With farmers and landowners continuing to be approached by developers, a leading Shropshire agricultural lawyer has warned it is vital that all bases are covered in development or option agreements.
The alert has come from award-winning farming expert Alexandra Phillips who said that she has seen recent instances of farmers signing option agreements with developers, with some unaware of the finer details and what they are committing to.
Miss Phillips, a senior associate at law firm mfg Solicitors, said that unless the agreements contain proper provisions protecting the landowner’s position, it could leave the region’s farmers caught short financially – or unwittingly tied to a developer when they didn’t intend to.
She said: “Since the start of this year there are examples of landowners signing option agreements with developers, which are essentially legally-binding contracts to sell land for potential future development if a planning application is successful, without having a real understanding of the documents implications.
“With Covid-19 lockdown measures having a huge impact on the farming sector, some have been looking to other sources of income to keep their business going. The problem is, while some have taken proper advice before signing, others have entered into complicated agreements without taking full advice which has put them at risk.
“First and foremost, signing an option agreement can be very attractive, as if planning permission is granted, then it is often possible to achieve a much higher price for the land than you would if selling at agricultural value. But there are a multitude of things to consider such as the calculation of the price, involving agents, inputting into the planning process, to what extent the farmer can continue to use the land during the option period and something many miss, what the tax implications may be.
“Covid-19 has brought unprecedented pressures on farmers and while selling land to developers can be lucrative over the long-term, there are still too many entering into these complicated agreements without understanding the full implications. That is a risky business and could put them on the road to a lengthy and potentially expensive dispute with a developer.
“The bottom line is that farmers or landowners should engage legal, agents and tax advice as early as possible so they have watertight and fully explained agreements in place that preserve their position to best extent possible.”