The importance of having a farming partnership agreement in place cannot be emphasised enough, says Kirsty Davey, of Coodes Solicitors’ Rural Services team.
“The average age of a UK farmer is now 59 and, I suspect, older in the South West, while the typical value of a farm stands between £2million and £10million. It is deeply worrying that only a quarter of farms have a farming partnership agreement in place.
“Many farms are run in partnership – typically by parents and children or by siblings. A partnership agreement is a legally binding contract, which sets out the terms upon which the partners wish to carry out the business. It is important for tax reasons as well as being essential for protecting your assets.
“A partnership agreement also plays a crucial role in retirement and succession planning, and by working closely with our Wills & Probate team at Coodes we can ensure the agreement complements a Will. It is, of course, important to ensure a partnership agreement stays up to date, particularly if anyone retires or if a new partner joins. There are a number of issues to be considered when drawing up a partnership agreement, so having an experienced lawyer is vital. We also recognise that it is important to work closely with the partnership accountant and other rural managers or agents.
“So, what could go wrong without a partnership agreement? Many farms are run as family businesses and as we all know, families change over time as a result of births, marriages, divorces, retirements and deaths. Family dynamics can also be complicated and we have unfortunately had some cases in which relationships have broken down. Having an up to date agreement in place can protect all the partners by ensuring they each get what they are entitled to.
“In the absence of a partnership agreement, the Partnerships Act of 1890 will come into play. This outdated legislation is not suitable for most farming partnerships today.
For more information on farming partnership agreements, contact Kirsty Davey on 01326 318900 or email@example.com