Factors to consider when buying or selling agriculture, horticulture, and viticulture businesses

The foundation of any agriculture, horticulture, or viticulture business is the land on which it is based. Understanding the way you can use and develop the areas where food, crops, or plants are produced is fundamental to the transaction. Where appropriate, thought should be given to whether produce can be easily processed at and distributed from the location. 

Overall, buyers and sellers alike must establish clearly the nature of the property being transferred, and how easily the land will lend itself to diversification in the years to come. This means carrying out extensive due diligence to uncover:

• Whether the land is freehold or leasehold
• The conditions of any leases
• Precise access routes
• Rights to water, drainage, and minerals
• The extent of any rights of way or easements over the land

The centuries’ old development of rural land law means substantial tracts of farming and other holdings are subject to multiple, sometimes informal, tenancies and other rights. These could interfere with a buyer’s use of the land post-sale, and so they must be established clearly ahead of sale.

Finally, an audit of existing subsidies, tax reliefs, and other government funding should be carried out and enquires made as to whether these benefits will survive the transition to a new owner.

Owners of agribusinesses, including horticulture operations and vineyards must navigate multiple environmental controls in the course of their business. From an environmental perspective the range of regulations and safety initiatives is wide, covering matters as diverse as waste management, use of pesticides, and slurry discharge.

Complex legal frameworks and a sometimes inconsistent application of planning law across the country can lead to uncertainty for buyers and sellers. It is not unusual during the pre-contract stage for buyers to question the validity of various planning permissions or licences held by the seller. Specific structures, such as polytunnels and greenhouses, may require separate planning permission, for example.

The buyer should always be sure that their intended use of any land or buildings being sold is carefully assessed against current planning permits to ensure compatibility. In addition, reference should be made to council-driven Local Plans and, where appropriate, any controls applicable to the target land if it is situated in an Area of Outstanding Natural Beauty or within the Green Belt. The planning team at DMH Stallard, including our Planning Consultancy, is one of the largest in the South East, recognised for its work helping agribusiness owners and others work through the complexities of the planning system.

Warranties and indemnities may be similar to most business sales where there is active trade, but key risks will be around the Environment Agency, the Office for Environmental Protection (OEP) or the Local Planning Authority, where liability can be imposed on a new owner for historical breaches such as land contamination or illegal construction.

Sellers should be prepared to fully disclose any past enforcement action they have faced and provide the buyer with detailed records. This enables the buyer to assess the risks, seek appropriate warranties and indemnities, and put them in place before completion. While sellers are often reluctant to do this (fearing reduction in value) it is far better to deal with these issues while you are in control of the business, rather than trying to defend an indemnity claim when you no longer have access to the land or records.

What are the core activities of the agribusiness being sold? These will dictate any additional regulatory burdens and other considerations the buyer should factor into the purchase. Businesses focused on crop production or plant and flower cultivation are subject to strict plant health, disease management, and biosecurity safeguards. A seller should expect to disclose all processes and procedures in place to manage these responsibilities. Buyers should also carry out an audit of any crop sale agreements in place at the time of purchase and establish whether they will be bound by these post-sale.

When it comes to farmers and others operating livestock businesses the Animal Welfare Act, 2006 is crucial. Provisions that buyers should be aware of include on-farm welfare regulations (housing, diet, protection from injury) as well as off-farm protections governing transportation and slaughter. Compliance with these obligations is strictly monitored and enforced. Business owners can face prosecution for serious breaches.

We have outlined just a selection of the legal and regulatory issues that can arise when buying or selling a business in the agriculture, horticulture, and viticulture sectors. We advise on these and a wide range of related matters, including ownership of equipment and machinery, subsidies, insurance, and employment matters, including laws on the employment of seasonal workers from abroad.

Our team of expert Sales, Acquisitions and Mergers lawyers is backed up by others working in areas such as Commercial Real Estate, Employment and Finance as well as Environmental and Planning Law.  We draw on this expertise across the firm on M&A matters to provide the best, value added service we can.

For an initial conversation please get in touch.