The model and the farms
Our co-operative purchases agricultural land with a view to subdividing it into a number of ecologically managed residential smallholdings. Drawing on the advice of organic horticulturalists and farmers, ecologists, soil experts, transport advisors, planners, prospective customers and those living locally and with local knowledge, we then propose a new smallholding cluster, including a binding whole-site ecological management plan.
Our tenure options are an outcome of the desire to make our smallholdings as accessible (affordable) as possible, and the need to create a sustainable business model. We have therefore developed three tenure options, which we intend to offer in combination:
Outright leasehold sale
Outright leasehold sale: The smallholding is sold on a 150-year leasehold agreement. This model suits smallholders with some savings or existing property equity. The Co-operative benefits from this tenure model as it allows us to immediately realise the capital invested in the smallholding’s development, which can then be reinvested into developing future sites. To date, one of our three existing leasehold smallholdings has been sold outright.
Rent to buy leasehold
Rent-to-buy leasehold sale: Our rent-to-buy model echoes shared ownership schemes, with a 20% up-front deposit paid, and followed by rental (a mixture of interest and capital payments) over 25 years. For the first five years small-holders pay interest only; capital payments start later in order to give smallholders the opportunity to build up their business. The rent-to-buy model suits smallholders who want the security of a longterm leasehold, but who lack the capital to buy the lease outright. The Co-operative benefits from this tenure model as it allows us to consider a wider pool of applicants.
Rental: We have not yet offered our smallholdings for rental but we plan to do so within the period covered by this business plan. Rental smallholdings are of interest to those looking for a first experience of managing a small-scale sustainable farming enterprise without making the significant commitment of buying a plot, and/or without the savings or access to capital needed to buy a lease. The Co-operative benefits from this tenure model as it gives us a long-term source of regular income. Rental payments have been set within our financial forecasts at £400 per month, rising with inflation.
Cost to Smallholders
The costs to smallholders break down into the following: The upfront cost of lease: the ‘premium’. This is set in this business plan at £22,000 for rent-to-buy and £110,000 for an outright leasehold sale. However, the final amount we will charge depends on the actual costs of producing the holdings, including the costs to the Co-operative of borrowing the money to cover expenditure. These projected costs are set out below in the Plan for Growth section. There is no upfront cost for rental properties. n The ongoing costs of lease: This is the rent paid on rent-to-buy holdings and rent paid on rental properties. During the first five years, rent-tobuy rent represents interest – at 6% – on the portion of the holding not purchased. After the first five years this rises to allow for capital payments. On a holding valued at £110,000, payments would total £430 and then £625 per month. Rental holdings have been calculated at £400 per month, rising annually with the Consumer Price Index. There are no ongoing costs of lease on outright sales. n Other ongoing costs: Our co-operative also needs to pass on the costs of insuring any shared infrastructure and land, and to maintain shared infrastructure. We also need to cover the costs of monitoring the site (biodiversity survey fees, water and soil testing, traffic monitoring, etc.) and for the staff time in providing business and planning support to the smallholders. In this business plan, these costs have been set as follows: − Insurance: £150 per site per year (based on quote from our existing insurer). − Maintenance: Not included, these will be passed on as and when they are incurred. − Site monitoring: Capped at £400 per year (base year 2014), rising with inflation, on each smallholding. − Support: Set at £650 per holding per year but decreasing to £0 over 10 years. This reflects the fact that smallholders will need less business and planning support as they become established. We have at the time of writing commissioned a market research exercise, to be conducted by Plunkett Foundation, exploring (among other things) current and aspiring smallholders’ preferences regarding up-front versus ongoing costs (see Market Demand and Marketing, below). Below are the actual costs for smallholders at our first site set against projected costs for subsequent sites. All prices are projected to be higher than Greenham Reach. This reflects increasing land costs and a recognition that we undercharged for our first smallholdings.
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