Farm Partnerships: Whose Land is it Anyway?

You may have heard the phrase “putting the land on the balance sheet”. Doing so can be useful for tax and succession planning but what does it mean, legally?

Once land is “put on the balance sheet” (becomes partnership property) it no longer belongs to the individual partner. Section 20 of the Partnership Act 1890 creates a statutory trust of the land. This means that, while the legal title may be held by the individual partner, the benefit of the land is owned by the partnership.

In other words, putting the land on the balance sheet, changes the nature of ownership of the land. If land is credited to an individual partner’s land capital account that partner has a claim against the partnership for the cash equivalent value of the land. Without express agreement to the contrary, the partner will not have the right to withdraw the land itself. However, a well drafted partnership agreement should set out the circumstances in which and the terms on which a partner may recover the land which has been contributed to the partnership.

These issues are frequently misunderstood. It is crucial to appoint advisers who not only understand agricultural property but also partnership law.

Need help?

To discuss these issues please call Victoria Spellman on 01473 350573, email [email protected] or fill out our enquiry form below.

Victoria Spellman is a Partner in the Corporate & Commercial Team at Barker Gotelee Solicitors.