Advice on tax and property compliance considerations for the owner of a country estate
Insight
Each month, the Farrer & Co Residential Property partners give us a brief insight into their working lives. This month, we give an overview of advice given to a client who owns a large country house and farmland in the north of England and has been weighing up the future of the estate in light of the Government’s incoming tax and regulatory changes.
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The Brief
As well as dealing with sales and purchases, a significant amount of our work involves advising our clients on their existing property portfolios.
A periodic catch-up with a longstanding client at the start of this year led to a detailed discussion of the prudence of continuing to retain their country house and the associated 300-acre estate given the forthcoming tax and regulatory changes. Our client wondered whether now might be the time to sell and had two specific questions – one about inheritance and the other on incoming changes that he had heard would impact him as a landlord.
Executing the Brief
In collaboration with our Private Client and Tax teams, we had already been advising our client on the reforms to Agricultural Property Relief and Business Property Relief and the impact these changes will have on our client’s inheritance tax planning. We revisited this advice as we worked through his new inheritance query. It is clear that the increase in our client’s inheritance tax liability will be significant and, given his country property was purchased in part with the existing inheritance tax reliefs in mind, the logic of holding onto the property in the long term now seems more questionable.
We then moved on to our client’s second question which centred on compliance requirements which are due to be imposed on landlords by the Renters’ Rights Bill when this becomes law. Our client was concerned about the condition of several of the estate cottages. He wanted to understand how the new standards will differ from the existing fitness for human habitation requirements (which require housing to be safe, healthy and free from hazards).
We explained that the Renters’ Rights Bill will impose prescribed timeframes within which our client will need to rectify known hazards (this goes further than the current position where landlords are not bound to a statutory timeframe within which to repair hazards) and will also introduce the “decent homes standard” to the private rented sector which outlines minimum requirements for housing, ie that it must be actively “decent”. This will raise the bar as, in practice, a rented property will need to be in a reasonable state of repair with reasonably modern facilities and services (for example, kitchens will need to be less than 20 years old). It will not be enough if a property is simply free from hazards.
These changes will be introduced alongside a “private rented sector database”, “landlord redress scheme” and new ombudsman. Full details are awaited but it is envisaged that landlords will need to maintain some information and evidence relating to property standards on the database (eg gas safety certificates), and the requirement to join a redress scheme alongside the creation of an ombudsman will facilitate a dispute resolution service with powers to put things right for tenants, including by forcing landlords to take remedial action and/or pay compensation. If the database, redress scheme and ombudsman are successful, landlords will need to take the standards seriously and spend money to bring sub-standard properties up to an acceptable level.
We reminded our client that these new standards will be introduced against the backdrop of the stricter management processes for leasehold properties set out in the Leasehold and Freehold Reform Act 2024 (which we expect to be implemented within the next year). We also flagged that the Government is currently consulting on changes to EPCs and Minimum Energy Efficiency Standards with the expectation that most tenanted homes will need an EPC rating of at least a C by 2030 (or 2028 for new tenancies).
We reassured our client that while there are significant challenges to work through on each of his questions, we could assist him in putting together a plan both to manage the estate and to manage tax exposure as much as possible. Our client decided to take some time to review and consider our advice.
The debrief
Our client returned to us a month later and has made the decision – based on our advice and his personal review of the position – to sell off a large portion of the estate including the main farmhouse and all bar two of the estate cottages. We are in the process of finalising the sales pack ready for a spring launch, which will give him the best chance of a successful and seamless sale.
Edmund has prepared an article examining why the compliance elements of the Renters’ Rights Bill may succeed where previous legislation has failed and we also refer you to Jenna Whistler’s top tips for getting a property ready for sale.
We are always happy to discuss the conveyancing process and how to manage a transaction.
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This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, April 2025
