Family Farms: Recording Written Agreements

We have seen an increase in clients who are part of family farming businesses where a dispute has arisen in circumstances where there is no written record of the clients’ understandings or expectations.  The types of disputes we are seeing are the common family break ups and conflicts caused, for example, by:

1. the separation of married or de-facto partners;

2. the death of a family member where certain family members are left disappointed by what is provided for in the Will;

3. disagreements between younger adult siblings who find themselves in control of the family farming business due to the older generation’s ill-health, death or change in priorities; or

4. mental incapacity of a family member (for example, where an elderly parent is diagnosed with Alzheimer’s or another degenerative disease).

Where these issues present and where there is no written agreement about what family members are entitled to or ought to expect, prolonged disagreements occur. Too commonly, the result of no written agreement is the breakdown of family relationships sometimes resulting in the failure of the family farming business.

Unfortunately, families are notorious for not getting together and discussing their business affairs, particularly where those affairs concern issues relating to money or a transition in financial control from one generation to the next. The reasons that people do not enter into written agreements are associated with suspicion of legal language or “legalese”, worry about the expense or concern that asking family members to write down an agreement will be offensive or demonstrate a lack of trust.

Often these concerns are misplaced.  Written agreements do not need to be long complicated documents.  At a basic level, written agreements should simply record what is agreed, i.e., who the parties to the agreement are and what is understood about money, property and decision making.  The agreement should also record, in plain language, what the purpose of the agreement is and how any risks or problems are to be dealt with. It’s impossible to foresee all future problems, but there are basic problems like disagreement between the family decision makers, a lack of farming income (perhaps due to drought or flood), death, divorce or disability that should all be addressed before they occur.

We consider that a large majority of family farm disputes would be settled with minimal legal involvement if family members got together and recorded their understandings and expectations in writing before problems arise.

 

SMR Legal Pty Ltd