Vineyards

Ownership of a vineyard doesn’t mean you have to become a winemaker. Lots of vineyard owners either have other companies make their wine for them, or they simply sell their grapes to other producers. When purchasing land or a vineyard you may also be able to buy an existing business. But, just as no vintner wants to sell a corked bottle of wine, no purchaser of a vineyard or winery wants to buy a tainted business.

If the structuring of your purchase dictates that, instead of buying the specific assets, you buy the company that owns the assets required to run the business, such as the land, crops, machinery and brand, you will be undertaking a share or corporate purchase. This means that you (and any other purchaser involved) will become the shareholders of the target company.

The purchase structure requires consideration and will likely depend on your circumstances and long-term goals. For example, are you acquiring the business as an individual or with others, possibly as a family investment company? If the latter, consider how to split the shares between the owners and whether all shareholders have the same rights or not. If one shareholder runs the business, while others are passive investors, different rights to profits or decision-making may be required. To achieve this, you may need to create and issue different classes of share. On the other hand, if all shareholders have equal rights, could this result in deadlock and how should this be resolved? What happens if a shareholder wishes to sell their shares? Are there restrictions on who they can sell to and the price? All these questions and more can be addressed in a shareholders’ agreement and company constitution, but it is imperative that you document the ownership structure and the shareholder rights carefully to avoid disagreements in the future.

Vineyards don’t just have to be about growing grapes and making wine. Consider adding the ability for the public to visit, attend tastings, watch the wine being made and staying for lunch at a café or restaurant on site, further diversifying the property.

To facilitate this, your winery will need premises to lay down bottles, keep expensive equipment, house people on site, and entertain your visitors and customers. From bats to asbestos, there are nuances with bricks and mortar. A good surveyor is important if you want to understand the potential liabilities and costs of upkeep or conversion of the farm buildings. Be aware of any covenants affecting the property which would prevent its use as a vineyard, as well as listing or other restrictions on any buildings you intend to use. Are there restrictions that could stop you growing vines on it? Whether or not the site has the right consents in place for your proposed use must be checked by your solicitor – the planning rules are not straightforward, and many wineries will require specific consents for retail and leisure.

Around 400,000 buildings in England are listed, including a surprising number of old agricultural barns. Carrying out unauthorised works to a listed building without consent is a criminal offence so cannot be taken lightly, and there is no limitation period for enforcement action, so you could have to put right unauthorised works carried out by the seller. In the most serious scenarios, you may decide that the seller has to apply for consent for unauthorised works themselves before completion, and you might keep back some of the sale price as a retention to deal with the risk.

Making wine is expensive. You need the land, the labour and specialist plant and machinery plus long-term capital to support expansion and maintenance. It takes five to ten years for a new vineyard to start selling wine. Start-up costs can be high, with the cost of planting per hectare reaching up to approximately £40,000. As such, it is crucial that proper financial forecasting and cashflow planning has been considered, with sufficient capital needed in the early years.

Growing grapes is still agriculture and the land is, therefore, eligible for agricultural subsidies. These can be lucrative but complicated, particularly as the Common Agricultural Policy fades away post-Brexit in favour of Environmental Land Management Schemes. Just as an early frost can ruin a crop, an unexpected tax bill can ruin your cash forecast and harm both investment and distribution. Tax will present itself at every stage so at a business level, keep in mind to establish the right structure at the outset.

Funding a vineyard endeavour can be complex, and where that money comes from is important. Are you borrowing it? From whom? What is the loan secured on? A range of assets can be used for security, not just land itself; some require more bespoke financing than others. The right finance can make a huge difference to the amount you can borrow, the interest you pay and how much flexibility you have over the operation of the business. Generally, land is the easiest asset to secure and, in recent years, money has been reasonably cheap. However, high street lenders will not usually lend against agricultural property, meaning you need to approach the handful of specialist lenders in this area. Larger and more established vineyards with a trading history meanwhile are increasingly using asset-based lending, which is borrowing against receivables generated by the business as well as land, plant and machinery. This often provides more flexible working capital than vanilla loans secured against just the land.

As with any financing, it is often helpful to approach a specialist broker who can find the right lender for your business and its borrowing needs. You will also need a solicitor to act on your behalf. Lending terms can be onerous and it is important to take legal advice to understand them in the context of running the business day to day. A good lawyer will explain potential defects in your security to your lender and give solutions, rather than simply identifying problems.