Buying a property? Get your due diligence right!

By Rachael Mitchell, Senior Consultant

The original version of this article was published in Country-Wide Magazine in April 2022

Farmland due diligence has always been carried out by purchasers to varying degrees – from talking to stock agents about the quality of animals on the property, right up to full scale financial and agronomic modelling. 

But farm sales are now more complex, and the levels of due diligence need to lift to accommodate these complexities.

Legislation is complicating things. New regulations at regional and national levels are in play, a notable example being the National Environmental Standards (NES) for Freshwater Management. 

From 2nd September 2020, the NES Freshwater became law, imposing regulations across a wide range of activities, including winter grazing on crops, dairy support, dairy platform, and irrigation on dairy properties.

Even in regions experiencing little impact from the regional council, the NES for Freshwater Management now applies. In areas where regional plans are in place, any activity or land use change must comply with relevant regional plans and the NES. If two similar regulations exist, the most restrictive applies.

Know the status of the property

Under current and future legislation, what were once accepted as inalienable rights (to subdivide, winter crop, etc) are no longer guaranteed.

If you’re purchasing farmland, it is imperative to know the status of the potential property. If the vendor or agent can’t provide you with good information on the property’s 2019-20 status, you may be restricted to farming in line with the vendor’s operation, or even less intensively.

Even if the existing system can be continued, understanding compliance with the relevant regional plan and any liabilities will also be important, for things like GHG costs, nitrogen loading and annual consent to farm.

Other due diligence questions need to be asked to discern the true cost and value of the land. What are the liabilities of the property? How does your proposed system compare with the 2019-20 year?

Can you subdivide?

Are you intending to subdivide the land to offset a purchase price? If you are, know that new legislation on Highly Productive Land will create an obligation on regional councils to preserve the best land in their region as production land (Land Use Capability Class 1-3). Any plans to subdivide may meet significant roadblocks.

The Cost of Biodiversity

To complicate things further, an exposure draft of the National Policy Statement for Biodiversity is also in the pipeline for later in 2022.

After pushback from farmers around the identification and treatment of Significant Natural Areas (SNAs), amendments have been made. Even so, phrases such as ‘maintain and increase biodiversity’ are likely to remain in the documentation. 

The definition of wetlands also has purchase cost implications. If the 50m² description is still in place, properties with lots of springs could face significant fencing headaches, not to mention the weed control that is likely to be required in the stock excluded areas.

On an existing property, you must mitigate all the regulatory restrictions to make your system work. However, when purchasing a new property, you need to look beyond how great the farm looks and evaluate how you will be able to farm that land within 2 to 5, or even 10 years.

A worthwhile investment

$5,000 will get you started on basic due diligence – farm visit, researching the legislative restrictions on the property, modelling your planned future system and reporting. That may seem expensive but given the seven-figure purchase price of most farms and the possibility of unseen costs, this is a small price to pay. Far better to spend due diligence money up front than be stuck with land unfit for the purpose for your operation.

There’s another upside to getting expert help. As you go through the due diligence process with your consultant, you’ll gain insights and information that will enable you to begin evaluating future properties yourself.

The role of real estate agents

On the one hand, real estate agents are engaged by the vendor to sell their property for the best possible price. On the other, they also have an obligation to ensure potential buyers are sufficiently informed about the property to make an informed decision.

Due diligence is your personal responsibility. Better to know beforehand that your ideal property might not be so perfect, than to have bought it and then not be able to farm it as you had wished. It is your responsibility to ensure you are fully informed – as the saying goes, ‘caveat emptor’ (buyer beware).

It is not all doom and gloom

There is good buying to be had by informed purchasers. Proper due diligence will give you the surety you need to buy with confidence.

Planning for future planting, fencing or land retirement can all be incorporated into the initial budget you present to the bank. Knowing that these expenses are in the pipeline and having a plan to pay for them will help reduce stress levels when the new regulations kick in.



Lee Matheson

Managing Director
Principal Consultant

B.Appl.Sc (Hons), FNZIPIM (Reg)

Lee came to agribusiness consultancy via the unlikely pathway of a suburban Wellington upbringing, an Honours degree in plant science and a six-year career in the financial markets. In his role as the firm’s MD, Lee doesn’t get out on-farm as much as he used to but makes the most of it when he does. While having swapped the paddock for the boardroom, Lee continues to provide advice in the areas of farm business strategy, farm system innovation, corporate governance, investment analysis and economic research.

Outside of Perrin Ag, Lee loves to spend his time coaching rugby, watching his three kids play sport and gardening with his wife Haidee.

“I love the challenge of empowering people in our primary sectors and the excitement of seeing clients achieving their aspirations. If we can encourage farmers to engage with their consumers, take a more active involvement in their supply chains and view their businesses through a wider lens, then I think our industries have a great future.”

Michael Booth

Consultant

Mike brings a wealth of agri-tech and dairy systems expertise to Perrin Ag. After graduating with a Bachelor of AgriCommerce from Massey, he started his career with DairyNZ as a consulting officer where he ran discussion groups and managed farm supervision.

