By Ralph Shaw
20 June 2023
Whether you are selling the farm due to financial considerations, a change in career path, or retirement, here at Pitt & Moore we understand that leaving the farming industry is an incredibly difficult decision which marks a major transition in a farmer’s life and is not made lightly. However, once that decision has been made, obtaining the right support can be key. Here we will set out some of the key considerations to take into account when selling your farm:
The first step is establishing who owns what aspects of the farm, be it you as an individual, the family trust, a partnership, or company. Once you have established who is selling, it is important to know exactly what it is that you are selling. Are you selling land, livestock, farming equipment, vehicles (including cars for personal use), and residential dwelling(s), or is it any combination of the above. Knowing exactly what it is you’re selling means that it can be clearly documented, which helps to avoid potentially expensive squabbles over what is included down the line.
Agreement versus reality
Once you are clear on what it is that you are selling, your experience and knowledge is essential for ensuring that the operational practicalities of running the farm are clearly documented in the sale and purchase agreement. For example:
- What does properly fed livestock mean, and do your livestock meet this metric so that the purchaser can raise no issue with the health of the animals and possible refuse to accept any number of them on settlement.
- What does keeping the pasture in good cover mean, and do your paddocks again meet this metric so that the purchaser can again, not raise issue which may avoid you having to purchase supplementary feed at a not insubstantial cost.
While these operational practicalities might seem obvious to you, the purchaser may have a completely different understanding. By ensuring this is agreed early on, you remove ambiguity and head off potential issues before they arise.
Know your obligations
We understand farmers have never-ending to-do lists. We are here to help ensure you are aware of your obligations which may impact the sale. Some of the obligations to think about when you’re selling your farm include:
- To your Bank. How much do you owe and how much will you need to repay on settlement. Understanding this will help to manage your expectation as to what you can expect to take home once the transaction is completed.
- Contractors. If you engage contractors to complete work on the farm you will want to understand what your contractual obligations are, and more specifically, what those obligations are in the event of a sale. For example, if you contract to a milker, what happens under that contract in the event you sell the farm. It may be that you must pay out the full duration of the contract if the purchaser does not want to take them on. Identifying these obligations early will allow you to negotiate any sticky situations from a stronger position.
- Legislative and regulatory obligations. Some examples of these obligations to consider include:
- If you’re selling workers accommodation, do the dwellings comply with the Residential Tenancies (Healthy Homes Standards) Regulations 2019.
- Have you obtained and complied with building consents where applicable.
- Is the farm complying with the different environmental regulations.
- Is the farm complying with the Health and Safety at Work Act 2015.
These are just some of the considerations when selling a farm, and while they can seem daunting, with the right support they are more than manageable. At Pitt & Moore our property and trust teams are fully equipped with the experience and knowledge to ensure all things are considered when selling your farm.
If you would like more in-depth advice or further information about the content of this article, please get in touch with the team at Pitt & Moore on 03 548 8349.