A well-researched valuation report can help achieve a fair settlement in divorce cases for the parties. It is important that a valuer is thorough and impartial so as to ensure they have the confidence of both parties, particularly in the midst of often-difficult divorce cases. This, in turn, will hopefully enable the parties to arrive at a settlement without recourse to proceedings.
Often, the book value of farmland and farm buildings may be quite different from their value in the property market. A decision will need to be made as to whether it is proportionate and appropriate to obtain a valuation of the land, buildings, and machinery etc., and whether this is necessary before the case can be resolved. Normally a valuation report is required.
If it is decided that it is necessary to value the farm and farmland, then it is often appropriate to instruct a single joint expert that the parties both agree on. The method of valuing land and farms for matrimonial purposes is similar to that used for sale, purchase, or bank lending.
The valuation process normally starts with a joint letter of instruction being sent to the valuer. Providing there is no conflict, the valuer will confirm their timescale, cost, and any further documents that he or she requires. Their valuation process then normally starts with a detailed inspection, measuring the farmhouse and farm buildings and land, assessing the quality of the soil on the land, the efficiency of the land drainage and the condition of the crops. An expert in valuing farmland is always recommended. Following the inspection they will carry out research with the assistance of the solicitors to establish land ownership, tenancies, restrictions, covenants, and development clawbacks. They will gather evidence of property sales in the region to form the basis of their valuation.
It is not unusual for ownership anomalies to arise. For example, the farmhouse may not be in the same ownership as the land and buildings. The value of the house is then potentially reduced by having the disruption of the farming operations close by. Another potential problem is that some of the land may be let on secure lifetime tenancies, regulated by the Agricultures Holdings Act 1986. In this situation the tenant has the right to occupy the holding for its lifetime and potentially, there may be rights for their children to succeed to the tenancy. In addition, the rent is reduced by the provisions of the Act. The reduced rent and the inability to obtain possession means that it can be worth less than land with vacant possession. This can be quite common on family farms where tax planning schemes were put in place for family members with the deliberate intention to reduce the land value to reduce future tax bills.
Given that many farms now diversify, means that the valuer may be required to value a variety of non-agricultural assets including offices, holiday cottages, farm shops, commercial storage, haulage yards, caravan parks, fishing lakes, woodlands, and windfarms. If such diversification has taken place, then enquiries will need to be made of the joint expert whether they have experience in this area or can involve someone that does.
The expert should also consider any development potential, but this may involve reviewing the Local Authority’s planning policies, and where appropriate, discussing issues with the planning officer. Where land has development potential, but no planning permission, this can be contentious. Sometimes consideration will need to be given to a future development clause if the intention is that both parties share the benefits of any future planning permission.
Valuations are an art rather than a science. It is important that an independent and impartial expert is instructed who will take a balanced view to find a fair value for the property and land. They will hopefully give an indication of the likely value range. The parties will then need to take this into account in their negotiations.
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