How to use this infographic
Disclaimer: please note, this graphic is not a replacement for legal advice.
- There is no "right" type of agreement for most of these business types - use the infographic to see what options are open to you, and to understand what questions you might need to ask.
- Click the green 'plus' buttons for more information on specific topics.
- The horizontal axis of the infographic shows different agreement types with increasing 'commitment' as you move from left to right. The vertical axis shows types of occupation and responsibility. So the top left shows the lightest (and lowest cost) forms of tenancy, and the bottom right shows the most committed (and most costly) forms.
- For all agreement types it is most sensible to be an incorporated organisation rather than a group of individuals. This limits your liability if things go wrong.
Googling is often the best way of finding relevant information, but the organisations below all have valuable guidance and resources.
Profits à prendre
Profits à prendre is not a form of tenure, rather a right to take or harvest something from land that you don't own or otherwise manage.
- If your business is about the sale of woodland products or non-timber forest products, this could be a good option to explore.
- It gives you no additional rights over the land, and there is no need for a notice period - so the landowner could cancel the arrangement at any time.
- Profits à prendre is less common, so may be confusing to stakeholders?
In order to be valid, a Profits à prendre agreement needs to be in the form of a deed, so drawn up by a solicitor or a conveyancer, and can be registered with the Land Registry.
Many woodland enterprises start off with an informal agreement with a landowner to, for example, harvest firewood or run courses or events.
- It's open to misunderstanding; it can lead to conflict.
- It doesn't provide any security.
If long term stewardship and ownership of the land is important, it may be worth setting up any associated business or social enterprise as a separate company. That way, if the business fails, you don't risk losing ownership of the land.
A licence agreement gives fewer rights than a lease. It grants non-exclusive possession of land (or a building) for a defined period of time, and can specify the types of business activities it permits.
- Licences can be quite "light touch" and may be particularly suitable if you are running courses or other activities but don’t need to be in the wood all the time.
- Licences can offer less security than leases and may not be ideal if you need to install infrastructure into the woodland or want to be able to plan for a long period ahead.
- If a licence is not well written, or if in practice it grants you exclusive possession, it can "accidentally" create a lease which may have unintended consequences.
It’s always worth getting legal advice on the details of the licence and what it commits you to!
Management/Service Level Agreement
Many woodland enterprises offer services to woodland owners, to keep their woods in good condition, or restore habitats. This might be coppicing, litter picking, paths maintenance or tree planting. A management or service level agreement is a contract that sets out what services will be provided, and how much the landowner will pay for them.
- It can enable you to operate across multiple sites, which may support a larger business model.
- It can be flexible, and allow the enterprise to focus on what it's good at.
- It doesn't provide security, and can be quite short term.
- It requires collaboration with the landowner, which may be problematic.
You will need a woodland management plan to be in place and agreed with the landowner.
This is the most common form of tenure over land, other than outright (freehold) ownership. A lease grants exclusive possession of a piece of land for a defined period of time, which can be from as little as one year to more than 999! It generally comes with all the responsibilities of full ownership, such as management and maintenance. If you need security for a loan or grant, or your business requires longer term thinking, then you are probably going to need to consider a lease.
- A well understood form of tenure, it should be relatively easy to get good legal advice on what a lease is committing you to.
- "Break clauses" can be written into even long leases to allow you to return the land without penalty if the business doesn't work out.
- Unless it forbids you to, you can generally "assign" leases - sell or give them to another organisation.
- Remember a lease falls in value the shorter it becomes: 25 years may seem like a long time now, but especially in woodland terms if the lease isn't long enough you may end up handing the land back just as you are recouping your investment.
- The freeholder/landlord can impose restrictions on what you can do through the lease; ideally you will have negotiated this beforehand but it can be inflexible if your business model changes.
You should be prepared to negotiate, both about the terms of the lease - what you can and can't do - and about any payment, whether that's a regular rental payment and/or an upfront "premium". This is generally done through exchanging "heads of terms" - a summary of the various terms of the lease. It is very helpful to have independent legal advice at this stage.
This is what most people imagine when they think of ownership - being the "landlord" of a defined piece of land. This doesn't mean you can do what you like - there may be rights of way across the land you have to respect, and you may need planning permission to build or bring infrastructure in, but you won't have to deal with an underlying landowner.
- Freehold ownership is straightforward and well understood.
- Good security for loan or grant arrangements.
- Full responsibility - which may be a distraction from your core business.
- If your business fails, the ownership of the land can be lost as well.
If long term stewardship and ownership of the land is important, it may be worth considering running your social enterprise as a separate legal entity with another type of agreement over the land - splitting out freehold ownership of the land from the business.