Farming Divorces

Sarah Crilly, Partner in the Family Law team at Ward Hadaway, looks at the legal aspects of farming divorces.

Divorce is never easy, but the impact of a divorce on a farming business can be really hard. Sorting out the finances between the parties while trying to achieve a fair outcome for everyone concerned can be extremely difficult.

Nearly two thirds of those divorces now end with the family wealth evenly split between husband and wife. Equality has become the guiding principle for settlement, even more so where there are significant assets involved.

However, farms are often inherited and involve a way of life so the courts find it very difficult to achieve a financial solution for divorcing farmers.

Courts tend to depart from splitting assets equally in these types of cases. The court has to consider a number of factors such as the parties’ financial resources, financial needs, their ages, the duration of the marriage and previous case law.

The leading case in this area was dealt with in 2004 and involves parties who were married for 16 years until separation and spent their entire married life farming a hill farm in the North of England.

The farm had been in the husband’s family for some time, he was the fourth generation to have farmed it. Although the wife had worked extremely hard, the court noted that her contribution was not to the acquisition of capital so only awarded her around 25% of the assets.

This allowed her to have her reasonable needs met for accommodation and income. The court made it clear that it was because the farm had been inherited and it was expected that the husband would pass the farm on to further generations. The court also made it clear that to award the wife any more would lead to a sale of the farm which would be devastating for the husband.

So the good news for farmers is that the courts will usually try to avoid the sale of an entire farm if possible while still meeting the parties’ needs. Some of the solutions that have worked in the past also include the following, namely:

– The courts can award substantial periodical payments in return for payments of smaller lump sums.

– The courts will look at selling part of the farm but very much as a last resort. This tends to

be in cases where there are no other available resources.

– Impose a deferred Charge on the farmland in case there is a later sale. –

– See if the parties are able to approach a mortgage company to raise funds or some form of loan arrangement.

Every single case will be treated on its own facts. The length of the marriage will be highly relevant. After short marriages, the courts will shy away from sharing non-matrimonial assets, such as inheritances and property brought into the marriage by one party. The court has a very difficult task, especially as in farming divorces most farms will be capital rich but income poor and the intention will be to pass the farm on through further generations.

The court at all times has to try and achieve a fair result. Good legal advice is therefore critical. It may be sensible for farmers already married to consider Post Nuptial Agreements and for those intending on embarking upon marriage, to obtain a Pre Nuptial Agreement.