwyn Williams's original text is taken on by Jeremy Moody and Nick Millard, renowned experts in the field, bringing the book right up to date to reflect recent changes in the rural economy, including development, diversification and renewable energy and specialist valuations and reference to all the latest legislation. Clear and accessible to students and professionals alike, readers will find Agricultural Valuations an invaluable guide to best practice in agricultural valuations.

Part 1 Foundations

2 Agricultural land

2.1 Land

2.1.1 Land (typically defined in the United Kingdom to include the buildings on it) is very distinctive as an asset as its character comes from both its nature and its physical location. Especially for farming, it can be seen not only as a fixed physical asset but also as the working material of the business, in that sense akin to plant and machinery. It may have buildings and fixed equipment or simply be bare. The legal framework for land varies between the parts of the United Kingdom.

2.1.2 All these points and any other factors may affect the value of rural property within markets that express the supply and demand for it and such attributes.

2.2 Character of the land

2.2.1 The nature or character of any individual parcel of land or farm will be the accumulation of a wide range of possible points of interest. The list offered here can only be illustrative and not exhaustive, while the balance of factors will vary between cases, over time and between markets:

• underlying geology
• type and depth of soil
• height above sea level, slope and aspect
• climate
• size and layout of fields
• boundaries with fences, walls, ditches, etc
• drainage
• contamination
• access
• proximity to markets
• fixed equipment
• dwellings
• buildings
• water supply
• vulnerability to flooding or drought
• other services (including for renewables, grid connection possibilities)
• public access
• exposure to and risks from intrusion, rabbits, deer, game damage, etc
• sporting opportunities
• state of repair, maintenance and management.

2.2.2 There may be specific legal issues binding the land such as:

• obligations (such as to repair the chancel of the local church) or opportunities (first refusals) under the legal title
• restrictive covenants (real burdens in Scotland) and, potentially, commitments for conservation management
• reservation to others of an access route or other rights such as sporting or drainage over the land
• easements (servitudes in Scotland)
• rights taken by utilities.

2.3 Location and designations

2.3.1 The place of any parcel of land in the market will depend on its location. In the modern world that is not only a function of its accessibility or otherwise, its position vis-à-vis neighbours and other such factors but also how it is affected by official designations.

2.3.2 In particular, the market for farmland, especially for smaller blocks, is usually very much locally driven as few will want to buy a block of land that is not conveniently placed for their operation and so will not compete for land further away, segmenting the market. Thus, location may largely drive the market of potential buyers, save for larger freestanding units.

2.3.3 One particular consideration for the value of farmland, more than for many assets, is the potential for neighbours or others nearby to see convenient land not only for itself but for the additional value it might bring to their own businesses, whether by better supporting overheads or using facilities such as buildings or irrigation. Each might be a special purchaser but, where there are several such possible buyers, they may make a market.

2.3.4 More generally, relevant issues can include:

• the country within the United Kingdom, each having its own legislation and approaches
• agricultural designations, including:
  • whether in the Less Favoured Area (LFA) and so Severely Disadvantaged Area (SDA) (generally upland except for the Scilly Isles) or Disadvantaged Area (less material now). This can be relevant to access to rates of payments, such as the Scottish LFA Support Scheme (LFASS) and its headage payments
  • direct payment region with the differing rates for area payments (currently Basic Payment)
  • relevance and impact of cross compliance, greening and equivalent provisions of state agricultural policies
  • inclusion in a Nitrate Vulnerable Zone
• environmental and landscape designations:
  • National Parks (and areas with related designations such as the Norfolk Broads)
  • Areas of Outstanding National Beauty (AONBs)
  • Conservation Areas
  • designations of buildings, structures, parks, etc. as listed for their historical, architectural or other interest
  • Natura 2000 sites
  • Ramsar sites
  • National Nature Reserves
  • Sites of Special Scientific Interest (SSSIs), called Areas of Special Scientific Interest (ASSIs) in Northern Ireland and the Isle of Man
• development control:
  • is it in a Green Belt?
  • is it brownfield land?
  • is it with in the village envelope or other settlement boundary?
  • how does the land sit within the local planning policies?
  • the permitted development rights available and useful
  • have permitted development rights been withdrawn (under Article 4 or equivalent powers in Scotland or Northern Ireland)?
  • is it subject to planning restrictions because of issues such as a high-pressure gas main?
• public rights of way and open access provisions
• areas with particular costs, such as an Internal Drainage Board or other area with a drainage rate.

2.4 Buildings and fixtures

2.4.1 The basic principle is that anything fixed to land belongs with it and so passes with it when ownership changes or, potentially, when it is let.

2.4.2 While that may appear obvious for substantial items like major buildings, road, drains or hedges, there are often items that have been added by an occupier or which can appear to be chattels (moveables in Scotland). Sometimes these are clearly removeable without damaging the land and so likely to remain personal property. In other cases, they may have needed to be fixed to land to be useful (as with the calibration of a bulk milk tank). In yet further cases, they may have become part of the land. The issue was summarised by the court in Holland v Hodgson:

Thus blocks of stone placed one on the top of another without any mortar or cement for the purpose of forming a dry stone wall would become part of the land, though the same stones, if deposited in a builder’s yard and for convenience sake stacked on the top of each other in the form of a wall, would remain chattels.

