I’ve just concluded a negotiation with a bank over a complex funding package for a ‘country estate’ which incorporates a farm. The client assumed that given the significant rise in the value of prime agricultural land it would be a simple process to do the deal with this lender with whom they have banked for about 55 years!
It is also quite common now for city people to move out to the country and buy farmhouses – and they also find it difficult to get mortgages.
There is a reason for this – which banks don’t always explain very well or want to even raise with clients. Basically if they lend over a property and the borrower then, without their permission, rents the property to someone, there can be the risk that an ‘Agricultural Tenancy’ is created. Unlike other forms of tenancy agreement, an ‘agricultural tenant’ is uniquely protected from eviction/repossession by a lender and the tenancy can also imply some kind of succession for children (you can imagine the reasons for this bit of historic law). This can mean that the freehold is poor security for the bank’s lending.
It is a complex area – but people looking at buying agricultural type properties should be aware of the issues.