Country estates, agricultural and rural property
Country estates, agricultural and rural property
Country houses are a prominent feature of the landscape in the UK and Ireland. Viewed by many as a rural idyll, they are wrapped up in acres of land and undeniable status, where inhabitants play lord or lady of the manor in a lifestyle of magazine-worthy ornamental gardens, thoroughbred horses and country pursuits.
In 2023, Knight Frank reported that sales of ‘super-prime country houses’ had hit a 15-year high, with 52 sales of properties worth more than GBP8 million outside of London in the 12 months up to March 2023, an increase of 16% from 45 a year earlier. For those who own or are hoping to own a landed estate, things can be far less rosy beyond the sweeping façade.
From estate management, tax and residential development to diversification, every estate brings with it a particular set of requirements and challenges. Specialist due diligence is crucial to ensuring things run smoothly, whether houses are a commercial business, family home or both.
The market for top-end country estates in the UK is very small and has been remarkably consistent over the last 30 years. Scarcity, coupled with the accumulation of serious personal fortunes, has led to strong prices.
Charlie Evans, Director, CKD Property Advisers
Landed estates: agricultural and rural property
To many, the phrase ‘landed estate’ evokes a uniquely English pastoral scene, of a stately home nestled among acres of rolling farmland offering quiet sanctuary from the pressures of modern life.
While there’s certainly more than an element of truth to this bucolic backdrop, it would be more accurate to view modern agricultural and rural property as a complex rural business that can encompass a wide range of commercial activities, from the leasing of cottages and employing farm workers, to large-scale commercial solar or wind farm developments.
It’s easy to idealise rural life on a landed estate but it’s important to consider the variety of factors and issues that acquiring a property of this manner might entail.
Reasons to buy
From our experience, there’s no such thing as a typical buyer of a landed estate. Such properties are acquired for all manner of either personal and/or commercial reasons, including:
As a hunting, shooting or fishing estate.
To rewild or farm the estate applying organic and regenerative practices.
To pursue a leisure activity or interest (such as stud farming or another equestrian pastime).
For the carbon offsetting/insetting opportunities and/or the creation of biodiversity net gain units as part of a wider ESG strategy.
To redevelop the main house (eg converting it into a hotel, spa or country retreat) or diversify the estate further (eg through renewable energy schemes or developing existing buildings).
For the estate’s long-term investment potential.
To use it as a family home.
Irrespective of a buyer’s reasons, past financial performance suggests that when properly managed, a landed estate can be both a much-cherished family home and a significant source of income with strong capital growth.
In recent years, income from traditional farming activities has declined for many landed estates. Instead, owners have looked to other commercial activities to diversify their source of income.
This diversification away from farming has meant that many estates are now perhaps better protected (although not immune) from the unpredictability of the agriculture sector with its vulnerability to weather and global markets. If managed properly and efficiently, a sufficiently diversified landed estate can now provide its owners with a comfortable income stream.
Furthermore, the Knight Frank Farmland Index has shown that the average value of farmland in England has increased by 23% over the last five years. More broadly, if a landed estate was purchased in 2006, then its farmland would have nearly doubled in value today. Farmland, which will comprise a large part of any landed estate, outperformed the FTSE 100 equities index, gold and Prime Central London and mainstream house prices in the three and 12-month periods to the end of 2023. Therefore, it continues to be an attractive asset to investors.
Types of estate
If you’re looking to buy a landed estate, then seek professional advice from a well-established firm of agents with relevant experience in rural and agricultural property well in advance of making an offer. While the market for landed estates is buoyant, it does not move as fast as the Prime Central London property market, so try not to be rushed into purchasing something that doesn’t fit your needs.
Depending on your reasons for buying an estate, you may want to consider the following before making an offer:
Is it listed?
If you have plans to redevelop the estate, check whether properties are listed (ie Grade I, II* or II) as this could limit your plans for development or make it prohibitively expensive. Furthermore, even if the main house is not listed, if any properties nearby are (such as an old barn) then the main house or any adjoining properties may be deemed to be what’s termed ‘curtilage listed’ and subject to the same restrictions on development as the listed property.
How private is it?
If privacy is a principal concern, ask whether there are any public rights of way through the estate and, if so, whether these are near to/visible from the main house. While public rights of way are certainly not uncommon through landed estates, you’ll want to know how often they are used, whether these are just footpaths or used by horses and vehicles too, and whether the public respects the route of the right of way. There may also be common land on the estate. While unusual, this effectively means members of the public have free access to and use of this land.
How will you farm and manage the land?
