Succession planning for rural property owners
The New Zealand farming industry is large and diverse with ownership of rural businesses and respective properties often lasting through generations. How can you create security for your rural property?
August 19, 2019
The New Zealand farming industry is large and diverse – driven by over 55,000 farm holdings and rural properties. These rural properties cover an average of 25 hectares of land, are typically family run and often passed on through generations.
While these rural businesses and respective properties stand and function for decades on end, the reality is that its ownership lasts through generations.
What does this mean for rural property owners? As your property and associated business can accrue significant value over time, succession planning is integral to determine a secure future for everything and everyone involved.
It’s crucial to get awareness around your succession plan and have it sorted sooner rather than later, so that rural businesses in New Zealand can continue to thrive.
Succession planning gives you freedom and choice with your rural business
Succession planning for your rural property is essential for clarity around the future success and growth of your rural business. Planning in advance gives you the freedom and the opportunity to thoroughly consider what you’d like to do with your business.
Options that rural business owners can consider when creating a succession plan include:
- Selling the property: if the best or only option is to sell the property, you’ll want a value that accurately reflects its purpose and worth.
- Dividing the property: if you’d like to divide your property as part of your succession plan, there are regulations which need to be adhered to.
- Repurposing the property: in some cases land may be better utilised and the next generation may wish to explore this option.
What’s involved in your succession plan, and what does it offer?
When it comes to sorting out a succession plan for your rural business, there are several options and choices involved.
What needs to be considered:
- Your property’s value: what’s completely paramount to efficiently create a succession plan is knowing the value of your property and rural business. This will allow the fair distribution of what you own. Knowing the value of your property can lead you into making important decisions about how much you want to sell for, and the potential growth of the business.
- Your rural business: you need to consider the assets and purpose of your rural business. It can largely affect the value of your property and how much you can sell for. Take the dairy industry, for example. While the industry has been favourable in the past, in some areas of New Zealand a change of land use to horticulture has occurred due to the greater profitability achievable. The conversion of drystock farm land to forestry is another example. Alternatively, knowing the value of your business’s assets will allow for a fair distribution.
- Your property size: while land area can be significant in determining value, it can also affect your eligibility to subdivide. If you’re looking to split up your rural property to create alternative options for the business or pass down to family, you’ll need to know if your property is eligible for this. The restrictions vary from district to district across New Zealand, so it’s important to consult a valuer to find out if this is something you’re legally allowed to do.
Succession planning: where to start?
It’s crucial to think about succession planning for your rural properties – so that the business’s future has a sound strategy. And the most crucial part of succession planning is knowing what your property is valued at.
Establish a baseline on where your business is today, and provide alternatives for the future.
If you own a rural property, start your succession planning now
Talk to those involved. Key to your succession planning is including your stakeholders. This means having conversations with family or potential buyers to establish clarity over their involvement with your property in the future. Make sure to organise where every asset is passed on, and ensure everyone is on board.
Get your property valued. With an accurate value for your rural property, you’ll be able to put a plan in place for both your property and business. Our valuers are able to accurately assess your property and provide a value. They can also assist with land rules and restrictions, and give you realistic options for the future.
This article was originally published by TelferYoung