You came home after school or university and started working on the family farm. Maybe you were paid a farmhand's wage, maybe less. Somewhere along the way it was understood that one day the farm would be yours.

That was 15 years ago. You have put in the early mornings, the calvings, the bad seasons and the improvements. You know every paddock. And if you are honest, you are not sure what you actually own.

This post is for you.

What a promise is worth

A handshake promise is not nothing. New Zealand law does recognise that someone who has relied on a promise to their detriment can, in some circumstances, have a claim. But turning that into something you can rely on usually means going to court, and the outcome is uncertain, expensive and slow. It also tends to happen at the worst possible time, after a parent has died or the family has fallen out.

There are three situations where an undocumented promise leaves you exposed.

If a parent dies. If their will does not leave you the farm, or leaves it in a way that does not work, you may have a claim under the Law Reform (Testamentary Promises) Act 1949, which covers people who worked for someone on the strength of a promise to be provided for in their will. But you would be making that claim against the estate, which in practice means against your own family.

If your parents' plans change. People change their minds. A parent remarries, a sibling comes home, the farm needs to be sold to fund care. Without anything in writing, you have very little say.

If your own relationship ends. This one surprises people. If you do eventually receive the farm and your relationship later breaks down, your partner may have a claim to part of it, particularly to any increase in value they contributed to, or to the family home if it is on the farm.

What you could have instead

There are well-established ways to give a successor a real, documented stake in the farm while the parents still own most of it. The right one depends on the farm, the debt and what your parents need, but these are the common options.

A sharemilking agreement. Your parents own the land and you receive a share of the milk income. As a herd-owning (50:50) sharemilker you own the cows and typically take around half the income; as a variable order sharemilker you supply labour and management for a smaller share. Sharemilking is a well-established, regulated arrangement with standard industry agreements as a starting point, and herd-owning sharemilking in particular lets you build real equity in stock and machinery.

An equity partnership or shareholding. If the farm is owned by a company, you can be issued or sold shares over time. If it is owned by a trust, there are ways to give you a defined interest. Either way, your stake is recorded and grows.

A lease with a right to buy. You lease the farm, run it as your own business, and have an agreed right to purchase it on set terms. This gives you control now and a clear path to ownership.

A staged sale with vendor finance. Your parents sell you the farm, or part of it, and leave some of the price owing as a loan. They can forgive part of that debt over time, which is a common way of recognising your years of lower pay.

All of these put your position in writing, which protects you, and protects your parents and siblings too, because everyone knows where they stand.

Protect your stake from the start

If you are in a relationship, or might be, a contracting-out agreement under the Property (Relationships) Act 1976 is worth serious thought before you take on any interest in the farm.

The starting point is that property received from your parents is your separate property. But it does not necessarily stay that way. Mixing it with relationship assets, using it as the family home, or your partner contributing to its value can all change the position. A trust is not automatic protection either.

A contracting-out agreement sets out what happens to the farm if the relationship ends. To be valid, each of you must have independent legal advice before signing. It can feel awkward to raise, but it is usually much easier to discuss early than later, and your parents and bank may well expect it.

How to raise it with your parents

Many successors stay quiet because asking feels ungrateful, or because they do not want to be seen to be pushing their parents out. That is understandable. It is also why so many promises stay unwritten for decades.

A few approaches that tend to help:

•           Frame it as protecting everyone. A written arrangement protects your parents' retirement and your siblings' position as much as yours.

•           Ask about their plans rather than stating yours. What do they want to happen? Where do they want to live? Their answers will tell you a lot.

•           Suggest getting advice together. A meeting with a lawyer who works with farming families often makes the conversation easier, because it is about options rather than demands.

•           Bring your siblings in. Most disputes come from people finding out late. If your brothers and sisters know what is planned and why, the arrangement is much more secure.

Start with what you know

If you are working on the family farm on an understanding, it is worth getting clear on where you stand. The broader picture is in our guide ‘The $150 billion conversation nobody's having’, and our three-minute succession path checker will show you which path your family is on and what to deal with first.

OCLaw works with farming families across the Waikato, Hauraki, Bay of Plenty and Coromandel from our Hamilton and Waihi offices. If you want to understand your position, confidentially and before any family discussion, get in touch at oclaw.co.nz/contact.

This article is general information only and is not legal advice. Every family's situation is different.