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Consent to convert could put money in your bank.

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Consent to convert could put money in your bank


A bit of planning before putting your farm up for sale can increase its value considerably, as Andrew Shirley finds out

Farmers could lose out on many thousands of pounds if they fail to identify the potential of their farms before selling, says Rosie Fraser, a strategic land and business consultant with Cambridge-based Bidwells.

"There are plenty of businesses planning to stay in farming that are taking advice about converting buildings and other ways to generate some diversified income. But it is something that is often overlooked by those who are thinking of leaving the industry and that could be a costly mistake."

However, a growing number of people are starting to reap the benefits of a more proactive approach, says Miss Fraser. "I had one client wanting to sell where I got planning permission to convert a barn into a residential development. It cost them £12,000 in fees, but the consent has increased the value of the property by perhaps £1m."

Of course, she concedes, not everybody will have a classic barn in a suitable location that can be turned into a multi-million pound house. "Residential schemes do see the most uplift in value, but there could still be lots of other fairly simple, low-cost opportunities that might be worth considering."

Miss Fraser says the urgency of a proposed farm sale will go some way to dictating what schemes will be viable. "If you want to put your farm on the market tomorrow then obviously it won't be possible to get residential or commercial planning consent to convert your buildings. But if you are retiring in 10 years there's a lot you can do."

SHORT TERM

Sorting out obvious, but easily forgotten, issues can help speed up a sale and prevent interested parties dropping out, says Miss Fraser. "Boundary encroachments can be commonplace and yet can delay a sale by months if issues are particularly contentious. It is a good idea to set aside at least six months before the sale to sort out any problems."

Careful lotting (see box) will help to identify previously unrecognised value, says Miss Fraser.

"Land that might have development potential or be attractive to horse owners and other amenity buyers will be worth a lot more, but you have to be careful; excessive lotting could reduce value. A nice farmhouse will be worth more if you haven't sold off all the surrounding land and the nearby buildings."

In certain circumstances it might also be possible to remove an agricultural tie on ancillary residential dwellings (see below), she says.

MEDIUM TERM

With more and more traditional farm buildings becoming redundant, converting them to alternative uses makes sense and if you have already got planning consent it will make your property more valuable, says Miss Fraser. "The problem is getting planners to agree."

Change of use to commercial premises that create employment opportunities is looked on most favourably, she says.

"If you don't think that is viable councils may insist on a year's marketing being undertaken to prove that is the case. Residential use is often seen as a last resort and makes obtaining planning consent more difficult, though by no means impossible."

Preparing design drawings and submitting a planning application through to a council decision can take anything between six moths to a year, says Miss Fraser. "And if you have to go to appeal you could be looking at many more years." Costs will vary depending on the scale of the development but £5000-£10,000 should cover a modest scheme, she adds.

What type of schemes will be viable will be dependent on location. "Planners will frown on anything that generates extra traffic down narrow country lanes and there is no point trying to get consent for something if there will be no demand," says Miss Fraser.

One option she reckons might appeal to planners would be to move an existing set of busy farm buildings out of a village centre in exchange for permission to develop the site into something else. "Always think what you can offer planners that will benefit the community in return for planning permission."

In a few cases it is also possible to boost values with planning consent for an entirely new dwelling. One 1000-acre site in Hampshire for sale is worth up to £2m more because there is permission to build a large country house. But obtaining planning consent for new-build residential schemes is very difficult, says Miss Fraser. "You could have a real battle on your hands and a bill running into tens of thousands of pounds."

LONG-TERM

Really forward-thinking farmers in areas of potential new house building should be looking at least 10-20 years in advance, she says. "When councils designate new development sites under their planning framework reviews they are often looking for buffer strips between the potential site and the open countryside."

By planting landscaping strips on the edge of villages, farmers could create natural boundary lines that would increase the likelihood of their land being included in future highly profitable development zones.

"The chances of anything happening might be slim, but the only cost would be for some advice on positioning the landscape features and the cost of trees. It might even be possible to include any planting in entry or higher level environmental scheme applications.

"It's a low-cost scheme that could add a huge amount of value."