2.4.3 These situations have been considered in a number of cases over many years with the key tests being the degree and the object of fixing an item to the property. In Elitestone v Morris, the House of Lords decided that a prefabricated bungalow had become part of the land on which it only rested, contrasting it with a greenhouse that could be regularly moved, with this review:

Many different tests have been suggested, such as whether the object which has been fixed to the property has been so fixed for the better enjoyment of the object as a chattel, or whether it has been fixed with a view to effecting a permanent improvement of the freehold. This and similar tests are useful when one is considering an object such as a tapestry, which may or may not be fixed to a house so as to become part of the freehold: see Leigh v. Taylor [1902] AC 157. These tests are less useful when one is considering the house itself. In the case of the house the answer is as much a matter of common sense as precise analysis. A house which is constructed in such a way so as to be removable, whether as a unit, or in sections, may well remain a chattel, even though it is connected temporarily to mains services such as water and electricity. But a house which is constructed in such a way that it cannot be removed at all, save by destruction, cannot have been intended to remain as a chattel. It must have been intended to form part of the realty.

2.4.4 These issues are relevant when considering what is to be valued for the sale, mortgage or other purpose for a property. Recent disputes concern whether fish in lakes or solar panels are part of land. Additional points arise for tenancies.

2.4.5 Tenant’s fixtures – That common law position has been overlaid by statutory intervention whereby the tenant, here particularly an agricultural tenant, is given a statutory procedure for removing some fixtures – “unfixing” them.

2.4.6 Under what is now s.10 of the Agricultural Holdings Act 1986, s.8 of the Agricultural Tenancies Act 1995 for farm business tenancies and s.18 of the Agricultural Holdings (Scotland) Act 1991 and in slightly differing terms, the agricultural tenant has the right to remove buildings and many fixtures but must first give the landlord the chance to buy the item in question at its value to an incoming tenant. This does not apply to the various forms of Limited Duration Tenancy in Scotland.

2.4.7 For Northern Ireland, s.17 of the Landlord and Tenant Amendment (Ireland) Act 1860 provides the right to a tenant to remove many fixtures where this can be done without substantial damage to the freehold or the fixture at any time up to two months after the end of tenancy, compensating the landlord for any damage.

2.4.8 Crops, etc – More fundamentally and a key reason for the existence of separate agricultural tenancy legislation, the rule that what is fixed to land, belongs with land applies to crops, fertilisers and other basic aspects of farm work, revealing land not only to be premises but here more akin to plant and machinery used in production. Without some form of statutory intervention, a seed would, once sown, belong to the landlord with the tenant having no right in it.

2.4.9 The tenancy agreement allows the tenant to harvest and have the benefit of work during the tenancy, but agricultural tenancy statutes in Great Britain intervene in two broad ways:

• providing a structure (often referred to as “tenant right”) at the end of the tenancy for compensating the outgoing tenant for what are then still growing crops, applied fertilisers and improvements to the soil, harvested crops (such as perhaps silage in the clamp), hefted hill sheep and some other works that must be left so that value is paid for what is left behind, encouraging the tenant to maintain the farm to the end
• disregarding at a rent review the generality of fixed equipment provided by the tenant (limited in Scotland to compensatable improvements) so that the tenant does not pay rent on the benefit of works the tenant has made.

3 Basic property law

3.1 Introduction

3.1.1 Agricultural valuation work requires a knowledge of land law to understand the rights and obligations relevant to a property. That law is a mix of basic common law and the growing volume of specific statutes. That combination then interacts with other regimes of law, such as those for subsidy policy and for development control.

3.1.2 Devolution in the United Kingdom – Basic land law is very similar in England, Wales and Northern Ireland, but it differs a little more in Scotland.

3.1.3 England and Wales have essentially had the same statute law until very recently, but with devolution some aspects of law relating to agricultural valuations are now beginning to diverge as the Welsh Parliament (Senedd) enacts its own legislation, varying or replacing existing acts and substituting Land Transactions Tax for Stamp Duty Land Tax.

3.1.4 Northern Ireland has had a different legislative history. While largely having the same common law as England regarding land, Ireland had a Parliament in Dublin until 1801 when legislation passed to Westminster before moving to Stormont in 1921. Much nineteenth-century legislation remains in place, as for conveyancing and the basic framework for all tenancy law (the Landlord and Tenant Law Amendment (Ireland) Act 1860 – “Deasy’s Act”).

3.1.5 Scottish law, including its land law, has developed slightly separately. It was a key term of the 1707 Act of Union that Scotland retained its own law and courts. In addition to its earlier history (including the Leases Act 1449 with its definition of what is a lease found to catch arrangements that might be licences elsewhere in the UK), more specific Scottish legislation was made in the second half of the twentieth century (such as the Agricultural Hol...