Last week’s Industry Eye column dealt with the importance of making provision for your family if you have a farming business. I qualified as a mediator nearly twenty years ago and in recent years have dealt with more and more disputes involving farms, farming businesses and families – often the direct result of not making provision in so many cases.
I was brought up to assume that if one had something made of money and indivisible and two relatives you have a potential dispute on your hands! This may seem facetious but it is too often true, and where the money is in the form of farmland, businesses and property the scope for problems is endless.
Many farming families, particularly when viewed from the stand-point of younger generations, are a tinder-box waiting to be lit by any small spark and these are so often created by uncertainty and festering grievance. Problems have often been caused by things done in the past by earlier generations who have died or are very old and not now able to control the situation.
If uncertainty can ignite disputes – certainty can prevent them. Farmers are not noted for their enjoyment of paying lawyers’ bills but the price of getting things properly in order can be an excellent investment, compared to the cost of resolving disputes and the damage that these can do to the harmony of close-knit families.
Some recurring themes in many farming based disputes include:
Not sorting out who has what shares in the farming business:
Too often there is no partnership or shareholders’ agreement, and capital accounts and ownership of assets are unclear. If there are agreements they are often badly drafted or out of date. There can be unacknowledged conflicts of interest and resentment about who is doing what. Letting sleeping dogs lie can come at a high financial and relationship cost later on.
Badly drafted or ill thought-through Wills, or no Will at all:
A well-considered Will is a sound investment provided that it takes into account the conflicting tensions that exist in any family. Every family is unique and everyone with assets should have a will; lawyers make far more money dealing with inheritance disputes than they ever do preparing a will! Do not assume that the rules as to who gets what if there is no Will will produce the right result – they almost certainly won’t.
There is a substantial difference between ‘Agricultural Holdings Act’ tenancies and ‘Farm Business Tenancies,’ both in value and the security of those involved. It is amazing how often I come across arguments about the existence or otherwise of an AHA tenancy, particularly where the ownership and tenancy are held within a family. If there is a festering doubt about this it needs airing and resolving sooner rather than later, the more generations that stand to inherit the worse the situation will become.
It is very sad to see a farming family at war and realising that if only things had been done differently the present could have been very different. And where does the ostrich farmer come in? It is no kindness to put your head in the sand and hope that lurking problems will go away. They won’t, and the sooner they are dealt with the better.
Christopher Butterworth is a civil and commercial mediator and partner consultant at Raworths LLP. To contact Raworths telephone 01423 566666 or visit our offices at Eton House, 89 Station Parade, Harrogate, HG1 1HF. Alternatively, you can email firstname.lastname@example.org