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Why is it important to have a written farming partnership agreement?

November 2018

If you are a partner of a farming partnership business, it is worth having a written agreement containing the terms of the partnership.

One reason is to clearly set out which assets are partnership property.  This is well illustrated by a recent case called Wild v. Wild, which centred on a pair of feuding brothers who wished to wind up their farming partnership.

It was unclear whether the Wild family farm was partnership property, or whether it had always been the brothers' father's private property.  This had obvious financial and personal implications for the brothers, one of whom had invested in renovating the bungalow he lived in on the farm.

Lacking a written partnership agreement, the court considered a number of factors to determine whether the farm was partnership property or not.  None of these factors were conclusive in themselves, in the way that an appropriately-drafted partnership agreement would have been.  Even the fact that the farm had appeared in partnership financial accounts from as long ago as the 1980s was not sufficient to prove that the farm was partnership property.

Ultimately, the court concluded that the farm was not partnership property.  The court did not see the need to imply that the farm had to be partnership property, as this was not commercially necessary in order for the partnership to farm it.

There are situations in which it may be appropriate for a farm to be partnership property and others where it may not.  The key point is that uncertainty and costly disputes can be avoided if the partners' intentions are properly documented.

More widely, the case highlights the need for clear succession planning with consistent documentation.  Legal and financial advisers working together can be crucial to achieving this.

Wrigleys Solicitors is able to advise you on family farming partnerships, and associated property, trust and capital taxation issues.

For further information about how we advise on farming partnerships, please click here.

If you would like to discuss any aspect of this article further, please contact Joseph Thompson or Head of the Rural Team, Jonathan Attey or any other member of the Private Client team on 0113 244 6100.

You can also keep up to date by following Wrigleys on Twitter here.

The information in this article is necessarily of a general nature. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors

Joseph Thompson View Biography

Joseph Thompson

Solicitor
Leeds

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