Selling a farm is an important stage in a farmer's life. And above all, it's a process that generates a great deal of stress for the seller.
We take stock of all the important factors involved and answer the most frequently asked questions when it comes to passing on your farm: when should you put it up for sale, how do you prepare your farm, find a buyer, sell the assets or shares in your company, rent or sell the land, etc.
It's a question we hear a lot. While the economic climate in agriculture can influence the sale price and the speed of the transaction, it is extremely difficult to define a good time to put your farm up for sale.
Economic conditions can change between the time you put your business up for sale and the start of negotiations with a buyer. If the situation is favourable, there may be a strong temptation to overvalue certain assets, which will scare off buyers.
Our years of experience in working with sellers have taught us that the right time to sell is when the seller is really ready to sell. There are several reasons for this.
Selling opportunistically (‘I'll sell if I find a buyer at the right price’) is often a bad strategy. A price that's too high can scare off buyers and give the farm a bad image. This is an image that will stick with the farm for a long time to come, because the farming community is fairly small and information travels fast. It will then be difficult to change this image, even if the price has returned to market levels.
Selling too soon is also a bad strategy. It often has the opposite effect to that intended:
By starting too early, you run the risk of selling later and for less than you had hoped.
When the seller is not really ready to sell, negotiation is usually very difficult in the presence of a serious buyer. But negotiation is an integral part of the sale: Refusing to negotiate means refusing the sale.
A seller must therefore accept that his farming activity will cease in the future and project himself into his future new life at the time the property is put up for sale. This is not always easy, and in a couple or a company, for example, the parties are not necessarily ready at the same time, which can generate a great deal of tension.
To ensure the success of your transfer project, you need to be well prepared.
Here is a quick list of questions to ask yourself on the main points to consider:
How long does it take to sell a farm? This is one of the questions that all sellers ask themselves.
The minimum period will be around 6 months between the time the property is put up for sale and the time the final sale can be signed.
The 1st stage is to find a buyer and then reach an agreement with that buyer. And making sure that the financing for the project is feasible. It's hard to count on less than a month to do this, with an average period of 6 to 8 months that can take up to a year or even longer.
In fact, it is often necessary to wait 2 months to obtain a financing agreement once the financing application has been submitted, which requires an economic study to be carried out beforehand (a delay of 2 to 3 months).
A preliminary sales agreement then has to be drawn up and signed. This phase also takes at least 1 month, with an average of 2 months.
We then enter the administrative procedures for the sale. The notary must notify the proposed sale to the SAFER, which has 2 months to make its decision. An application for authorisation to farm must also be submitted. This procedure takes a minimum of 4 months, but can take longer depending on how long it takes to inform the owners. Not to mention the risk of extending the deadline by 2 months. So you need to allow at least 4 months, with an average of 6 months.
All that remains is for the notaire to draw up the final deed of sale, obtain the necessary financing in return for the guarantees, and arrange the sale. This process can be covered by the other deadlines or take a further 2 months.
If the buyer applies for start-up aid, the time required to validate the Personal Professional Project (PPP) and the Business Plan (PE) is at least 1 year. The impact on the duration of the sale will depend on how far the applicant has progressed with these procedures prior to the proposed purchase.
In summary, here are the timescales you can expect to see for the sale of a farm:
|
Steps |
Minimum duration | Average duration | Long term |
| Finding a buyer |
1 month |
3-6 months |
18 months |
| Obtaining financing |
1 month |
3 months |
3 months |
| Compromise signature |
1 month |
2 months |
6 months |
| Administrative procedures |
4 months |
6 months |
8 months |
| Notarised deed signature |
Included |
1 mois |
2 months |
| Total duration |
6 months |
15 à 18 months |
36 months |
These are estimates, of course, as each project is unique.
It should also be noted that in certain situations, the sale of company shares can significantly speed up certain deadlines.
To sum up, given the average time taken to complete a sale, you should make your proposed sale public between 12 and 18 months before the optimum date.
We have a number of specific articles on evaluation methods, which we invite you to consult if you would like to find out more.
Here are just a few of the main points.
There are several valuation methods:
The use of one method rather than another is decided on a case-by-case basis.
If your farm can be sold separately, the asset method will be preferred. While this may seem fairly straightforward for land, a house, equipment, etc., it will be much more difficult to determine the market value of a farm building on its own, especially if it contains highly specialised facilities that cannot be used for a different project.
On the other hand, if it is not feasible to sell the property off individually, the profitability value will be preferred.
The valuers in charge of a valuation most often use an asset valuation and an economic valuation and then produce an overall valuation by prorating the 2 methods.
