Water abstraction licences: are you prepared for a sale?
4 June 2021
Water abstraction for agriculture is regulated and managed by the Environment Agency (EA) through the abstraction licencing system. The licences which are granted under this system are broadly separate to land ownership itself and are a distinct asset.
It is common for sellers of land to include an assignment of their abstraction licences within land sales and it is imperative that this asset is properly prepared and managed prior to any sale, change in ownership or shared use.
Points to consider when preparing to sell land
- Know who owns the licence. We are aware of difficulties being encountered in the past where the owners of a farm were working together in a formal partnership. On each change of partner, the legal title for the land was brought into the correct names, but the abstraction licence was not. You may encounter problems if you try to transfer an abstraction licence which is in the names of partners who no longer own or manage the land.
- Keep your paperwork up to date and available. The normal pre-contract enquiries require information on all water abstraction licences (past and present). Ensure that you have copies ready to give to a buyer.
- Ensure that the licence is up to date and you know its status. Licences can be time limited or effectively open ended. They can also be expired but held over (for example under the limited extension of licence validity scheme or similar). Each of these will have an effect on how and when the licence may be available to transfer.
- Consult with the EA where you intend to split a licence. It is by no means guaranteed that the EA will accept an application to transfer part of a licence in circumstances where there is a sale of part of a farm. You should therefore take advice on this at an early stage and consider consulting with the EA on your proposals.
- Consider the current EA policy. This point is an entire topic on its own. It is however safe to say that the EA’s policy on water abstraction is under review nationally and there are certain areas where licences are considered to be at risk of reduction or cancellation.
Points to consider when managing or sharing a water supply
- Transfer on death or bankruptcy. If any person named on the licence dies or becomes bankrupt, the EA must be informed within 15 months or the entire licence may become invalid.
- Sharing your water. The three ‘Cs’ apply here – Care, Cooperation and Clarity. Given the value of licences, it is important that you record each party’s obligations in writing. The main points to consider with any Water Supply Agreement are:
- quantity of water allocated to each party
- that obligations are secured at HM Land Registry by a restriction to ensure future owners’ compliance
- whether a formal easement is required for any irrigation pipes
- who is going to deal with the management and renewal of the licence
- how and when the agreement can be terminated.
- Ensure you are up to date with all paperwork that needs to be sent to the EA.
For detailed advice on managing or trading or your water abstraction licence, you should contact a specialist land agent. You should however consult us early on where you intend to include an abstraction licence along with a sale of land or where you wish to share a water supply. Preparation is key given the value that proper irrigation adds to land and the old adage rings true here: “Failing to prepare is preparing to fail!”
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at June 2021.