Growing houses on farm land is not always the easy option

Many farmers faced with complex decisions about their future are increasingly being seduced by the argument that the best crop is houses. But such a course of action puts farmers’ business skills to the test and may not be the ‘easy option’ many hope it will be.

Leading agriculture lawyer, Colin Clark of Pagan Osborne, agrees that the opportunities exist for very profitable developments on rural land, but is concerned that some farmers will set out on such diversification without fully realising what is involved.

He says,

“Planning laws, planning gain and the breadth of development options make so called ‘house crops’ a very complex and time consuming and costly business. On the other had, approached properly it can be a very successful enterprise. From the start it is always best to see this as a long term exercise.

“Ultimately there are three issues to address – what have the local planners decided for the area and when do they review these policies; the substance behind an Open Agreement with any developer and what needs to be done to bring it to fruition; and finally the implications of planning gain (and when introduced, Development Land Tax/Planning Gain Supplement).”

Before the land can be developed it must be zoned for development. With every council implementing its area plans, farmers should be aware of local policies, the local planner’s interpretation of those policies and when the local planning framework is next under review, a process that is meant to occur every five years, but is often much longer in practice.

Simultaneously, a developer and landowner could enter into an Option Agreement, with the developer agreeing to buy land subject to various conditions. These can include making sure there are no infrastructure problems, and that water, drainage, roads etc can be connected at a reasonable cost and obtaining detailed planning permission. So whilst such an agreement shows the Developer hope to buy the land, it is in no way guaranteed.

Finally, planning gain is a major issue for farmers when the Development Land Tax/Planning Gain Supplement in the next couple of years, will in its simplest form, witness planning consent exchanged for something the Council would like in return, such as a new play park, road, roundabout, school or social housing or cash contribution. Often amounting to substantial sums of money, planning gain can be so excessive that it sometimes makes the development uneconomic or seriously reduces the price offered to landowners.

Colin Clark continues,

“Farmers must do their homework. Before they or a developer can even think about developing land they must firstly find out if it is highlighted within the local council’s plan and liaise with the local council to find out more about their policies and their chances of gaining planning permission for the proposed development on their land.

“That’s just the first hurdle, planning gain is still a major issue and having the right property developer working with you is crucial. With ‘deals’ being constructed by the council and developers for planning consent, this can have a huge financial impact on the landowner, a factor to be considered.

“All in all, the development of land and existing buildings is timely, costly and complex, but equally the rewards can be considerable if you are prepared to be patient. Heading down this route must be carefully considered and weighed up.”