COVID-19 - How will Coronavirus affect the agricultural sector? - Goughs Solicitors

COVID-19 – How will Coronavirus affect the agricultural sector?

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COVID-19 – How will Coronavirus affect the agricultural sector?

Farming businesses are hugely affected by the rapid spread of coronavirus and you need to think and act quickly to find ways in which to tackle the impact of the virus on your business.  It is vital that adequate measures are in place to ensure continuity in the generation and supply of food and keeping farming businesses afloat. 

Do you have any questions about the impact on the agricultural sector? Contact us today.

Questions to be answered in this article

Implications for Supply Chains

The extended measures the Government has put in place in relation to lockdowns and grounding industries will create significant disruption to wider supply chains over the coming days and months.  It is important to keep your contractual arrangements and insurance policies under constant review. 

The latest shift in the Government’s guidance may open up new options for relying on force majeure and termination provisions in contracts.  Contracts with both customers and suppliers will need to be carefully reviewed, as the recent changes may now limit or improve businesses’ ability to recover their losses from others in the supply chain.  In light of the evolving social distancing guidance, farms may choose to go above and beyond the guidance in order to preserve customer relationships.  If you do, you will need to think carefully about how this affects your contractual rights and obligations. 

Commercial Units

You may let out commercial units on your farm to tenants. If so, you need to be aware of rent deferrals or holidays to help mitigate the impact of coronavirus on your tenants.  The Government has announced that commercial tenants who are unable to pay their rent due to coronavirus will not be evicted if they miss a rent payment within the next three months and the legislation ensures that you will not be able to exercise any right of forfeiture on your tenants during this period. 

Commercial tenants will however still be liable for any missed rent at the end of this three month period as the legislation only delays your right of forfeiture or right to recover rent. 

Mitigating Labour Shortage

It is imperative that farms and the food sector receive short-term exemptions from lockdown regulations and workers are provided with safe work and protective equipment to enable them to do the urgent and necessary work required to keep the food supply chain robust. 

However, any employees that are forced to stay at home due to coronavirus are entitled to agricultural workers sick pay.  This means that they should be paid as normal.  Any agricultural workers that are self-isolating are entitled to Statutory Sick Pay under the new Government legislation.  You will be able to reclaim the money spent on Statutory Sick Pay (SSP) for employees in light of the coronavirus pandemic subject to certain qualifications. 

Farm Business Tenancy

The farm business tenancy is a particularly important contract at this moment in time.  It is important that you review the terms of your tenancy agreement in relation to dispute procedures, termination provisions and rent review clauses. 

Do you have any questions about the impact on the agricultural sector? 

Contact us today.

Insurance

It is important that you liaise with your insurance company and check your insurance policies carefully.  You must take steps to protect yourself and your employees.  It is important to ensure your employees understand the Government’s latest public health advice and guidance to minimise risk and prevent the spread of the virus.  Unfortunately standard business interruption is unlikely to cover the coronavirus as cover usually requires damage to property such as storms or fires in order to be triggered.  This is particularly important in relation to diversified farm businesses working in areas such as hospitality. 

Rural Planning Delays

Rural planning decisions are likely to be delayed.  This will change any long term strategic plans you may have.  If you have plans in the pipeline regarding rural planning decisions it may now be a good time to submit your application.  You may be able to acquire temporary permitted development rights.  However, expect delays with the local authority who may be pooling resources and whose service will be disrupted.

Making a Will and Lasting Powers of Attorney

Now is a good time to write or update a will to ensure that your farm and personal possessions are dealt with in accordance with your personal wishes upon death.  If you are concerned about your financial legacy and the taxes your farm might be exposed to, we can evaluate your farm and your exposure and ensure that you are fully aware of the tax implications for any intentions you have for your will. If necessary, we can then advise you on appropriate tax or estate planning.

It is very important to have an up to date will in place especially at this uncertain time. You must have a will in place to ensure that your testamentary wishes are carried out on your death. There are certain very valuable inheritance tax (IHT) reliefs available to those owning farms and businesses. If particular assets qualify for these reliefs then up to 100% of the value of the asset can be sheltered from IHT which is normally charged at 40%. The law around these reliefs is very complex and you must take legal advice on these matters. We are able to provide you with advice on how to structure your farm and business to maximise your estate’s potential for claiming such reliefs on your death. 

It is also very important to have Lasting Powers of Attorney (LPAs) in place. LPAs are documents which enable you to choose who would deal with your affairs (property and finances and health and welfare) if you were unable to make decisions for yourself. For example, in the case of a loss of mental capacity. If you were to lose mental capacity without having LPAs in place then the Court would decide who would make decisions about your affairs. The Court can take a very long time in deciding this and may not appoint the person you would have chosen. We can advise you on creating and putting in place LPAs.

Partnership Agreements

Partnership Agreements are important during difficult times such as these. The purpose of a partnership agreement is to protect your investment in the farm, govern how the farm will be managed, clearly define the rights and obligations of the partners and determine the rules of engagement should a disagreement arise among the parties.  A well written partnership agreement will reduce the risk of misunderstandings and disputes between the owners of the farm.

How can Goughs help?

We have a dedicated agricultural team at Goughs who can assist and support you in relation to any queries or concerns you may have in relation to your farming business during these difficult times.  Please feel free to contact the Farming and Rural Land Team farming@goughs.co.uk.

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