As head of a family farming business one would imagine you had already planned for succession by making a will, having a business structure in place and ensuring that the real estate was held by the right individuals. Nothing could go wrong could it?
Well, sometimes it can, as the farming community appears to have an almost complete monopoly on the relatively unknown legal principle called proprietary estoppel. This principle allows the court to disregard the planning already put in place, if a judge takes the view that an individual who has been heavily involved with the farm over many years has been treated unfairly.
To succeed with such a claim the individual needs to show that: (1) a representation has been made e.g. “this farm is yours once I am gone” (2) the representations have been relied upon e.g. the individual has worked on the farm for many years and (3) the person has suffered detriment as a result e.g. worked for low wages and had no financial independence.
If a Judge is content that the grounds are made out and it is unconscionable that the individual should remain at a disadvantage, the Court has the power to order that the individual must be compensated by money, or even that farming assets have to be transferred to the claimant regardless of what the legal documents already in place may say.
Such claims are prevalent in the farming community due to the value of farming land and the high percentage of farms that are run by generations of the same family.
In one recent case, a son was awarded the entire farm on the basis that he had only been paid £70 a week and worked on the farm since school. In another, a son’s claim failed since the Court decided that the parents were entitled to move away from their promise to give the farm to the son when he did not show a firm commitment to the family business.
So how do you prevent disputes of this kind and avoid the need to engage someone like myself to resolve the matter?
It’s clear that more than succession planning is required. The key ingredient is the difficult issue of frank communication between family members over many years. For example, sitting down as a family to discuss who owns which assets, recognising who may be making contributions to the success of the business and what the future may hold and then planning accordingly.
It is only by these means that there can be a better understanding of the needs, expectations and thinking of your family, who you are not only related to but also working with.
For advice contact Jonathan on firstname.lastname@example.org