Pictured above: Philip Meade

An increasing number of farming tenants in the area are being given the chance to buy their farms as landlords look to sell their farms while the land market is buoyant and money is tight.

Farm tenancy specialist Philip Meade of Davis Meade Property Consultants at Oswestry says he is acting on behalf of half a dozen tenants at the moment who have been given the chance to buy their farms as sitting tenants.

"Farmland has never really been a high returning investment for landlords but with land prices currently so high a farm worth, say, £7,000 an acre may only be yielding a rent of £70 an acre - just one per cent - so landlords may feel the economics don't stand up," he explained.

"Some may need cash to pay off other debts in the current difficult economic climate or they may want to use the money for another investment."

A million pounds realised from a farm sale could buy half a dozen buy-to-let cottages which could be rented out for £500 a month each, giving a far greater return on investment. Commercial premises too can give yields as high as 10 to 15 per cent.

"It is tending to be the bigger estates, usually with significant other non agricultural assets, that are approaching their tenants, particularly the dairy holdings. This may be due to worries over NVZ regulations causing landlords to think they may be better off selling up before they are obliged to invest in expensive slurry facilities," he explained.

So what discount can the sitting tenant expect if he is given the chance to buy his farm?

"A tenant needs to take advice on this as the answer will depend on various factors, including the age of the tenant, the market value of the land (especially if it has development potential), the length and type of tenancy (Lifetime or Farm Business Tenancy), the current rent paid and the amount of investment that the tenant has made on the farm," Philip said.

"The discount to a sitting tenant is likely to be anything from 20 per cent to as much as 60 per cent of the market value, depending on circumstances, but negotiate for the best deal and make sure you do all the normal checks and local searches before committing to buy."

The tenant obviously needs to sort out the finances before buying and most banks will welcome them but shop around for the best terms.

"In most cases the banks have been very supportive in providing the necessary finance at a decent rate.  They are keen to lend to farmers as agriculture is one industry that seems to be holding out during the recession and, if the sitting tenant is buying a farm for say 60 per cent of its true market value, the equity is already there," he said.

A tenant may be paying £1.2 million for a farm worth £2 million so the bank can immediately see £800,000 equity which they would have little trouble accessing.

Some banks will also request that the tenant agrees to sell off a block of land to reduce the debt and this is often worthwhile to secure a good deal.

For farmers not wanting to buy the alternative will be to receive a golden handshake on quitting the farm or negotiating to split the proceeds when the farm is sold.

"We have a case on the Welsh borders where a tenanted farm is being sold on the open market. We are acting for the tenant and another agent for the landlord," said Philip. "Once the farm is sold the tenant and landlord are going to split the proceeds on a pre-arranged basis, however, the paperwork has to be very carefully drawn up to protect both parties."

For many tenants looking to retire, a golden handshake may be the only substantial source of capital they can look forward to.

"In the past, a retiring dairy farmer would use his share of the value of the milk quota to boost his pension but with quota worth just a penny or so, many tenants are now being forced to farm until their dying day."

There are tax implications for both tenant and landlord and a tax specialist should be consulted to advise on amongst other things, the possible capital gains tax and stamp duty obligations.