2nd January 2020

2020 Property Resolutions

As the last of the turkey gets eaten and people drift back to work (those lucky enough to have a couple of weeks off), many people reflect about their aims and ambitions for the coming year.  For lots of us it might be joining a gym or planning some exciting holiday adventures, but for those in business there may be a whole raft of ideas coming out of the holiday period.

It seems sensible to commit those ideas to writing, so you can recall them and review them.  There’s no shame in not doing everything on the list, but it’s harder to complete tasks unless you know what to do.  Communicating tasks is also important.  Who do you need to help you achieve things in your business?  Is it family members, business partners, staff or colleagues?  Work out what people around you need to do and make sure they are aware and engaged.  Do they need training?  Do they need resources?  Find out.  If you are not clear what you want to achieve, how can people help you?

Many of our clients will be looking to restructure their businesses, perhaps as part of a succession plan or perhaps, unfortunately, for a partnership/business dissolution or matrimonial breakdown.  One of the key assets is usually property owned by a family or business and Oakwood is often brought in to assist in evaluating assets.  The type of property owned by a business (or a family) can be wide ranging and may involve trading property (such as a farm or factory) or investment property.

When dealing with assets from which a business trades, we may have to consider the effect of the business if ownership of the property is altered.  If for, example, a market rent becomes payable, is the business still viable?  If assets are sold off, individual components could become unviable.

Quite often we meet clients seeking to split off properties within families and they have a rough plan of what they would like to achieve.  We then raise questions not often thought about, such as rights of way and access, utilities, development potential and restrictive covenants.  Many clients think that transferring ownership within families changes very little (“we’re just saving tax”!), but there needs to be a well thought out transfer document to prevent future arguments.  What if family members sell their property to a third party? 

Whilst we have a broad property experience within the firm, our traditional client base is farmers and this is where we encounter many property based myths.  Farming does enjoy an advantageous tax position so there has to be great care to maintain this when planning for succession.  However, this should not be at the expense of running a modern business and accommodating family requirements.  Having no cash just to save future inheritance tax is a non-starter in the twenty first century, but sadly remains the aim of many in the farming community.

We also consider ongoing profitability as it has become crucial for business development and funding.  Historically farming businesses were able to borrow on the strength of asset value, even if income and ability to service debt was questionable.  Today, regulations on lending require a clear plan for debt repayment and serviceability. 

Perhaps 2020, a new year and a new decade presents the opportunity for tidying up businesses and property ownership.  Death and taxes are life’s only two guarantees but planning for both may prove beneficial.

Graham Bowcock MRICS

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