Where any occupation is not documented (eg a family member or old retainer is living ina cottage on the estate with no tenancy agreement in place), the bank will require eachadult to sign a form consenting to the grant of the charge. Often the bank will requirethat independent advice is given to each occupier. Again, this can cause delays and addto the cost.The ideal land to charge will be land where the occupation position is clear, can be easilyreported to the bank and is properly documented (or where only a limited number ofindividuals would need to provide consent).Tax“There are also likely to be tax issues to consider, in particular relating to inheritance tax(IHT), when selecting the land to charge to the bank. Once upon a time (before 2013) itwas possible to use borrowing to help with IHT efficiency – borrowing against residentialproperty to invest in assets that benefited significantly from business or agriculturalproperty relief. This is no longer possible as the IHT liability will attach to the propertywhich would, but for such investment, have benefited from the tax relief. It is importantto consider the purpose of the borrowing, and hence the likely impact on future IHTliabilities, when taking out a loan. This is a detailed and complex area and you should takespecialist advice at an early stage.It is important to consider the purpose of theborrowing, and hence the likely impact on future IHTliabilities, when taking out a loan. This is a detailedand complex area and you should take specialistadvice at an early stage.Change of ownershipFinally, an issue which won’t delay drawdown but could make matters more complicatedin the long run. If there is any discussion of an imminent change in ownership, especiallyif this involves a change of trustees, the necessary steps should be taken before the landis charged. Once the charge has been granted and the loan drawn down, you will needthe bank to consent to any change in the title structure. The bank might also require thenew owners to grant a new charge to the bank and you will have to start the process (andpay all the valuation and legal fees) all over again!Rural Estates NewsletterSpring 202117
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