The sale price may differ from the valuation, either at the seller's discretion or in order to retain a negotiating margin. This margin should be small and not exceed 10%. If the price is higher, there is a risk that motivated buyers will be driven away.
When passing on your farm, you may well consider selling or renting all or part of it, whether it's the land, the house or the farm buildings.
It's a complex issue, with advantages and disadvantages for every situation.
The advantages of renting :
The disadvantages of renting :
The advantages of renting :
The disadvantages of renting :
The advantages of renting the farmhouse :
The disadvantages of renting :
We invite you to read our full article on these 2 alternatives
Finding the buyer to take over your farm is not always easy. First of all, you need to bear in mind that the majority of transfers take place locally, within your network or through acquaintances:
In addition to registering with the Répertoire Départ Installation (after filling in the DICAA form), you can also contact agencies specialising in farm transactions, publish an advert on an advertising portal such as www.ma-propriete.fr, etc.
We'll be devoting a separate article to this, as it's a vast subject. The tax you have to pay when you stop working will of course depend on your personal situation.
There are many factors to take into account, including
We advise you to get in touch with your accountant to find out exactly what your situation is and to see how you can change the terms of your sale to reduce income tax when you stop trading.
Voici la liste des diagnostics à réaliser pour la vente d’une maison d’habitation :
|
Diagnostic |
Type of property | Period of validity |
|
Loi Carrez |
Co-owned property | Unlimited if no work is carried out |
|
DPE |
Covered and heated enclosed property | 10 years except works |
|
Lead |
Property built before 1 January 1949 | 1 year or unlimited if lead-free |
|
Termites |
Property located in a declared risk area |
6 months |
|
ERP/ERNMT |
Property located in a declared risk area |
6 months |
|
Asbestos |
Built before 1 July 1997 | Unlimited if no asbestos |
|
Gaz |
Installations over 15 years old |
3 years |
|
Electricity |
Installations over 15 years old |
3 years |
|
Sanitation |
Properties for sale by geographical area |
3 years |
The DPE diagnosis is the only one that is compulsory when a property is put up for sale (property advertisements). The other diagnoses must be carried out at the latest before the final deed of sale is signed.
We do, however, recommend that you carry out all these tests at once. For one thing, you'll be able to get a better overall price. Secondly, you can provide clear information to your buyer and avoid the risk of renegotiation at a later date.
As part of the sale of your farm property, you will no doubt be required to provide or carry out other diagnostics, particularly those that are compulsory as part of your professional activity.
These include:
In addition, you may be asked to carry out other checks or verifications to ensure the security of the parties involved:
Although these checks are costly and time-consuming, they do remove the risk of liability for the seller in the event of an accident after the transfer.
This is the essential phase in the sales process, as it represents the irrevocable commitment of the vendor and the purchaser to complete the sale on the agreed terms.
The deed will of course contain conditions precedent, whether legal (obtaining finance), administrative (obtaining authorisation to operate) or purely contractual (signature of leases by the owners, etc.).
This contract must be drawn up by a specialist who will be able to incorporate all the specific clauses relating to a farm (transfer of PBOs, employee contracts, administrative authorisations, inspections and diagnostics, etc.).
Although obtaining bank financing is generally a legal condition precedent, we advise you to obtain financing agreements from banks before signing the contract.
If you fail to obtain finance after signing the compromis, you will have lost many months, and will have had to deal with administrative formalities and landlords. And during that time, you may have missed out on another buyer who could be financed.
If you run your farming business as part of a company (EARL, GAEC, SCEA, etc.), you will need to decide whether to sell the shares in your company or the company's assets.
It is generally more complex to sell shares in a company than to sell its assets.
It is necessary to determine the exact value of all the company's assets and liabilities on the day of the transfer. A provisional value is generally determined. Then, on the basis of the balance sheet on the day of the sale, a definitive valuation is carried out with a regularisation of payments.
The risk to the company's assets and liabilities must also be taken into account through an Asset and Liability Guarantee. This is a key element to negotiate.
Lastly, the seller's tax position may be very different depending on whether he is selling securities or assets.
Lastly, while the use of companies was common in the past, particularly to avoid the SAFER's right of pre-emption, the introduction of the Sempastous Law has called these practices into question.
While there are no general rules, the most important thing is to avoid imposing the terms of the sale on a buyer (for whom the situation is often unfavourable), but rather to choose the solution that will be the most advantageous for both the seller and the buyer.
It's a long way from the decision to sell to the final sale. Many of the choices to be made are complex and require high-quality support, whether from your accountant or a firm specialising in farm transfers.
To take things a step further, we've put together a series of more specific articles that we hope will meet your needs.
