News:

Richard Brown of Hexham & Northern Rural has been appointed by the Tenant Farmers Association (TFA) onto their list of Recommended Professionals. The invitation by the TFA Committee makes Richard only the seventh appointment of a Chartered Surveyor onto their North Eastern regional list, which covers Northumberland, Co. Durham and Yorkshire.

In addition to the comprehensive professional experience gained within the tenanted sector, whilst working for the ambitious and expanding firm of chartered surveyors, Hexham & Northern Rural, Richard’s involvement in his family’s tenanted farm near Alnwick, make’s his appointment the ideal choice. Richard comments that, “Having previously been employed, and with a number of clients in Yorkshire, I am in the fortunate position of being able to offer knowledge and experience of rental markets throughout the North East of England.”

The TFA work closely with selected land agents and chartered surveyors across England and Wales and with many tenant farmers currently facing a rent review for the first time in over ten years, the Association strongly encourages them to seek professional advice to ensure their best interests are protected. TFA members are entitled to a free consultation with a recommended professional.

TFA Chief Executive George Dunn said “We want to ensure that our members have access to good quality, professional advice. Our regional panels of recommended professionals, which are overseen by our regional committees, are therefore very important to us and I am pleased to welcome Richard to the team”.

However following last autumn’s dramatic rise in arable commodity prices many landlords responded with the inevitable service of rent review notices for tenancies held under both the Agricultural Holdings Act 1986 and the Agricultural Tenancies Act 1995.

Following a period of stagnation in the rental market many landlords are now looking to secure substantial increases for rent in 2008 and for the arable sector this could conceivably see landlords seeking as much as a 50% increase. At the other end of the scale, when looking at hill farm rental it is very hard to see any landlord being able to justify any rental increase in this sector, in light of the second FMD outbreak in six years.

It is essential that any increase in rent can be sustained by farming businesses and while any rental dispute between landlord and tenant may ultimately be referred to arbitration it is always hoped that agreement between the parties can be reached.

Professional advice and knowledge of the local rental market is vital to achieve a satisfactory review. The basis with which rent reviews are conducted vary between the Agricultural Holdings Act 1986 and those of the more recent Agricultural Tenancies Act 1995 (Farm Business Tenancy Agreements). 1986 rents are assessed taking into account the terms of the tenancy, the character and situation of the holding, the productive capacity, related earnings capacity and recent comparable lettings. Whilst in contrast when carrying out reviews under the Agricultural Tenancies Act 1995, the FBT can contain its own rent review mechanism and criteria and care should always be taken to first check your tenancy agreement. If the agreement is silent the statutory provisions will apply and the rent must be reviewed to a level which the holding might reasonably be expected to let on the open market, taking into account all relevant factors.

For further advice or assistance on farm rent reviews please contact Richard Brown at the Hexham Offices.

Richard W Brown MRICS FAAV Hexham and Northern Rural Mart Offices Tyne Green Hexham Northumberland NE46 3SG

01434 607028 07974 706133

e-mail: rbrown@hexhammart.co.uk

DO NOT UNDERESTIMATE THE IMPORTANCE OF UK AGRICULTURE TO THE UK LAND MARKET

Escalating grain prices and the resulting hike in animal feed costs are beginning to open up a substantial divide in profit margins experienced between the arable and livestock sectors. This will range from continuous wheat farmers who are inline for the most profitable harvest this decade (depending on the quantity of the 2007 harvest that was forward sold) to pig producers experiencing substantial weekly losses as feed bills double and treble. Unfortunately this is currently being compounded by the unsatisfactory livestock prices experienced with a ban on exports and crippling movement restrictions imposed following the untimely return of Foot & Mouth in early September.

Nevertheless, it is this “feast and famine” climate that undoubtedly creates opportunities and allows for necessary change, expansion and restructuring throughout the industry. Historically agriculture has always evolved and adapted, with change a healthy and essential part of the industry.

Prior to and throughout the turbulent transition from production based subsidies to the current Single Farm Payment (SFP) regime, this element of change has been noticeably absent. Some three years on, farmers are comfortable with the stability brought about by SFP and accepting of its minimal impact on land values. Thus creating greater confidence amongst land owners who are now happy to place land onto what is a very buoyant market.

The increase in UK land values has been well reported to date. Demand for farms sold by Hexham & Northern Rural (HNR) has been largely fuelled by Irishmen with ever stronger purchasing power on the back of land values four and five times greater than our own. This, coupled with favourably low rates of interest; inheritance tax relief and the low risk investment status associated with land ownership (all helping to attract city and lifestyle investors) will ensure the firm market should continue.

Whilst the above factors are well documented, we must not forget the most important contributor to demand for UK farmland – the UK farmer. In 2006 over 50% of farms were reported to have been successfully purchased by active farmers - a statistic upheld throughout the last 12 months across HNR sales of land in excess of 1400 acres.

Conversely, it is for many of these factors that there remains a massive shortage of land for sale and land prices continue to hit record levels. However, what is apparent is the number of farmers, often livestock, (who like arable farmers in 2005) are now wishing to arrange the letting or contracting out of their land. What is encouraging and a good indicator of the level of optimism remaining in agriculture is the large volume of interest that is continually expressed in farms to let, from bare arable land to upland hill units.

Although we are often reminded that the average age of farmers is 58, it is HNR’s experience that there is a strong contingency of determined young, agri-business farming families who are willing and able to take opportunities when they arise. For every farmer wishing to surrender a tenancy, there would appear to be several eager to take their place. With the majority of letting farms being offered separately from SFP entitlements, all budgets accompanying tender forms must detail efficient farming practice with each enterprise being entirely self supporting. This applies from arable land where production is king to upland units where potential tenants must seek to achieve the correct agri- environmental balance to ensure best profitability.

 Therefore, whilst we continue to focus on the external factors affecting the modern farmland market, we must not forget that it is the relentless drive for farming efficiency, diversity and bravery to expand, which ensures developments in agriculture and ultimately underpins demand within the UK farm land market. For this reason Surveyors at HNR consider it an essential part of their job to help farmers facilitate change through the sale, letting or contracting out of farms to benefit the individual as well as the industry and market as a whole.

The 2006 telecommunication rental survey shows that operators continue to resist rises in rent. Being faced with delays from the operators and lack of flexibility from their agents, many owners feel they have little option but to concede to minor inflationary increases in rent rather than use evidence from comparable market rents.

However, with average rents for all ground based sites across the UK being around £5,150 p.a. owners must ensure they are taking advantage of rent review provisions in their contract and receiving the maximum rent possible for their site.

All businesses are required to carry out an annual stocktaking valuation at their respective year end. Business Economic Note (BEN) 19 sets out the Inland Revenue’s (IR) guidance on stocktaking with the preferred basis of valuation being “actual cost” of production and failing this “deemed cost” can be used - for crops being 75% of market value, 60% for cattle and 75% for sheep and pigs.

Prior to the Mid Term Review, Arable Area Aid (AAPS) and set-aside were treated as aids to sales and so accounted for as and when the crop was sold. However, the SFP is not included in stocktaking but the Protein Premium should be treated like AAPS. Please contact one of our Surveyors if you require further advice or assistance with annual stocktaking valuations.