Bank security: The benefits of landowners, banks and solicitors working together

We all know farmers don’t like selling land to release capital. Re-financing is often the better option to raise cash to invest in your farming business. Whether it is to buy more land or convert redundant buildings, allowing a bank to take a charge over your assets is an obvious choice to release funds.

Having been in practice for over 15 years, I often find clients are puzzled as to why their solicitor has asked them so many questions about their farm, especially if they have lived there for generations. This is, I believe, because many landowners don’t necessarily understand the process required for charging their land to a bank.

This article gives an overview of the procedure that solicitors must undertake before those important draw down facilities are available.

If a bank takes a charge over your property, your solicitor will be instructed by not only the landowner but also in most cases by the bank as well. There are strict regulations a solicitor is required to adhere to and the process is akin to if you were buying your farm for the first time. Unfortunately, the fact that you have been in occupation of your land for many years is of no comfort in the security process.

Your solicitor needs to check the legal title, carry out searches and raise any enquiries with you to clarify any issues which a bank may not be able to lend on. Some of the common issues I have encountered in carrying out security work over farmland are as follows:

  • Who the land actually belongs to is a fundamental issue. If the property is owned by a Trust but a farming company is seeking the finance, it is vital that the mortgage deed accounts for the correct legal owners. Title deeds need to be readily available, so a bank can agree the best vehicle for lending.
  • When you agree with a bank on the land and buildings to be charged, ensure that a plan is prepared showing the exact area. So often instructions are received with the heading “100 Acres at Black Acre Farm” and it is difficult to ascertain where those 100 acres lie. Having plans at the outset makes the transaction much swifter.
  • If you have let any farm buildings or containers on your property, ensure that these lettings are documented by way of written tenancies which allow you to regain possession of the property at the end of the tenancy. The bank will need to see a copy of any tenancies/licences and they will need to be taken into account when the bank’s valuation of the property is carried out.
  • Planning is another issue that often comes to light. It is important to have all the planning documentation for any extensions, including building regulation approval for any works carried out to farmhouses or farm buildings if planning law dictates. A bank requires confirmation from the solicitor that planning laws have been complied with.
  • If you plan to charge only part of your farm or estate, it will be necessary to grant a right of access to that part which the charge will be secured against if the property is registered under separate titles at the Land Registry. This is to ensure the bank has all necessary rights to call on its security, access the land and, ultimately, to sell it if you default on your repayment obligations.
  • Your solicitor will need to raise a number of enquiries with you relating to boundaries, rights of way, planning, environmental issues etc. These enquiries are in a similar vein to those which would be raised if you were buying land.

Following the completion of a charge, it will then be registered at the Land Registry or, if your property is unregistered, it will trigger a first registration at the Land Registry. If you are taking out a charge in the name of a company, it must also be registered at Companies House.

The rural services team at Moore Blatch is highly experienced in dealing with landed estates, farms and land, so we are adept at making the process of charging your property to a bank as painless and as stress free as possible.