March 4, 2015

Protecting your legacy: farms and proprietary estoppel claims

Posted in Agriculture

So what is “proprietary estoppel” and what can be done prevent a potential claim against a farming estate?

Put simply, the purpose of “estoppel” is to provide the court with a mechanism to redress the balance of what it deems to be an unfair situation. In the context of farmland, the key elements for establishing a potential claim will be that a promise has been made to a person about the inheritance of the farmland and, relying upon that promise, that person acts to their detriment.

The classic example is a farmer promising his son that he will inherit the farm upon his death. As a result of this promise, the farmer’s son works hard at the farm for many years, often putting in extensive hours for comparatively little pay, or potentially no pay at all. Were the famer’s son to discover that, upon his father’s death, his father had not actually left him the farm, then the farmer’s son may have a valid claim to a share (or all) of the land.

The farmer’s son may also have a claim if the farmer decided to sell the land before his death. In these circumstances, the court may find that, given the promises he had made, it was unreasonable for the farmer to change his mind. As a result, the court may seek to provide the farmer’s son with a remedy (be it land, or money) by way of compensation.

Naturally, this may be concerning for farmland owners. While it is far from guaranteed that a claimant will be successful, there is certainly a risk that farmland may need to be split up and sold in order to resolve a dispute.

It is important, that farmers carefully consider succession plans for their farming business. It is likely to be appropriate for famers to include family members in the decision making process, particularly if they have been working on the farm during their life. Not only should the farmer ensure that his wishes are clearly documented within a Will, it is important that any person who incorrectly believes they are due to inherit some or all of the farmland is made clear of their position. While such planning may not necessarily guarantee that a claim cannot be brought, it is certainly preferable to take steps to avoid what is likely to be an expensive and stressful dispute for the family members left behind.

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