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This month, after a long and expensive legal case Rebecca Carter had her right to ownership of a house on her family’s farm confirmed in court.
Separately, a judge found that Julie Mate was entitled to a share in the uplifted value of farmland sold for development (see “Promised barn conversion leads to £1m-plus farming family court case” and “Farmer’s daughter wins fight for share of development proceeds” – both further below).
See also: Analysis – Supreme Court rules on disinherited son’s claim to farm
Numerous issues give rise to family disputes, sometimes caused by misunderstandings or assumptions.
Legal advisers warn that more thought should be given to clarifying details and expectations about gifts or promises.
Failure to do so can lead to costly and stressful family situations if relationships go wrong, with many of those involved having to continue working together or at least living in close proximity.
“If you make a gift of property, discuss it and document it,” advises Katie Alsop, a partner with law firm Wright Hassall.
“Sometimes people avoid doing so because they think it will lead to tax issues, for example, whether the asset will still attract agricultural property relief from inheritance tax [IHT].”
Promised barn conversion leads to £1m-plus farming family court case
Rebecca Carter won the right in the family court to ownership of a converted barn on her family’s Yorkshire farm.
The barn has been her home for 13 years and was promised to her on the understanding that if she paid the mortgage on the property, it would become hers.
Her original case was based on proprietary estoppel, where someone relies, to their detriment, on a promise made to them, which is then broken.
Her mother, Pamela Teasdale, lives in the main farmhouse just 6m from Cow House and appealed the decision to award Ms Carter the barn, losing that appeal earlier this month.
The appeal judge said this was one of the most regrettable pieces of litigation he had ever come across, not just because the family had become so fractured as a result, but also the costs involved.
At the initial hearing these were about £828,000, and the appeal costs were £220,000.
Cow House is worth £245,000 after a 20% reduction for an agricultural occupation restriction.
The case was complicated by Ms Carter’s parents’ divorce. The costs will be added to by a further hearing to decide what is known as the financial remedy in the divorce.
“There is tendency to think ‘don’t fiddle with things now by putting them in writing, it can all be sorted after death’.
“However, verbal agreements now can lead to disputes later and whether something qualifies for IHT relief will be part of the probate process.”
A gift should be recorded in a deed of gift, which does not have to be complicated, but should clearly identify any property, including a plan, says Ms Alsop.
Farmer’s daughter wins fight for share of development proceeds
Julie Mate recently won a share in the proceeds from the sale of development land on her family’s farm, also in Yorkshire.
Ms Mate’s claim was on the basis of proprietary estoppel and unjust enrichment.
While the estoppel claim failed, she was awarded £652,500 on the unjust enrichment point, with the judge assessing this as the value of the services she had provided in investigating the potential for development of the land and her contribution to subsequently pursuing that potential.
“The legal title to the gifted property should be transferred to the recipient of the gift and not simply held on trust by the giver for the gift recipient.
“If the gift is not the whole of a registered title, a copy of the deed of gift plan should be attached to the transfer deed.”
Whether a property is registered or not, a transfer of the legal title will also give rise to the obligation to record the change of ownership at the Land Registry.
Where it is part of a larger property, such as a farm, a new title will need to be created in this process.
“It’s important to attach a clear plan of the property to the deed of gift and transfer, showing what it is and the extent of any land,” says Ms Alsop.
Clarifying the terms of use is also key:
- Access – by whom and for what purpose
- Use – residential only or is commercial activity permitted?
- Parking
- Services – water, electricity or sewage may be delivered through or shared with another property. Any rights to these need to be included in the transfer document at the Land Registry, or new supplies and meters installed.
- Responsibility for maintaining shared access routes and shared services apparatus and how a contribution to shared costs is calculated.
Gift and asset advice
- State intentions and acts such as gifts clearly in writing
- Make everyone aware of what is done, so there are no surprises
- Be clear who owns what – farming assets are sometimes owned by individuals in a farming partnership, but the same assets mistakenly appear in the accounts as partnership assets, or assets are owned by a partnership and therefore not capable of being gifted by an individual
- Ensure that partnership agreements and wills agree on asset ownership and distribution
- Cleary identify what a gift is and any conditions attached to it
Longer-term issues should also be considered. For example, the giver may want to include the option to buy property back should it be put up for sale.
“The important thing here is to be clear about how it will be valued – for example, a market valuation at the time it is put up for sale,” says Ms Alsop.
“Where things do lead to family disputes, we would always advise mediation.
“This costs significantly less than proceeding to a final hearing and gives more flexibility and control for the parties than going to court, as it can consider a whole range of issues, not just those set out in the claim.
“Once you’re at trial, it’s a question of whether the judge prefers your evidence to that of the other side, and the claim is all they are able to consider.
“There is also a tendency for people to become more entrenched and determined once things have gone to trial.
“This can result in an attitude that they have spent so much already that they might as well continue to trial, but the costs of going to appeal thereafter and being unsuccessful could easily bankrupt someone.”
Whether there is a dispute or not, it is sensible to make a note of discussions and to keep paperwork that might be relevant.
Good housekeeping
Whether promising, gifting or simply organising the occupation by a family member, tenant, employee or holidaymaker, it helps to have clarity about the extent of a property and its use, along with its services, access rights and any restrictions or conditions, say advisers.
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