WJM on the importance of seeking legal advice when diversifying a farm in Scotland
Innovative thinking and diversification have always been a feature of Scotland’s farming community but the uncertainty of Brexit and potential decline in subsidies have given fresh impetus for many to hunt down that all-important second – or even third – income stream.
According to NFU Mutual’s Diversification Report from the end of 2018, some 20 per cent of Scotland’s farmers have plans to diversify into other enterprises to support their farm business in the wake of Brexit.
The report highlighted the findings of a Department for Environment, Food and Rural Affairs farm business survey, which indicated that 62 per cent of UK farmers had already diversified, with 90 per cent of those who have done so declaring it a financial success.
The variety of new farm businesses could scarcely be more diverse. While around a third have opted to support cleaner sources of energy by entering the renewables sector, a further 27 per cent are either making use of existing properties on their land or have constructed new buildings to either lease or offer as short-term holiday rentals.
Some are exploring more niche markets to meet consumer demand for something different, from innovative food and drink products and handmade crafts, to yoga and writers’ retreats.
“It’s about not having all your eggs in one basket,” explains Elisa Miller, who was born and raised on a Caithness farm and is now an Associate at prominent Scottish legal firm Wright, Johnston & Mackenzie (WJM), which has a dedicated agriculture and rural team.
“Farmers are not sure of what the future holds. Many have been busy, carrying on with work as normal during harvest time, but they are also thinking about other projects to reduce the uncertainty of what may happen.”
While they are dreaming up their ideas, she warns that there is a crucial need to be aware of the legal implications that can come with diversifying into new income streams.
“For example, farm shops are becoming very common,” she points out, “but working farms have got to think very carefully about people coming on to the property and how they access it.
“There may be legal restrictions in the title deeds, there will need to be a risk assessment, careful consideration of where on the farm the shop is located – and if there are any cattle around, they will have to make sure fences are secure. Sometimes they might have to do alterations to existing buildings to accommodate the shop. So there’s a need to look at construction, planning and building consents.”
Others are answering a growing demand for Airbnb and holiday cottage lets driven by “staycation” holidaymakers seeking to explore their own countryside and international tourists hoping for an authentic Scottish countryside experience.
“Farmers often have cottages on their land that can be adapted,” agrees Miller, who is based at WJM’s Inverness office. “However, there is an interesting debate around whether they may need a change of use consent for this, and there are signs that the Scottish Government is thinking of cracking down on this matter.”
Bed and Breakfast accommodation has long been a feature of many Scottish farms and, again, Miller warns that there is a need to check key legal points, such as access rights, building control consents and title restrictions. “It’s really important before anyone starts altering buildings to see what permissions are required as early as they can – that is the same for any kind of diversification,” she says. Longer rentals would require a lease or rental agreement clarifying who is responsible for looking after the property and its contents and other terms.
“Glamping is also very popular, with a lot of farmers erecting pods and providing campsite space,” she adds. “Again, farmers need to be well prepared and aware of access and safety issues.”
Some farms may be tempted to throw open their fields to higher numbers of visitors for farming demonstrations or live lambing events, which enable the public to see a working farm at key times of the year, or for music, craft or beer festivals.
Another growing area is adventure tourism targeted at the corporate team-building, stag and hen party market. Driving a tractor and herding sheep may be a fact of life for farmers, but for city people tied to an office it’s a thrilling day out – one which also brings an element of risk requiring carefully worded insurance.
Certain events will need an entertainment and alcohol licence while, of course, any kind of business that encourages visitors to the property will need public liability insurance to cover the risks of accidents.
“It is very easy for something to go wrong,” Miller adds. “An animal can escape or it could be a case of just not having thought about the access required for farming to continue, or there may be shared access obligations.”
Getting a new business known about – and having staff on hand as it grows – can require specialist help, from ensuring that it sticks to advertising rules to employing staff and meeting pension obligations.
On the plus side, there are various grants available through the Scottish Government’s Scottish Rural Development Programme for landowners and farmers who are keen to diversify, while Scottish Forestry is encouraging the expansion of woodlands through its forestry grant scheme.
Christmas trees, in particular, are a low-maintenance crop which can provide a steady income as trees mature, are harvested and re-planted. “A forestry lease agreement is where people who have the land where the trees are growing, lease it back to someone who wants to use it for Christmas trees,” adds Miller. “There can be special foliage agreements put in place governing which trees can be cut down and restrictions placed on access, which ensures that the farmer can still work away on the land.”
For rural businesses and landowners seeking to explore the growing renewables sector – from wind farms to hydro, biomass to solar – WJM, which has offices in Edinburgh, Glasgow, Inverness, Dunblane and Dunfermline, has a specialist team to guide them through the legal requirements.
But whichever route a farmer might want to take, seeking early legal advice is vital, says Miller. “One of the main pitfalls farmers come up against is not getting the permissions correct, especially when it’s a change of use and knowing what is in their title deeds in terms of restrictions,” she adds.
“They might not remember there being a restriction in their title deeds to prevent them from using the property in certain ways. Not getting the correct planning or building control advice could lead to enforcement action by the local authority – in the worst case scenario they could be told to take down the building.”
With farming’s future in such a state of flux, it’s likely the farm of the future will be much more diverse than simply a space where animals are reared and crops are grown. “Farmers are often keen to keep the farming land in the family, but there are many reasons why they are not carrying on with traditional farming,” says Miller. “It could be money reasons or it could be that the next generation simply doesn’t want to carry on farming. Whatever the reason and whatever the business, it’s important to take legal advice as early as possible in the diversification process.”
This article appeared in the Scotsman’s Vision supplement. To find out more about Wright, Johnston & Mackenzie, visit their website.