Recognise when you need help.
The competition for rural land and the continued pressure for alternative development is only going to increase. It is likely you will be exposed to proposals for tenanted use of land areas.
Take home messages:
- Don’t sign anything unless you understand the document, and if you don’t understand the document, seek advice from a ‘Big Wig’.
- Ensure you understand your position – from your capacity to enter the proposal to the full implications of the proposal.
- Don’t rely on verbal promises and representations. If it’s not in the document – then it’s not part of the agreement.
- Be able to articulate the premise of the document to other stakeholders.
Be prepared to engage with experts in their fields – to protect your fields.
Complex legal documents:
Have you ever been in the position where you are faced with the signing of complex documents, and for all intents and purposes, they read like a whole lot of legal gibberish? You’ve had a discussion with the business representative, and they’ve explained it – but you haven’t actually checked if all their representation are presented as stated in the document.
It might a simple matter for your business, perhaps new bank facilities, or even signing up for the purchase of some more land. But, during the obligatory reading and signing process you’ve been asked a question by the representative.
“Do you have capacity to enter into the transaction”?
There is a long and uneasy silence while you stare at them blankly. Firstly, you are questioning how you should respond to such a stupid question, (after all you’ve been signing documents since Adam was boy) and then you wonder; ‘What is this person referring to and, should I waste my time answering this fool.’
So, you answer the question with another question – which is always helpful.
“Why wouldn’t I have the capacity?”
Unfortunately, since Adam was a boy, the financial and legal environments have moved on a bit, and no one has bothered to tell you.
‘Capacity’ is a legal concept that describes whether a person can legally enter a contract. Having capacity is more than just having the ability to sign off on a contract. To truly have capacity you must:
- understand all the facts.
- understand the main choices you can make.
- be able to properly weigh up the consequences of the choices you are making.
- understand how these consequences will affect you or your business; and
- be able to communicate why you have made your decision.
For a contract to be valid, each party that agrees to that contract must have full legal ‘capacity’.
The danger in assuming capacity, that is, know the answer, or worse, guess, is “you don’t know what you don’t know, and you just might not know enough.”
To complicate the matter, farmers have an inherent desire to do it themselves, and that could be because no one can do it like you want it done, or there is a long-established desire to save money. It’s unfathomable to pay someone $400/hr to tell you what something says, and you must pay for that out of a primary production income based on slim margins and seasonal risk.
So – what is the risk?
Well, getting it wrong might just cost you a whole lot more, and the money you saved has now cost you one way or another 10 – 20x over.
To put some context around the consequences, the number of litigation proceedings for contract law filed in 2022 was 19% greater than 2021 and is increasing at a rate higher than in the pre-pandemic era. This acceleration has landed Australia in the ranks of the most litigious countries in the world.
In the current world, land holders are being exposed to an increasing need to protect their land from other interested parties. This interest could be as close to home as allowing the local council access to extract gravel from a source on your land. Or distant and complex such as negotiating access and rights for multi-nationals to explore and/or develop mineral or infra-structure projects on rural land –
your rural land.
Further to that, the agreement is likely to outlive you and possibly the next generation.
The competition for land and access to resources is increasing in heat now. As urban environments bulge under the pressures of over-development and increasing environmental impact problems, the overflow must bubble up in rural and regional areas. This exposes unassuming farmers to the firing line for a complex game of corporate chess to gain control of appropriate land assets.
So, lets look at who are the players in this game of land chess.
Playing with the white chessmen (always goes first) is a well organised authority, body or corporation that has dozens of people, qualified in chosen disciplines of law, accounting and/or economics.
- This team works closely together for a minimum of 37.5 hrs a week and enjoys a day or two of relaxation at the end of their working week.
- They have access to the best IT services, software, and data management systems.
- The team is focused solely on the task of preparing feasibility studies, economic analysis, and writing documents for the sole purpose of maximising profit and minimising both cost and risk to the organisation that affords them the lifestyle they enjoy.
- This team has strong leadership and meets together, discusses progress, and uses collective knowledge to best present their idea and strategies to achieve the greatest prospects of success.
- On average, this team owns their private homes, and these are not at risk of any impact from their daily work.
In terms of a sporting team, engaged in the arena of business analysis and legal negotiation, this team is managed and runs like a professional A Grade side.
Playing with the black chessmen (respondent) is a group of individuals that may or may not know each other are even playing the game.
- On a weekly basis they work outdoors for closer to 50-60 hours and at times for more than 7 days continuously without a day’s rest.
- They are highly skilled operators of machinery, managers of pests and weeds, manipulating the natural environment to produce food to feed the white players.
- The people in this team are focussed on the task of running a complex business, considering everything from minute-by-minute weather conditions to long-term investment strategies for the success and continuation of their business.
- They read legal documents when the weather is unpleasant, or they find time in their busy schedule to see if ‘it looks ok’.
- This group has rural internet services and software setup to run their farm business – but generally is likely to have inferior telephone services and IT infra-structure to their opponent.
- The team members (individual farm owners) meet occasionally at social events and guard information carefully so as not to give away any competitive advantage.
- The members of this team expose their home, business and income earning capacity to risk every day.
In terms of a sporting team, pitched into the arena of business analysis and legal negotiation, this is a group of Under 18’s from different towns with more heart and determination than the ‘All Blacks Juniors’ vs ‘Rest of the world’.
They’ll have a go at it – but they’re up against some stiff competition. The question is;
“Is that enough to get them over the line?”
Enter stage left – the opportunity to engage a ‘Big-wig’. What if relative expertise becomes available to better balance the teams by adding qualified professionals to the landowners. A captain and coach who has been educated and trained for a minimum of 5 years so they can pursue a professional career of 50-60 hours a week (or more) specialising in the interpretation of legal documents, economic analysis, and the fine art of negotiation.
They will work with the farmer team one-on-one and/or as a collective, dealing with specific aspects of any proposal.
These professionals have the added advantage, that they are likely to have previous experience interpreting, negotiating, and re-writing similar agreements and deeds.
They potentially know the market better and have more experience than the A team.
The value they hold is knowledge, and Knowledge is Power. Warren Buffet is famously quoted as saying; “Price is what you pay; value is what you get.”
So – when there is a proposed alternative use for land, what should you do?
Contact your existing professional services.
It’s more than likely their network will have already dealt with a case of similar nature.
Phone calls and early conversations are cheap in comparison to costly errors agreeing terms and conditions that could potentially impose restrictive practices to your titles.