TOP TIPS FOR ADDING VALUE

* Plan ahead -- Some schemes may take years to bear fruit

* Be realistic -- Match the plan to the location

* Be imaginative -- Don't rely on traditional schemes

* Don't miss the obvious -- Clever lotting can highlight value

* Consider an uplift clause -- But don't be greedy

WHERE TO FIND OUT MORE

Local authorities will include details of their local development framework online. Go to www.tagish.co.uk/links/ localgov.htm for a full listing of: local authority websites

The Office of the Deputy
Prime Minister is in
charge of planning policy -- www.odpm.gov.uk

Acorus www.acorus.co.uk 01954
268 283

Alexanders 01480 432 220

Bidwells www.bidwells.co.uk
01223 841 841

British Institute of Agricultural

Consultants www.biac.co.uk 01795
830 100

Fisher German www.fisher
german.co.uk 01530 410 814

PHOTO (COLOR): Rosie Fraser, strategic land and business consultant, Bidwells.

PHOTO (COLOR): From this to this… Even the most ramshackle barns have potential as illustrated by the National Trust's new headquarters. If you're selling, don't miss out.

~~~~~~~~

Edited by Andrew Shirley, 020 8652 4920, andrew.shirley@rbi.co.uk

LIFTING AGRICULTURAL TIES

* Removing an agricultural occupancy condition on a dwelling can both increase its saleability and value significantly, says John Ikin of Fisher German's Ashby office, which has just boosted the profits from a recent farm sale by tens of thousands of pounds.

There are two main routes to removing AOCs, which, as a rule of thumb, pull values down by about 30%, says Mr Ikin. The first is to prove that the property is no longer required for agriculture both on the holding and in the locality. "Marketing evidence is required to justify this which can take a long time and prove quite expensive."

The alternative route only applies in certain circumstances where the dwelling has been occupied in contravention of the AOC for at least 10 years. If this can be proved, then it may be possible to apply for a certificate of alternative lawful existing use.

"This process is much quicker and involves less expense. There are limited circumstances where you can pursue it but if you spot the possibility there are big benefits." Examples include where family members occupy a farm cottage but are employed in non-farming activities or alternatively where the property has been let to people that are not employed in agriculture, says Mr Ikin.

LOTTING--IT PAYS TO IDENTIFY LAND

Blocks of land of about 50 acres in strategic locations close to towns and larger villages blocks are increasing in value, says Cluttons' Harry St John.

"Cluttons has offered various parcels of this type of land with long-term development potential or 'hope value' in Oxfordshire, Buckinghamshire, Hertfordshire and Surrey for sale over the past two years and £20,000/acre is being achieved on a regular basis. Only three to four years ago £5000-£10,000/acre was more typical."

Although planning policies give priority to brownfield land for development, says Mr St John, investors and speculators are looking to the 10-20 year-plus term, by which time most of the brownfield land in southern Britain will have been redeveloped, leaving planners with little alternative but greenfield land to build on.

"It is becoming clear that some land on the edge of existing settlements, whether green belt or not, may have to be released sooner than people realise. From large institutions to smaller investors, the search is on. With values of residential development land ranging from £800,000 to over £2m/acre depending on location and density approved, the potential rewards are significant."

Spotting which land has potential is not easy, says David Ellis of planning consultant Acorus. "You need to try and anticipate what planners might be looking for, which is why it can pay to use a specialist. New directives tend to come down from government level and then be interpreted by local authorities."

Mr Ellis says each council will have a local development framework, which targets land where future growth might be located. Persuading them to include your land in that would add to its value. "It's best to take a softly-softly approach and talk to planners early on to see if you'll be completely wasting your time."

The cost of a consultant varies from a fixed fee to a percentage of any uplift in value, says Mr Ellis, but an initial consultation would not involve a huge outlay.

UPLIFT CLAUSES

* One way to lock into any future development potential of land or buildings that you are selling is to include an uplift clause in the sale, says Michael Alexander of Huntingdon firm Alexanders.

These state that the vendor should share the profits from any increase in value.

"We are seeing them used increasingly across the board, especially now we are not sure where development will settle. 15 to 20 years ago they were unheard of."

Such a clause will state what type of development will trigger a payout, the timing of the payout - either when planning consent is granted or actual development commences - the amount of time it will apply for and what share of the increase in value the vendor will be entitled to.

"There's no point being too greedy," says Mr Alexander. "If you are too demanding it will put buyers off and restrict values. It can poison a deal and I have seen people walk away. You want to ensure that the prospect of development is still attractive to the buyer."

A 25-40% share for the vendor with the clause remaining active for 20 years is reasonable for both parties, he reckons. If planning consent has already been granted on buildings or land this should be factored into the selling value instead of using an uplift clause, he adds.


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