John Mitchell
- Partner
Insights | Rural
A Beginner’s Guide to Buying Forestry
9 March 2023
Scotland’s forests and woodlands protect, enhance, and allow communities to benefit from the goods and services that flow from natural capital. In the past year, commercial forestry values increased by at least 15% with the average price paid for a commercial forest rising by 10% from £3 million to £3.4 million, according to several industry reports.
Industry leaders have commented that commercial forestry values continue to be driven by increasing demand from investors due to a limited supply, and there is a strong market inclined to pay higher premiums for the best assets.
Undeniably, buying commercial forestry or amenity woodlands is an investment opportunity, but before purchasing, a buyer’s solicitor needs to consider several issues as part of the conveyancing process.
The missives
To buy woodlands, the buyer’s solicitor will prepare a formal offer setting out the property details, the buyer’s details, the price being offered, and any standard conditions which relate to title conditions, access to the property, third party rights, leases, licences as well as grants and schemes, to name a few. The offer will form the first formal correspondence between solicitors and the offer together with the formal acceptance and any further formal letters, will form the terms of the contract. During the period before you have a binding contract for purchase your solicitor will carry out various checks, some of which are described below. Once satisfied your solicitor will conclude the contract to make it binding and arrange for the price to be paid and for the title to the land to be transferred to you.
Title examination
The buyer’s solicitor will examine the property title, check the title deeds, searches, and other documentation in respect of the property and report to their client.
When carrying out the title examination, the buyer’s solicitor will consider the following:
Title conditions
If the woodland is being bought for use as commercial forestry, the title deeds to the property must be checked to establish that there is no prohibition against this use.
Access to the property
To allow timber to be extracted from the woodlands there should be access rights to the public road network and the suitability of the roads for timber extraction must be considered. If the property is not directly accessed from a publicly adopted road and it is determined that the seller of the woodlands does not own the private roads connecting to the public network, you need to consider whether you have adequate servitude rights of pedestrian and vehicular access over third-party owned private roads and that these routes are suitable for timber extraction.
Third-party rights
If neighbouring landowners have access rights over the land to be used for forestry or lead services through it, it is important to check that these routes will not be adversely affected by any proposed use of the land. Not all third-party rights are detailed within the title deeds, as there could be well-established, unwritten rights that may have become legally enforceable.
Public rights of way
The Scottish Outdoor Access Code (SOAC) details the public’s “right to roam” which allows members of the public to wander on privately owned land, including woodlands, only on the basis that they act responsibly.
Searches
A Property Enquiry Certificate will outline any property matters that must be considered such as the status of water, drainage and any road proposals and environmental notices affecting the property.
A legal report will be carried out over the title deeds, and this will disclose if there are any securities affecting the property.
Further searches need to be obtained to determine whether there are any historic designations, Local Authority Core Paths and Public Rights of Way which could affect the ability of the land being used for tree planting.
Fishing rights
Anyone fishing in rivers, streams and inland lochs must have the landowner’s permission. The SOAC expressly excludes any right of access for hunting, shooting, and fishing. So, to be able to carry out any of these activities, a member of the public must have permission from the landowner. Salmon Fishing rights also need to be considered since the rules relating to these are particular.
Deer stalking
Deer stalking is the tracking and shooting of deer, and to allow this, permission needs to be obtained from the landowner in writing and there are also other considerations since the management and welfare of deer in Scotland is regulated by the Deer Commission for Scotland (DCS), who monitor when and how deer may be shot, and what to do if herds become a nuisance or hazard.
Felling licenses and Forestry grant schemes
Felling licences and all grant schemes affecting woodland should also be checked and confirmation needs to be obtained from the relevant authority that licence and scheme conditions have not been breached and that all replanting and aftercare provisions have been complied with. Evidence should be obtained to illustrate that there are no issues with non-compliance by the seller.
Financial and Tax Considerations
Owning woodland and forestry does not always provide a quick investment return, and to tackle this issue there are a number of Forestry Grant Schemes available to owners connected with the creation and management of a new woodland. Further income may also be generated by woodland owners by registering for eligibility under the Woodland Carbon Code.
There are tax benefits in owning and managing commercial woodlands, which include 100% relief from Inheritance Tax due to Business Property Relief once the woodland has been owned for a minimum of two years. There is no Income Tax or Corporation Tax chargeable on the sale of timber from commercial woodlands and on a disposal of the land Capital Gains Tax is payable only on the increase in value of the land and not on any gain attributable to the value of the trees.
You need to consider the tax issues carefully and take appropriate advice before making any decisions either from your lawyer or accountant.
If you require any more information, or need assistance buying woodland, please contact us using the contact form on this page.
You may also be interested in the following articles: