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Bell Ingram’s Guide to Buying an Estate
6Feb2012
Many people dream of owning an Estate in Scotland, whether it’s for business or pleasure. The popular image of a Scottish Estate conjures up visions of mountainous expanses interwoven with lochs, rivers and vast forested areas. It may also feature a large shooting lodge or perhaps a castle and an extensive portfolio of farms and cottages. This image is re-enforced when an estate comes onto the market and a copy of the glossy colour brochure arrives, filled with panoramic shots of the landscape and roaring open fires in cosy lodges.
Over the past three years there has been an increase in the number of Scottish Estates coming to the market and potential purchasers from around the globe have pored ov
er the shiny particulars. Most notable at present is Tournaig Estate in Wester Ross and Dalmagarry Estate in Inverness-shire. Tournaig extends to a cool 6,697 acres and has a guide price of £2.5 million. For that you will receive a seven bedroom house, four estate cottages, red deer stalking and an in hand stock farm. Dalmagarry Estate is a large driven grouse moor of a similar size at 6,673 acres with a guide price of £5 million.In the agent’s brochure, estates may look like an exciting and attractive prospect, but don’t be fooled by their glossy exterior. The reality of buying and owning an estate rarely lives up to the romantic ideal and there are numerous pitfalls to be aware of. For someone inexperienced in estate purchase and management it is essential to rely on professional advice. There are many problems that a potential purchaser could face and numerous of questions to ask. On the other hand, professional advice at an early stage can open up a range of possible uses many of which are not initially obvious. Some of the issues to consider are as follows:
Staff
Many estates have existing staff and there are legal requirements to adhere to. The Transfer of Undertakings (Protection of Employment) Regulations 2006 or TUPE , are crucial when a new owner takes over. These regulations legally transfer employees and their associated liabilities to a new employer, including the period of employment under the seller for redundancy purposes.Residential Property
It is likely that there will be a portfolio of residential property on the estate. This may be used privately or let out. It is important to establish if all tenants have the relevant AT5 notices and Short Assured Tenancies or alternatively if they have the much greater security of an Assured Tenancy. A crucial element for all ‘new builds’ is that the relevant Building Completion Certificate has been issued and that the property adheres to all fire and SEPA regulations. In April there will be a Tenancy Deposit Scheme to comply with as well.Sporting
This covers a very broad area and may include deer stalking, game shooting and fishing. Studying accurate annual returns for each of the elements is essential and if the sport is leased it needs to be determined if the figures are realistically and sustainably achievable
outside of a lease agreement. The estate may also be part of a Deer Management Group (DMG) and subject to a wider Deer Management Plan (DMP). A DMP may dictate how much control an owner has on grazing over the heather. This will be more pertinent if the area is adjacent to an estate subject to a Section 7 Control Agreement. Estates with salmon fishing have to be aware of what happens up and down stream of them and the status of coastal nets. Another consideration is global warming and if this is having any marked change in habitats, e.g. heather cover and river temperatures etc.Farming Operations
The estate may have an in-hand farming operation, tenanted farms, contract farming agreement or any combination of these. There may also be a combination of Limited Duration Tenancies, Short Limited Duration Tenancies and Grazing Licenses in existence, all of which have implications in terms of land use, security of tenure, flexibility and taxation. There can be EU cross-compliance issues which a new owner needs to be aware of, as well as more topical issues like diffuse pollution which feature highly in areas subject to a catchment management plan. With the changes in the CAP in 2014 or 2015, it is essential that subsidy rights are not lost unnecessarily over the next few years.Buying land in a county subject to Crofting Rights is a whole subject in itself. Crofters have had the right to buy their croft outright for many years and this was extended to whole communities in 2006. The relative rights of landowners and crofter are very different from elsewhere and specialist advice is essential.
Renewable Energy
There may be an existing hydro electric scheme or wind farm on the estate and the present owner may well have a long lease and/or contract with a power company. Due diligence would be required to assess the existing arrangements. In the absence of a scheme there may be potential for one, but if a potential purchaser is opposed to wind farms then it would be worthwhile checking other plans in the area that may affect the view.Forestry
An estate with woodland that has been awarded funding for planting is almost certainly subject to conditions that a purchaser would inherit as to its proper maintenance. Failure to do so can mean repayment of grant, with interest.Single Farm Payment & Existing Grants
The estate may have an existing Single Farm Payment Entitlement which could be transferred when sold to a new owner. This may have to be negotiated with the existing owner. A new owner would also be liable for honouring other grants that the estate is subject to. With most of the Scottish Rural Development Programme applications, a contract of five years is awarded, with some forestry grants extending even further.Reservoirs
The Reservoirs (Scotland) Act 2011 brought about further responsibilities for landowners who have reservoirs on their ground. Although SEPA have a regulatory duty to monitor all reservoirs, there may be an outstanding maintenance liability on a dam that could affect the future use of any loch which will need to be borne by a new owner. In any event there will be the cost of statutory inspections to include as well.The list of issues is endless but the above examples provide a broad outlook on what a potential purchaser needs to look for when purchasing an estate. Professional advice from an early stage is of paramount importance, and whilst it may be viewed as an unnecessary expense prior to an estate being purchased, it could save a buyer a lot of money in the future if these points are investigated thoroughly from the outset. Overseas purchasers should also consider the possible effect on ownership and values in the event of Scotland becoming independent.
If you still have your heart set on a Scottish Estate, Bell Ingram have all the expertise in appraisals, valuation and management that you need, as well as being able to advise on what property is and might be on the market. We also have the depth of knowledge in specialist fields including forestry, farming, sporting, renewable energy, accountancy and tourism to asses an estates’ every aspect for value.
By Charlotte Gilfillan, Malcolm J Taylor & Hector MacLean
For more details contact malcolm.taylor@bellingram.co.uk at our Forfar office on 01307 462 516.