The Courts when dividing marital assets are guided by S25 of the Matrimonial Causes Act 1973. The law is the same whether dividing assets on divorce in a farming case or otherwise. The aim of the law is to share out all of the assets of both partners in a way that is fair. In the majority of cases a fair outcome, depending on the resources, is one that ensures that both spouses' needs are met in the short-term and, if the resources allow, in the long-term. What someone 'needs' depends on their particular situation. The needs of any children of the family and of each partner are going to be the main focus of the case. Where the assets involved in a case are more than enough to cover needs additional considerations may apply, for example, some non-matrimonial assets (usually those acquired before or after the period of marriage) are more likely to be excluded. It cannot however be assumed that a farm is protected and it will depend on many factors but particularly whether the needs of each partner and that of any child can be met without looking at the farm. The wish of the remaining spouse to preserve the farm for future generations will not in itself prevent a sale. Having said that the Courts will normally do their best in farming divorces to find solutions which are fair to both spouses and which do not force a sale.
Often farming cases can have additional complications which will need to be taken into account including the following: -
- Farms are often inherited and it is often the case that both spouses hope that future generations will carry on the business. The focus then becomes how capital can be extracted for the departing spouse's needs without selling the farm.
- They are often inter-generational with other family members being involved in the running of the farming business. Any divorce could therefore impact on other family members.
- Farmers are often asset rich and cash poor. Liquidity can be a significant factor which will need to be explored.
- There are often different tenancies involved. Some may be let on a long-term interest under the Agricultural Holdings Act 1986 and some may be under shorter term tenancies which we call ‘farm business tenancies’. This can all add to the complexity.
- Many farm businesses involve some form of Trust or family settlement.
- Often farms are run as partnerships between the couple with one of them owning land which has been inherited, often being passed down to the third or fourth generation. A couple often work together actively on the farm and within the business.
- Sometimes the farmhouse will be both part of the working farm and home to the parties. There may be a tie over the farmhouse which exists to restrict the occupancy of the farmhouse for those involved in working on the land. Therefore as a matter of planning law the option of transferring the family home to one of the spouses may not be available.
When looking at a divorce case the Courts will firstly require a full valuation of the assets including farm, farmhouse, freehold farmland, tenanted farmland, livestock, crops, machinery, subsidies and quotas together with the other savings, investments and pensions.
As highlighted above, of significance in a farming case will be the needs of the spouse leaving the farm, including their housing and income needs and whether their reasonable needs can be met without a sale of some or all of the remaining assets. In a longer marriage those needs will be assessed generously. Liquidity, cashflow and how to raise and extract capital can become the main issue for consideration in cases involving farms.
Photo by Federico Respini on Unsplash
Back to blog