He left DairyNZ to travel the world but within a few months Covid hit, the borders closed, and Mike and his wife Nikita returned home. Back in New Zealand, he took up a role managing DairyNZ’s monitor farms on the Hauraki Plains before joining Halter.

After finishing his OE, he returned home to live in Papamoa and joined the Perrin Ag team in February 2024.

“I’m not someone who likes to sit still and I like to be continually learning. I saw an opportunity with Perrin Ag. As a business their ethos is about continuous improvement and learning. There are always new and better ways of doing things and we need to be at the forefront of that for our clients.”

Abbey Dowd

Consultant

B.Ag.Sc (Hons), MNZIPIM

Abbey joined Perrin Ag in February 2023 as part of the firm’s graduate recruitment programme, Empower.

Abbey grew up surrounded by dairy farms in a close-knit community in South Waikato. She saw first-hand how local farmers supported her community, which is what inspired her to study at Lincoln University.

Growing up in a rural community Abbey has always been impressed by how much local farmers contribute to the community. She wanted to help give back to the industry and play a part in helping our primary sector continue to produce quality food in a sustainable way.

In 2022, Abbey spent the summer as an intern on one of New Zealand’s first commercial deer milking operations. Her Honours project was researching deer milk alongside other more traditional milking operations and assessing the deer milking industry’s future production possibilities.

“Growing up I didn’t live on a farm, but I always knew I wanted to work in the farming sector. I wanted a role where there was a balance between working on and off farm and where I could support farmers to get the best out of their businesses.”

Sam Gray

Consultant

Sam grew up on a dairy farm in the Far North. After graduating from the University of Otago in 2005 with an Honours degree in molecular biotechnology, he spent several years working in medical research in New Zealand and Scotland. Upon returning to New Zealand in 2012, he spent four seasons dairy farming in Northland before purchasing a 56 ha block in Taupо̄, where he was first exposed to farming under a nitrogen cap. Sam joined Perrin Ag in 2023 and brings his strong analytical skills that are grounded by a pragmatic approach to problem solving. Outside of farming and consultancy, you’ll likely find him fly fishing, hunting or snowboarding.

“A lot of farmers feel overwhelmed in the face of a rapidly changing regulatory landscape. I strive to help farmers understand what these environmental regulations mean for their business, and offer practical solutions that allow them to keep doing what they do best, whilst remaining compliant”.

Danni Armstrong

Finance administrator

Danni grew up on a life style block in Atiamuri and spent five seasons as a relief milker in the area. During this time, her full time roles were in various fields including the rental car, health care and marine industries. Danni has had a focus on administrative and accounting duties, but is also proficient in looking after customers especially well, social media and website operation, running a rental car fleet and the associated tasks like training, rosters, H&S and organising repairs! Danni joined Perrin Ag in May 2021, to be part of a business in an industry she is passionate about.

During her spare time Danni can be found reading a book with her cats or out enjoying the walks in Rotorua’s Redwoods.

“What motivates me each day is knowing that I will be challenged with a range of problem solving tasks. I love to see all the figures adding up and knowing that my role makes a difference to the team.”

Duncan Walker

Director
Principal Consultant

B.Appl.Sc, MNZIPIM (Reg)

Coming from a drystock and dairy farming background, Duncan has always been passionate about growing primary sector businesses. Whether it’s pastoral farming, forestry, horticulture or investments outside the farm gate, sustainably optimising business performance is Duncan’s passion. After graduating from Massey University with a Bachelor of Applied Science in Agribusiness, Duncan’s first opportunity to optimise a farm business was by undertaking a dairy conversion. Duncan project managed the conversion and continued to run the dairy farm for a further three years.

Since joining Perrin Ag in 2011 Duncan works with a wide range of clients including those ‘outside the farm gate’. With his strong background in investment analysis, business strategy and project management, Duncan is increasingly working with clients to analyse and integrate horticulture and forestry investments into their farm businesses.

“I enjoy helping clients navigate through the complexities of today’s operational, financial and environmental challenges. Seeing clients achieve their goals is very rewarding”

Lee Matheson

Managing Director
Principal Consultant

B.Appl.Sc (Hons), FNZIPIM (Reg)

Lee came to agribusiness consultancy via the unlikely pathway of a suburban Wellington upbringing, an Honours degree in plant science and a six-year career in the financial markets. In his role as the firm’s MD, Lee doesn’t get out on-farm as much as he used to but makes the most of it when he does. While having swapped the paddock for the boardroom, Lee continues to provide advice in the areas of farm business strategy, farm system innovation, corporate governance, investment analysis and economic research.

Outside of Perrin Ag, Lee loves to spend his time coaching rugby, watching his three kids play sport and gardening with his wife Haidee.

“I love the challenge of empowering people in our primary sectors and the excitement of seeing clients achieving their aspirations.  If we can encourage farmers to engage with their consumers, take a more active involvement in their supply chains and view their businesses through a wider lens, then I think our industries have a great future.”