Are there existing farming tenants who will continue to farm the land for the foreseeable future, or is the land farmed by the owner in partnership with a third party? If you have no previous experience of agriculture, then we can introduce you to rural land agents early on. They can help you find the right estate and guide you through the various rules and regulations that govern the farming and management of land.
When will you take possession?
Usually, the buyer and seller will enter into a legally binding contract and agree a completion date when the buyer will assume possession of the property. A prospective buyer will need to factor in both the financing of the payment of a deposit at exchange of contracts, as well as how long they need to prepare to take full possession of the estate and pay the residual amount of the purchase price.
Be aware of the possibility that the farmland and any commercial properties may be subject to VAT on the purchase price. You will also have to pay stamp duty land tax on the consideration, but depending on how the transaction is structured, the lower tax rate that is applicable to what are termed ‘mixed-use’ properties (ie those that comprise both residential and non-residential elements) may apply. This can sometimes offer a significant tax advantage to a buyer.
‘Wentworth House’ is the largest private home in the UK. The façade – which, in architecture, is the most predominant front facing onto an open space – is the longest of any country home in Europe.
At 600ft long,
it is twice the length of a standard football pitch, and twice the length of Buckingham Palace.
Estate management: when issues arise
Whatever your reasons for purchasing a landed estate, while it can be exciting and rewarding, it’s not always easy. It’s imperative that you build a team of professionals at the start of the process, be it land agents or domestic staff, who can assist with the day-to-day management of the estate and also seek legal support from an experienced law firm.
Inevitably, landed estates are subject to the same issues and risks that apply to urban and residential properties. However, given that some estates are centuries old and comprise several thousand acres of farmland with cottages, farm buildings, gardens and grounds, unique issues often arise.
Common pitfalls you need to consider ahead of a purchase include:
Changes to rights of way: Many country estates will be subject to rights for the public to pass through them or use the land for recreation. These may be by public footpaths or bridleways, rights of way where vehicular access is permitted, or where the land has been designated as a town or village green. It’s also possible for members of the public to acquire new rights of way or recreation if steps are not taken by a landowner to prevent those rights from arising. Investigating the use of the land by the public prior to the purchase and ensuring that adequate steps are then taken to limit those rights to prevent enlargement can help mitigate against this risk. In some cases, where rights are acquired over an estate these will adversely affect its value when privacy is compromised, or land use is constrained.
Tenants’ rights: An estate will often come with farm workers, tenants and domestic staff that live in accommodation on the estate. The employment aspects aside, in some cases, those tenants will have been in occupation for decades and will have rights to continue to do so for their lives (this may extend to allowing spouses and children to live there for their own lives as well). The farmland may also be occupied by farming tenants who may have similar rights to farm for their and a close relative’s lives on their death or retirement. The nature of agricultural and service occupancies and farming tenancies are governed by esoteric areas of law that require specialist knowledge and advice. The right enquiries of the tenants need to be made before the purchase and where vacant possession is sought, a clear strategy and knowledge of the legislative framework is necessary.
Water risks: If there is a lake on the estate then this should be surveyed by a specialist hydrologist prior to the purchase to ensure that there are no problems with the water and its supply and that the retaining banks are structurally sound. Where problems are identified after purchase, remedial work can be expensive, and there can be significant risks and potential liability if, for example, a bank were to fail.
Asset performance
According to the latest instalment of the Knight Frank Farmland Index, the price of farmland in England and Wales rose by 7% in 2023 on average and an acre of land is now worth GBP8,951. Across a period of five years, farmland values have risen by 27%, beaten only by gold (+67%). The Knight Frank Wealth Report 2024 claims that in 2023 farmland formed the biggest investable real estate sector at least by size, comprising five billion hectares, or more than 40% of the globe’s landmass, with food production and environmental benefits leading investor objectives.
Key points to remember
Before an offer is made, make sure you enquire about the following:
- Who is in occupation of the land and buildings and on what terms?
- Whether VAT will be payable on the non-residential elements of the estate.
- Who is employed by the sellers, and will they be leaving with them or staying?
- Is the land being sold with a standing crop that will need to be valued or is any farm machinery/equipment included?
- Are there any public rights of way near the main house and/or a proposed development on neighbouring or nearby land?
- If the land is being sold on the basis that the lower mixed-use rates of stamp duty land tax apply, is this correct?
- Be aware of potential limitations on a listed property – if a building on the estate is listed, then do consider how this may limit your plans for development/use.
- Appoint a buying agent – on acceptance of an offer, be sure to have detailed heads of terms agreed that deal with all elements of the estate and their transference to you.
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Charlie Evans from CKD Property Advisers
