8 issues that could slow down the sale of a farm

Posted - 20/07/21

When considering the sale of a farm or land, owners can ensure a smoother process by considering the following commons issues.

  1. Not providing enough information

Providing comprehensive information about a farm or a block of land is vitally important when preparing for a farm sale, especially when selling commercial farmland or an active business. Buyers are especially shrewd in expecting detailed information relating to an asset. Often vendors and their agents will prepare a data room of information to allow easy access for buyers to scrutinise all the information they require relating to a sale. Moreover, once a sale is agreed, such data rooms allow a facility for a buyer’s legal team to review information whilst performing their legal due diligence. Insufficient information can either slow the process down or put buyers off entirely.

  1. Having loose ends

Often historic agreements which a vendor has with third parties such as tenants of contract farmers can be done on a handshake or using out-of-date contracts. Even if there is a cost involved in formalising or bringing up to date such agreements, this could be time and money well spent versus the complication or delay of doing so at a later point in the sales process. Often such incomplete agreements, whilst acceptable to a current owner won’t be for a purchaser, especially if a bank is involved, and therefore ensuring these are dealt with ahead of a sales process is hugely important.

  1. Ensuring a good marketing strategy

When choosing an agent to represent you in a sale, you should ensure they propose a comprehensive and tactical marketing strategy. Issues such as when to launch the farm sale, whether to test the market with a private marketing campaign beforehand, how they intend to best present the assets (with brochures, photos, drone imagery and virtual tours) as well as lotting and any retentions or restrictive covenants all should be discussed and agreed upon prior to launch.

  1. Overly restrictive or complicated lotting

Lotting of a farm is potentially one of the most important decision a vendor and their agent can decide upon ahead of a sale. The key is to ensure flexibility in the sales process to allow for as much interest as possible whilst also not overly complicating things by having too many options / potential outcomes. Once any lotting of a sale is agreed, accurate and detailed plans should be drawn up to clearly show the options available to a purchaser.

  1. Retaining the “cherries” from a sale

It is tempting as a vendor to retain the best parts of an asset when selling, whether it be the village edge land which might have development potential in the future, or any high yielding assets such as renewable energy interests or commercial lets. Buyers are increasingly keen on diversification of assets when they acquire a farm and therefore are keen to ensure such assets are included in a sale if owned by the vendor. Obviously, they can’t compel an owner to include these in the sale, but if it becomes clear that the farm currently has these “cherries” included, then buyers may be less inclined to pursue a purchase if they feel an asset has been stripped of any potential enhanced value.

  1. Adding complication to a sale

It is equally tempting for a vendor to retain an interest in a property going forward in the form of a retention / clawback / overage which allows for future payments to be made to a seller on the event of certain pre-agreed circumstance. This can be seen by some in the market as a fair compromise compared to retaining the asset in question. However, such overage provisions inevitably add complication to the sale and therefore careful consideration should be taken to the correct structure of such clauses.

  1. Bad first impressions

Buyers will inevitably make judgements about a farm based on first impressions. Therefore, ensuring hedges are cut, verges are trimmed and fencing, and gates are all kept in good working order all helps ensure that the farm looks its best during any viewings. Likewise, if an asset such as a dilapidated barn / building is not likely to be cost effective to fix or make safe, and there isn’t any future development potential, it might be worth considering demolishing it as a buyer may be put off by buying potential liabilities.

  1. Rushing to sell or moving too slowly

It is important to time a sale carefully to ensure a proper marketing campaign. Conversely it is then also important to be decisive once a strategy has run its course. Key is not appearing to be too desperate to sell, even if the reality is different. Obvious mistakes which give this situation away include bad timing of photos (say during winter when the farm isn’t looking its best) as well as a bad launch date. Buyers will become aware that timing is tight and act accordingly. Equally, once a marketing campaign has come to a conclusion, making swift and decisive decisions as well as ensuring your legal team is prepared and has capacity to move in a timely manner is vital.