Most landowners know exactly what the family owns, including the finer details of boundaries, tenancies and history. However, they may be less clear about exactly who owns which property and what’s on the business balance sheet. It’s not uncommon for someone to think they own land when in fact it’s still held in the names of grandparents’ executors, or for them to think it’s owned jointly with a spouse when that’s not the case.
The implications of getting this wrong can be serious. It can mean:
- Rental income which has been declared as belonging jointly to a spouse should have been taxed on the sole owner only.
- Land may be shown as a partnership asset when the intention was always that it would belong to one partner only or, perhaps more commonly, vice versa.
- Land may be developed by an individual in the belief that he owns it, whereas in fact it’s owned by someone else. This typically occurs where parents promise to gift land to a child, who gets planning permission and builds on it, but the relevant deed of gift isn’t completed at the time.
- Ownership problems emerge where land is to be sold. Sometime it is still registered to executors who are themselves long since dead.
If these problems are discovered before a transaction has gone far, and all the individuals are alive and cooperative, it can usually be sorted out fairly easily by way of statutory declarations. However, the real problems arise where something unforeseen happens, such as a major partnership dispute, divorce or tax problem. At that point, both parties start gathering evidence to demonstrate why the circumstances fit to their own advantage. This will involve tracing back through old archives of correspondence and accounts, normally at considerable expense.
In many cases, the people who knew all the answers are dead or retired. And, of course, each solicitor is obliged to settle the matter to the advantage of its own client. In tax matters, it can mean that reliefs that a vendor thought were available are not and indeed, the funds to be raised by a sale may not even pass as expected. If a limited company is involved, the problems can be even worse, with potentially overdrawn directors’ loan accounts and punitive tax charges.
Be sure to get a terrier!
No, we’re not looking at the “Jack Russell vs Yorkie” debate: those sorts of terriers rarely make life easier (though possibly more interesting!).
A terrier is a list of land held within an estate, including details of extent, description and ownership. Life is much easier for accountants, solicitors and their landowner clients if one is set up and maintained.
So the moral of the story is to take time out on a rainy day to sit down with a map, a file of solicitor’s correspondence and a set of accounts, and list out what properties are there and who owns them. The results may be surprising but at least they can be rectified in a controlled way while everyone is still alive to sign the necessary documents.
If you would like further advice regarding your agriculture property or business, please contact Nina Baker on 01328 807098 or email email@example.com