8th July 2020

Covid-19, business as usual on the farm?

As the Covid-19 crisis continues, you could be forgiven for thinking that farmers are not affected in any major way. For those of us who live in the countryside, in the first stages of lockdown, farm traffic was often the only movement seen on the roads. It would appear to most that farmers, who already often work in isolation, simply continued on with life as normal.

It is however not as simple as that. Many farmers have been affected in a number of ways and have had to face difficulties which most of us could not have anticipated.

Covid-19 has caused staffing issues in a number of diverse ways. There are those farming businesses who rely heavily on foreign or seasonal workers who have found things difficult. They may have thought Brexit would be the main challenge but in addition, this spring time,  they have had to work much harder and have faced many more challenges in relation to engaging the workforce needed to bring in harvests and produce. On the other side of the spectrum are those who have lost certain income streams or who have been unable to continue certain parts of their business. They may have had to place staff on the government Job Retention Scheme (JRS) or even consider redundancies. Whilst the JRS has been a lifeline to many businesses, it is not an easy system to navigate with rules and guidance changing at a rapid pace and many uncertainties such as entitlement to holiday pay etc being regular queries dealt with by our employment law team.

Lockdown has also affected some of those businesses who support agriculture. We have seen a number of reports or issues where farming clients have struggled to obtain usual services due to their suppliers working at a reduced level often as a result of having furloughed their own staff to protect their own cashflow position.

Many farming businesses who have invested in diversification projects over the last number of years to supplement their farming income have felt the effect of the lockdown first hand. Farm shops and cafes will have closed or were only able to deliver a reduced service. Those running holiday lets or wedding venues have had to face many challenges and a number of queries have been raised with us as to the requirement to return deposits, frustration of contracts, the validity and enforceability of force majeure clauses in contracts and the availability of insurance cover under business interruption provisions. Many of these contracts and insurance policies where drawn up in a time where the effect of a pandemic such as Covid-19 could not have been envisaged and it will be important for an appropriate review of such contracts and booking conditions to be carried out.

It is not unusual for farmers to let out surplus farm buildings or sheds to other commercial businesses. Many of those businesses may not have been able to trade during lockdown and as a result we are seeing many farmers as landlords agreeing to changes to irritancy provisions and deferral or even waiver of rental payments in order to secure the long-term viability of these leases and to protect their future income streams. Again, deferrals and waivers of rent may have a big financial effect on farming businesses relying on this additional income.

There are a number of government backed loans and other loan schemes available to businesses. It is important to note that where such loans are taking out, finance is restructured or where payment holidays are agreed on existing loan repayments, that the terms thereof are carefully considered and agreed. This to avoid any unexpected consequences or increased financial obligations down the line.

During the crisis, those who have been involved with the legal profession in relation to sales or purchases of farms, registrations of the right to buy, tenancy disputes and associated court actions or the administration of a deceased’s estate will have felt the effect of the sudden closures at the end of March of the Registers of Scotland to new applications and the Scottish Courts’. Parts of the Registers and Courts have since reopened or worked out digital solutions but neither the Courts nor the Registers are fully open to all business and may not be for some time which will have a continued effect on certain transactions and disputes. For some transactions where time is or was of the essence this has caused additional anxiety, stress and financial hardship to some clients.

With the focus of the Scottish Government being firmly on Covid-19, other government business has stalled. As result we have seen no further progress on the implementation of the Agricultural Holdings legislation brought in by the Land Reform (Scotland) 2016 act such as the provisions relating to the requirement to register the right to buy and the right to relinquish and assign. There will be some concern as to whether or not there is now sufficient time for these provisions to be brought into force prior to the next Scottish Parliament election.

Considering the potential negative effect of Covid-19 on overall farm income and the wider economy, it will be interesting to see what happens in relation to rent reviews to take place over the next 12 to 24 months. There has already been a suggestion that certain rent reviews due during the pandemic which cannot be completed in safe manner should be postponed. And of course, we have seen the deadline for claims under the Tenant’s Amnesty provisions already extended to December 2020.

In addition, there is continued and ongoing discussion in relation to the future availability of certain tax reliefs to farmers, for example Agricultural Property Relief (APR) and the suggestion some of these may be scrapped to provide funding to fill the enormous financial hole created by Covid-19 in the government’s finances.

And of course, finally, we must not forget that some farming families and their businesses will have been personally affected by illness or death caused by Covid-19.

It is hoped that for the sector as a whole some positives may flow from the crisis, such as the realisation in the wider population of the importance of food security resulting in a possible increase in the demand for home grown food. Some businesses will have been forced in to new working practices, some of which, such as online meetings with buyers and suppliers or remote selling and buying of stock, may be carried forward beyond the crisis and deliver some cost savings and efficiencies. Only time will tell if we will see meaningful and lasting changes.

For now, most of us mourn the loss of social contact and interaction and look forward to a time where we can all meet up with friends, clients, colleagues and other professionals again.

Petra Grunenberg
Partner

Rural Land & Business
Blackadders LLP

www.blackadders.co.uk

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