Rural Estates Newsletter Spring 2021 - Flipbook - Page 15
The Bluebell Estate
The Bluebell Estate has three large farms and ten cottages. The farms and cottages all
obtain their water supply from the PWS which rises from a source on Primrose Farm in
the heart of the estate, is pumped to a reservoir and then distributed by gravity along
a network of pipes. The estate is owned by Lady Daffodil and let out to tenants. Lady
Daffodil bills her tenants directly for their water consumption and her estate manager
arranges all repairs and maintenance. That said, the PWS is beset by the usual problems:
the running costs and capital expenditure to comply with PWS regulations increases
every year, the tenants are late in paying licence fees, which always fall far short of the
running costs, a dead sheep was found in the pump room last summer – it all keeps Lady
Daffodil awake at night.
Then Lady Daffodil dies, her executors are forced to sell the estate and the PWS presents
a problem. If, as seems likely, the estate is sold in three main lots corresponding to
the three farms, the PWS infrastructure would be split between the separate farms,
complicating ownership and management of the PWS in the eyes of potential buyers and
driving down the purchase price. The other two farms would be entirely dependent on
Primrose Farm for their water supply. It would be legally and practically extremely difficult
to place a buyer of Primrose Farm under a positive obligation to continue to provide a
supply of water to the other farms in a manner satisfactory to all parties. A purchaser of
Primrose Farm would not be attracted by the obvious potential liabilities that come with
managing the PWS for the benefit of other users.
One solution is to set up a special purpose vehicle (SPV) to take a transfer of all the
parcels of land on which the PWS infrastructure sits (the water source, reservoir and
pump room). This can be done by a long lease of rights (say, 125 years at a peppercorn
rent) which also grants the right to use all the pipes and other PWS apparatus. When the
ownership of the estate is split up by a lotted sale the transfers will be subject to the PWS
long lease.
The SPV (incorporated as a limited company with bespoke articles appropriate to its
function) will be owned jointly by the new owners of the separate parts of the estate.
Buyers become shareholders and each will have the right to appoint a director to the
board. Day-to-day running of the SPV (and therefore the PWS) can be delegated to one
director or a third party manager. Users of the PWS will enter into licence agreements
with the SPV, under which they make their annual contributions to meet running costs in
the same way as happened with Lady Daffodil.
This approach solves a number of problems. It is both simpler and quicker to sell the
estate in lots because the PWS is owned by one body. Each sale is subject to the existing
rights of the SPV and there is nothing to negotiate in the sale documents. This structure
also affords limited liability to the buyers of the estate which is attractive for obvious
reasons. Ownership of the PWS by a limited company provides a single administrative
unit and cost centre for the running of the PWS. The users pay their licence fees to
the company, but they also manage the company as directors and the company is
accountable to them as shareholders.
Rural Estates Newsletter
Spring 2021
15
