April 20 2017
When rural land is bought and sold, sale and purchase agreements usually contain a ‘good husbandry’ clause. Real estate agents often insert generic clauses as standard when preparing the contract, but this can be problematic. Here’s why it’s better to tailor-make this clause to suit your individual situation.
The clause isn’t specific enough to consider transactions where settlement happens some time after the agreement is signed. It also doesn’t account for properties which practice specialised types of farming.
Here’s how the clause is often worded:
From the date of this Agreement until settlement, the Vendor shall continue to farm the property in a good and husband-like manner and in accordance with approved good farming practice in the district and shall neither overstock nor under-stock the property, nor do anything to impoverish the soil nor remove or damage any improvement or fixtures on the property.
The pitfalls for sellers
There are no published ‘good standards’ for farming practices. If you’ve presented your farm for sale, found a buyer and signed the agreement, how can ‘good husbandry’ be accurately determined? Do you want to be held to account for your farming practices?
Common sense would suggest a better option is to promise to continue to farm the property in the same manner as you have always done in the past? It’s as easy as supplying details of your farming practice prior to the agreement being signed. Our rural lawyers can provide advice about the preparation of these documents.
The pitfalls for buyers
If you’re buying, you will probably want some assurances about the care and maintenance of livestock and property, especially if settlement takes some time. Here are some examples:
- Are you expecting fertiliser to be applied after you sign the agreement and before settlement? If so, how much and what type?
- Are you expecting some paddocks to be ‘locked up’ so you have a good supply of grass when you take possession? Alternately, if winter crops are grown, will planting continue as normal?
- If you’re purchasing a horticultural property, will spraying programmes be continued as normal? For example, crops such as kiwifruit require spraying records for export certification. Orchard property spray programmes should be clearly recorded and available on settlement. If pruning usually takes place during the settlement period, this issue also needs to be covered. You may wish to do the pruning yourself to ensure that it’s carried out the way you want it done.
The complexity of defining good husbandry
Orchardists and farmers often have their own methods for running their operation, which has suited the way they farm or grow crops or fruit. As every orchard and farm operates on a unique piece of land, these practices vary from district-to-district and farm-to-farm.
What is considered good practice by one farmer may not be regarded as good practice by another. In some instances, the buyer may plan to change to a different type of farming or horticultural activity to the seller. In this situation, normal farming practices may not be necessary or may cause difficulties for the buyer.
What’s the solution?
The best solution is for buyers and sellers to make these decisions together. As with every clause in a contract, neither party should take the good husbandry clause as read. You should consider, discuss and agree on how the farm or orchard should be run and managed during settlement as specifically as possible.
A rural lawyer can certainly help to facilitate rural transactions, but you have the in-depth understanding of the day-to-day operation of your farm or orchard, so you need to have significant input into this part of the sale and purchase agreement to ensure all expectations are met. Talk to our rural lawyers if you need any further advice.