Buying rural property
When buying rural property, you should ensure that its intended purpose is allowed under its zoning and by council, and that any proposed farming activities are feasible. Various issues can hinder your farming enterprise such as the presence of chemical residues, livestock and plant diseases, noxious weeds and animals.
State bodies and local councils provide information and resources on soils, land, water, noxious weeds and diseases and retain records showing orders issued on properties with any issues.
A lawyer with knowledge of rural property transactions can recommend the relevant searches and enquiries before a contract is entered to minimise the risk of issues affecting the land and your proposed activities.
Selling rural property – contract preparation
Contracts for rural property transactions must be carefully prepared to ensure that the land is correctly identified, mandatory disclosure information is included, and the parties’ negotiations are properly documented. The property often comprises multiple parcels of land – each must be correctly identified in the contract.
During the sale process, government bodies will play a role in answering purchaser enquiries about rates, animal and stock disease, pest control and chemical residue issues.
Farming and rural properties are unique, and a transaction may involve not only the sale of the physical land and structures, but other matters incidental to the business of the farming enterprise such as crops, stock, plant and machinery.
Plant, equipment and livestock (together with PICs) to be included in the sale should be listed in an inventory attached to the contract. As these assets form part of the farming enterprise, the parties may need to obtain financial advice regarding how the prices should be apportioned in the contract.
Water rights forming part of the sale but held separately to the title of the land must be transferred through the relevant Government authority. Water access rights must be clearly defined, and appropriate processes included in the contract for their transfer on completion.
Agricultural leases and agistment agreements
Agricultural leases concern the rights for a person or enterprise to use land for production, harvesting or the farming of produce. These leases may also provide for the use of buildings and shelters on the subject land.
Agistment agreements are important considerations for farming enterprises, whether dealing with ongoing climate conditions such as drought, or as an alternative way to run stock without the overheads of purchasing additional land.
Rural arrangements such as these are common within a farming enterprise and should be legally documented in a binding agreement which sets out the respective rights and responsibilities of the parties.
Taxation considerations on rural transactions
The sale or purchase of a farming enterprise will typically raise implications such as the application of goods and services tax (GST) and capital gains tax (CGT), as well as liability for stamp duty.
Legislation across various jurisdictions provides duty exemptions for certain transfers of farmland between family members, known as intergenerational farm transfers. These exemptions offer considerable savings but must be carefully considered to ensure a party is not caught out with a non-exempt transaction.
Farm succession planning is a strategic process to sustain the family farming enterprise so it can be passed onto future generations. A succession plan should support the viability of the farm, keep the business in the family (if desired), provide a retirement plan and financial security for retiring family members, and deliver workable arrangements for remaining and incoming members. Plans typically consider matters such as the individual / family needs and goals, the use of appropriate legal structures, the sale and transfer of assets, and financial and taxation implications.
When dealing with rural property, you are dealing with a lot more than the land and a dwelling – selling and purchasing requires consideration of matters outside the scope of a typical residential property transaction. A farming enterprise involves a livelihood, often one that has passed through generations and has weathered many conditions. There is much to consider and sound legal guidance is essential.
If you need any assistance contact one of our lawyers at [email protected] or call 07 4927 9477 for a no-obligation discussion and for expert legal advice.