Receiverships involving the farming community had increased consistently in recent years, Philip explained, so it was important to understand their unique issues.

It was not possible to make a farm 100% secure and the scale of land involved created challenges around trespass, rights of access and land use. It was therefore advisable to identify areas of particular weakness or vulnerability and focus time and effort on those.

He gave an example of one costly receivership: "We acted for a large estate where the receivers ended up with 24-hour security, using ex-military personnel for about a year. Imagine the cost of that."

Binding ties

By their nature, farms were often a family business, Philip explained, so it was not unusual for several generations to be occupying the farmhouse or other nearby dwellings. Some of those individuals might claim an interest in the property, or say they had not realised a receiver had been called in. If that happened, the lender and their lawyers must be notified immediately.

The emotional ties of families to their farm could not be overestimated, he warned, leading to rational solutions being ignored for years, especially if land sales were suggested. Sensitivity was advised.

"Some farmers act as if they think you’re trying to sell off a child. In one receivership case, a tenant placed by the receiver was chased off the land by a shotgunwielding farmer’s wife.

"Receivers must always be mindful of such emotional ties when addressing farming insolvencies. It may be that taking a sensitive approach will generate co-operation, which could be invaluable in getting a better result for all concerned."

Clean-up costs

It was not uncommon for farmers to cause contamination to the land, so specialist advice must always be obtained to decide who would bear the burden for environmental liabilities and whether the cost of clean-up could fall to the receivers. Philip added that the direction of travel for the courts was such, that costs were being given more weight and may not be merely unsecured claims against the borrower. If there were significant costs, the expense might make the receivership pointless.

It was equally important to review all planning matters, which might include agricultural ‘ties’ on dwellings, especially if recent developments had taken place, and also to see if new proposals could unlock value.

Philip recalled one unusual case where the farmer had built a small light industrial business park without permission – and then provided the power and water from his kitchen. He also stressed that receivers had to take great care with agricultural chattels, citing three key elements:

• Examine all machinery, from combine harvesters to portable dairy parlours, for name plates or other evidence of third party ownership. It is also worth checking for chattel mortgages at Companies House.
• Decide which chattels will be vital for the ongoing operation of the farm, and then see if you have the powers to allow their use to be continued.
• Create a detailed plan before your appointment, including information on chattels which will need to be replaced before operations can resume.

Dealing with livestock and other animals would always be a priority issue for receivers dealing with agricultural insolvencies.

"My favourites were homing pigeons. We removed them from the land – and of course they came back,” said Philip (with a smile). “One was worth around £5k, but there were several hundred in one barn, so you’d need some luck to identify it."

Receivers should always be mindful of reputational concerns regarding the treatment of animals. Britain was a nation of animal-lovers and its media would be quick to cover stories about potential cruelty, especially where bankers and receivers were involved.

In addition, timing was especially important for appointments involving live animals, crops or other perishable produce. Philip identified three important aspects:

• Consider the seasons. If you’re approaching the time for lambing, do you want fields full of expectant ewes – or new-born lambs?
• Can animals be sold, who will help in that process, who has the required documentation, and how can their welfare be guaranteed?
• Ensure the right support is in place. If the borrower is hostile, for instance, consider using High Court sheriffs rather than county court bailiffs.

Establishing the difference between a legal charge over agricultural land and a separate agricultural charge was always crucial. As with so many issues associated with farm insolvencies, early engagement was essential.

Relationships matter

Philip ended by stressing that putting effort into creating a workable relationship with the borrower should not be solely for the postappointment stage; it must be ongoing, however challenging that might be.

"I dealt with an insolvency where only part of the farm was charged, and access was via fields which were unaffected, so we needed the farmer’s co-operation to sell the property at a decent value.

"There is obviously potential for a real upside for the borrower in such instances, and that is equally true if equipment or other chattels are to be sold."

Finally, he said although a farm appointment may cover all the farmer’s land, receivers should consider if it would be possible to repay the debt by selling only some of the lots, allowing the borrower to retain some assets and perhaps even allowing them to stay in their home.