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Succession planning for farming families

View profile for Jessica Newton
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Succession planning for farming families

The recent Court of Appeal decision in Kingsley (Deceased) v Kingsley highlights the importance of succession planning and thinking about the future for farming families.

Background

The Kingsley family had farmed at Lodge Farm since the mid-19th century, and, prior to his death in 2015, Roger Kingsley had run the farm in partnership with his sister, Sally Kingsley.

Roger was survived by a daughter and his widow, Karim. Karim was the sole beneficiary and an executor of his will.

Sally and Karim did not get on, and, following Roger’s death, the matter ended up in court. The executors brought an action against Sally, claiming the dissolution of the partnership and an order for the sale of the land.

High Court ruling

The case was previously decided by the High Court in May 2019, when it was considered whether Sally, as the surviving partner in the family farming partnership should be entitled to have the first right to buy the farmland before it was offered for sale on the open market. The High Court also considered whether occupational rent should be paid by the partnership, where the surviving partner continued to farm the land.

A base value of the farmland was agreed upon as being £2.75 million, however the amount of “hope value” that should be attached to the land was in dispute. Sally’s expert valued the farmland, including “hope value” at £3,118,000 and the estate’s expert valued the farmland, with “hope value” at £3,453,250, a difference of £335,250!

The executors wanted to achieve the best possible price for the estate, whereas Sally wanted to pay a reasonable price for the farm which would enable her to continue farming the land.

The High Court decided that the land should be sold, and that Sally should have the opportunity of purchasing the land prior to it being offered for sale on the open market. 

They determined that the price payable by Sally, if she wished to purchase the land, should be £3,245,000, giving her two months in which to complete the purchase. If the purchase was not completed within this timescale, the land could then be offered for sale on the open market. The Court also ruled that no occupational rent was payable.

Court of Appeal decision

This decision was then appealed by the executors of Roger’s estate, citing four grounds of appeal in relation to both the High Court making the order for the farmland to be sold to Sally, and the decision in respect of occupational rent. They believed that a higher price could be achieved with a sale of the land on the open market and that Sally should be required to pay occupational rent to the executors, as she had occupied the land for her own benefit since Roger’s death.

The Court of Appeal upheld the High Court’s decision, permitting Sally the opportunity of purchasing the land at the fixed price. The appeal was, however, allowed in respect of occupational rent. Sally didn’t need to pay this.

Moral of the story

This situation could potentially have been avoided with some careful succession planning by Roger and Sally during Roger’s lifetime. By definition, a partnership is a relationship between two or more persons, carrying on a business with a view to profit. Where there are only two partners, the partnership will automatically come to an end if one of the partners dies, unless there is a carefully drafted Partnership Agreement in place stating otherwise.

Thousands of pounds will have been spent by both parties in litigating this matter, paying court fees, legal fees and experts fees, whilst the family was grieving the loss of their loved one. 

It is of vital importance that farmers think about the future and put plans in place for succession of the farming business to prevent costly litigation proceedings following the death of a family member, and to give the farming business the best possible chance of continuing following their death. If you need assistance with succession planning, please contact our specialist Agriculture and Estates team.

I am based in our Colchester office and can be contacted on 01206 217312 or jessica.newton@birkettlong.co.uk.

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