When all is not what it seems

Who owns the farmland that the farm operates on?

It’s a fairly straightforward question, but the answer is not always what it seems. Invariably, farmland is passed down through the generations, and agreements completed with a handshake. Titles, therefore, do not always accurately reflect ownership, with no written documents to confirm the position.

It is vital that the ownership of the land is clear. Aside from the tax implications of ownership, clear records help to avoid potential conflicts. Recent cases highlight the importance of having a clear understanding of the ownership of land, particularly in respect of partnerships.

There is a misconception that if land is referred to in the partnership accounts, it is a partnership asset. This is not always the case.

In the case of Wild v Wild, the court held that despite the land being included within the accounts, this was not conclusive to include it as an asset of the partnership, and as such it passed under the terms of Mr Wild’s will.

There was no written partnership agreement to rely on, which would have assisted the parties to determine the intentions of each partner.

The argument put forward by Mr Wild’s son, Gregory, was that the land had become a partnership asset by virtue of the fact Mr Wild had allowed the partnership to use it. This argument was rejected. It is up to the partners to agree whether land is treated as partnership property.

On the facts, the judge considered that Gregory was added to the partnership at the age of 16, and it was therefore unlikely that Mr Wild would have ceded control over the farm at this stage. Mr Wild’s will instructions also demonstrated that he believed the farm to belong to him personally.

If it is unclear if land constitutes partnership property, the legal title of the property should be checked. Statute provides that a disposition of land can only be done in writing. In this scenario, this could have been achieved by a written partnership agreement, or a declaration of trust.

In the absence of any written proof, other factors may be considered to establish how the land should be treated, including how the land purchase was financed, why it was purchased, how the land is dealt with in business accounts, and if the partners have made wills that contradict the ownership of the land.

This case highlights the importance of having a formal written partnership agreement, to be made in conjunction with wills, to ensure that these documents reflect a common outcome.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.