The concept of diversification is nothing new. But for those who are thinking of branching out and converting an agricultural building for commercial use – be it a workshop, farm shop, office unit or even a wedding venue – there are certain practical steps that need to be taken. 

Beyond the structural considerations of the building or buildings in question, it’s also important to understand how any new venture fits into your existing business model.

While by no means exhaustive, we’ve highlighted a few key considerations that farmers and landowners should bear in mind:

1. Consider your end goal.

Does what you have planned fit with the existing operational requirements of the farm? If you already run a wedding venue for example, you don’t necessarily want a commercial venture nearby that’s going to make a lot of noise. If you take on a tenant, will they require 24 hour access seven days a week? Will there be forklift truck movements or machinery operated at certain hours of the day? How will this impact other occupiers and neighbours?

2. Do your research.

What is it that you have planned and is there demand in the local area? What will any potential tenant be looking for and who is likely to move in? If, for example, you’re renting out the building as warehouse or storage space and there will be lots of HGV movements, it’s likely that any occupier will want to be close to a main road rather than off the beaten track. Is there anyone locally that has a similar premises? How can you differentiate your offer?

3. Tenancy agreements.

If you’re moving in a tenant then it’s important to seek independent legal advice. But broadly speaking any agreement will either be by lease or by licence. A lease grants exclusive possession of a property for a fixed term, while a licence is a personal permission to use the property without exclusive rights. Leases provide stronger landlord and tenant protection and security of tenure and are more suited for longer term occupation, whereas licences are generally shorter, more flexible and easier for landlords to terminate.

4. Business rates.

Agricultural buildings are exempt from business rates, so if you’re considering another commercial use there may be business rates to pay. Rates are based on the estimated annual rental value rather than the size of the building, so a small unit in a prime position might have a higher rateable value than a larger unit in a less desirable location. If the property's rateable value is £12,000 or less it qualifies for 100% Small Business Rates Relief, while those with a rateable value of between £12,001 to £15,000 are eligible for a reduced amount. For anything above £15,000, full business rates apply. You will also need to consider business rates liability if tenants move out and the building becomes vacant. This is the landlord’s responsibility, subject to any qualifying reliefs.  

5. Is planning permission required?

As well as necessary planning consents for any alterations to the building itself, it’s also important to ensure the required permissions are in place for any change of use. Failure to do so could lead to an enforcement notice from the local authority and having to suspend operations – resulting in a potential loss of income.

6. Energy efficiency.

All commercial buildings are required to have an Energy Performance Certificate (EPC) rating of at least B by 2030. If undertaking a conversion it’s worth ensuring your building meets those future standards. Solar panels, improved insulation, triple glazing and LED lighting can all help. Otherwise it could mean more work and expense further down the line. Higher energy efficiency ratings also make buildings more attractive for potential tenants – helping reduce costs and addressing any requirements they may have with regard to sustainability.

7. Connectivity.

While having access to the nearby road network is important, it’s also essential to consider how the site will connect to local utilities. How much electricity will you need to power the building? Will an upgrade be required? Do any tenants need EV charging points for delivery vans or other vehicles? Is the internet connection of sufficient quality? Historically, rural areas have struggled with broadband speeds, but satellite systems such as Starlink have made this less of an issue. 

For farmers and landowners exploring alternative sources of income, commercial buildings and tenants can prove a useful addition. However, other factors such as insurance cover also need to be considered, so it’s important to seek professional advice and decide if you want to undertake the day-to-day running ‘in house’ or outsource to an experienced managing agent.

Further information

Contact Harriet Hemmings or Phil Dennis