If you are purchasing a dairy farm you should thoroughly investigate the adequacy of the effluent disposal system. If the system is does not comply with regional authority rules under the Resource Management Act, you could become liable for criminal prosecution by the regional authority, and you could incur substantial expense to upgrade the farm infrastructure.
You can take the following steps to ensure that the farm’s effluent system is compliant and make it the vendor’s responsibility to put things right if the system is non-compliant:
- Contact the regional Council
You (or your lawyer) can contact the regional authority to obtain details of all resource consents, permits and licences that are recorded for the property and details of any environmental breaches. - Obtain a report on the system
You can commission a report on the system by an accredited farm dairy effluent company or a suitably qualified independent consultant. (Dairy NZ, Waikato Regional Council and other industry representatives have produced design standards, a design code and an IPENZ design practice note for effluent systems and set up an accreditation system for companies involved in the industry). Your dairy company or regional authority may be able to give you additional advice. - Identify the relevant legal requirements for effluent disposal
Along with your enquiries of the regional council and any reports you commission on the system, you may need further professional advice as to the legal requirements for effluent disposal on this farm. For example, you will need to determine whether or not your regional authority will require you to hold a resource consent. - Make the vendor responsible
If your enquiries reveal that the system is not compliant or the vendor does not hold the requisite consents, or the farm has had incidents of non-compliance in the past, then these matters can be covered in the agreement for sale and purchase. Alternatively, you can adjust your offer price to take into account any work you may have to do to bring it up to standard. - Make the agreement conditional on your enquiries
If you wish to sign an agreement for sale and purchase before you have completed your enquiries, then the agreement can be made conditional on you being satisfied with the effluent system. If the system is unsatisfactory you can then choose to end the agreement. Alternatively, you (or your lawyer) may be able to negotiate an amendment to the agreement making any necessary work the vendor’s responsibility. - Protect yourself with a well drafted agreement
You should consider including the following conditions in your agreement:
- The effluent system must meet all legal and dairy company requirements at the time you sign the agreement and on settlement
- The farm must comply with all regional council and dairy company requisitions prior to settlement
- The vendor must hold all necessary consents and must transfer them to you on settlement
- The vendor must empty the effluent ponds before settlement
- The vendor must generally comply with good husbandry practices
- The vendor must allow you to inspect the property before settlement so you can check compliance with the agreement.
There may be other matters specific to your circumstances or the farm that need to be covered in the agreement. The time and effort you invest into your pre-purchase investigations and a well drafted agreement may save you a substantial amount of time and money in the long run.
Please email me at [email protected] with your ideas for future articles. Keep an eye out for next month’s column, where I will discuss another relevant rural legal issue.
Barbara McDermott is a partner of Norris Ward McKinnon, specialising in commercial and rural law. With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters. Find out more about us at www.nwm.co.nz