Any property legal Beagles out there? Extracting an asset property as gift??

Devon_Sailor

Hi all,

Firstly, apologies if this should be elsewhere. As it deals with both tax and property it could have gone in here or the Mortgage/property board, so took a punt! Please feel free to redirect/move if MODS feel it appropriate.....

Right, the situation, in a nutshell.

Farm partnership. Believe it is just a 'standard' partnership rather than Ltd company. Father, Mother, Grandmother (85, dementia, father has power of attorney) are the three partners.

All three wish to gift a delapidated barn to Son, so that he can develop it and move young family in there.

My questions are -

1) Is it possible to legally extract the barn from the farm business so that it can be gifted?

2) what would be the process of doing so?

3) Is it complicated (ie, please read that as massively costly!! lol)

4) what potential "red card" problems are there - eg, there is a loan/mortgage taken out on the business already...would removing part of the asset of the business screw up said mortgage/loan (although there are other new assets that are worth much more, to be borrowed against);

Very many thanks for taking a look, and I look forward to reading any responses with great interest!

Regards,

D_S

Savvy_Sue

Professional advice needed, I'd say. Does the farm have an accountant? That would be my first point of enquiry.

troubleinparadise

Definitely take professional advice re situation to do with capital assets being removed from the "farm" as a business, and the tax/inheritance tax implications - accountants and solicitors.

Other possible problems: presumably this is an agricultural building, in an area of land deemed to be for agricultural use - there are special considerations when applying for planning - whether change of use/need/within a conservation area/greenfield area/likelihood of selling off the newly developed barn/limit of occupants to those in the agricultural industry (agricultural tie). Quite a minefield.

And don't forget water supply, sewerage, electricity etc; and road access for vehicles & services (eg bin men) - these all get looked at within the planning areas. And surveys for environmental issues - wildlife such as barn owls and bats can scupper development.

A few hours googling the above will probably give a bit more info.

Depending on the position of the barn, having a barn conversion owned by a new person outside of the farm business, but sited within the working farm itself could lead to future problems with selling the farm, or the barn conversion, and devalue the farm itself as a business entity.

So planning advice would also be a good move before even starting the ball rolling - pay a rural planning advisor perhaps before speaking to the local planning office, who will probably be quite negative. Google your local area planning office to see if they have any guidelines or policies you can read about; or the outcomes of planning applications for similar conversions locally.

A bit of money spent on professional/expert advice could well save you thousands in the long run.

Devon_Sailor

Hi TIP thanks for the reply.

Farm is based on a box configuration - main farmhouse, two barns and a wall/main gate surround a courtyard. Both barns derelict (although both have a roof). Plannin permission has already been granted on both. Right next to a main road so there is sufficient acces, and there is a main drain and water junction just outside the main gate so all utilities are easily accessible.

Both barns will be done up for family members (me and my brother), both of whom already live on the farm, and will inherit the whole upon death of parents. No intention to sell outside of the family!

Barns as assets of the business were used about 8/9 years ago to secure a mortgage to build a farm shop on another site. This shop is now a (thankfuly!) thriving going concern so would I be correct in assuming that the company may well agree to look favourably on the split of these old assets, now that they have something worth many, many times more to secure against?

Looks like I will just have to sit down with an accountant and see where we go....but at least it looks like being, in theory, possible?????

D_S

Savvy_Sue

See if you can get an accountant who specialises in farms rather than a generic 'small biz' (or even large biz!) one. I understand from posts on here that it's a whole other world ...

If the farm has an accountant, I would start with them, as they know the business.

troubleinparadise

Hello DevonSailor,

It certainly sounds as though the physical set up of the barns won't be too much of an issue in terms of practicalities; and the added bonus of planning permission in place really does make it a goer as a plan.

I'm wondering if this is a proposal you are making to the business owners, or is this their idea? Because of course the business itself could benefit from the barn development and then renting out to you brothers as tenants, with the added increase in the capital assets of the business and an income; which would then come to you in the fullness of time (but with increased IHT) It may be that the business owners would wish to be given some remuneration, rather than just gift you the barns - tax implications again.

As Savvy Sue says, see an accountant who specialises in rural businesses who will know all the positives, pitfalls, tax and inheritance implications, and a solicitor with rural expertise wouldn't be a bad idea either.

Farm businesses involving families can be a minefield in themselves!

Devon_Sailor

Hi TIP,

As per my first post, the business owners are my parents! :-) They currently have a couple of other pokers in the fire, including the aforementioned shop (which the mortgage was taken out to cover the build costs of), and a solar and wind farm.

Taken into consideration with the land that comes with the farm (not mahoosive, but coupled with the rest, not insignificant monetarily), it would be better from an IHT point of view to get some assets out early as gifts to drive the overall liability down (althoguh with them only being late 50's i very much hope it is not for a long time yet!)

D_S

troubleinparadise

Hi DevonSailor,

I had taken on board the business owners were your parents, but I wasn't sure if you were posting just to get some ideas you were having validated, or if they were involved with the plans - it does happen that there isn't necessarily full disclosure early on with new ideas!

Simplistically, it sounds like you are in a very fortunate position on so many fronts - property in a rural location, an ongoing viable business that is supporting your parents and grandmother, and will potentially be yours (even if shared) in the future; and a lovely place for you to live and bring up your family.... I'm sure many would love to have your challenges (me included)!

I wish you all the best with your project - it is workable, with good advice.

pps: A word of caution about your grandmother with dementia - from the sounds of things, with a viable business, should she need residential care if her dementia worsens, she would be self-funding? Be careful about hiving off any assets she may have in advance of needing care thus depleting her assets or so that she would fall below the financial cut-off thus qualifying her for LA funding. An LA financial assessment can go back into her financial history, and if it looks as though there has been a deprivation of assets/capital, they do not just ignore it.

Savvy_Sue

Re the deprivation of assets, probably depends in what circumstances any of them belonged to her, if ever. Definitely something to get proper (ie paid for) advice about. If farm or part thereof passed to parents via a will, then that probably helps!