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Dalnavert Community Co-operative Limited

Euan MacAlpine

1. Setting up and Developing the Co-operative: 1982-1994

Introduction
The idealism behind the venture
Allocating land for personal use
Initial ideas

2. Our Position in 1994

What we had learned
Our financial viability
Our View of the future

3. 1994-1998

Membership and housing
Taking stock and looking ahead
Financial outlook
Objectives
What would we do differently if we were starting afresh now?
The advantages of belonging to the co-operative

1. Setting up and Developing the Co-operative: 1982-1994

Introduction

In 1982 150 acres came up for sale at Dalnavert, which lies on the east bank of the River Spey, a few miles north of Kincraig. Six people decided to join together to buy the land to farm as a co-operative. The total price was 34,000. At that stage there was no planning permission and the land value was entirely based on agricultural use. We decided that we would fix a cost of 5,000 each and raise the remaining 4,000 by means of a loan, which would be duly repaid in time, as it was.

Having set up an agricultural co-operative we applied for planning permission for seven house sites on the high ground. This we got but only after giving verbal assurances that we would use the land only for agricultural co-operative purposes and that the house sites would be for the sole use of the directors of the Co-operative. That is, we agreed right at the outset to tie ownership of the houses to the joint ownership of the land. We got the best legal advice available, funded by Highlands and Islands Development Board , to ensure this could be maintained but we all knew that in the end goodwill would be essential.

We decided to regard the 5,000 as made up of 3,000 for a housing site and 2,000 for shares (for which we got tax relief). We also imposed a levy of 10 per member per month. This was intended to help offset the overdraft and to remind us that nothing comes free. In effect we all regarded the 2,000 as a joining fee and these sums, together with subsequent donations to the Co-operative, were all written off formally in October 1993.

Soon after forming the co-operative we recruited a seventh member to complete the group. Of the six initial members, five are still with the co-operative. Subsequently we recruited two additional members, since two members who lived locally decided not to build at Dalnavert.

Although we called Dalnavert an agricultural co-operative, essentially we managed the enterprise as a Company Limited by Guarantee, but with all members of the co-operative sharing - one man, one vote - in running it, and all equally sharing the financial burdens and guarantees to the bank. The terms "shareholder’. "director" and "member of the co-operative" were to have one and the same meaning.

The Idealism behind the Venture

We all saw the co-operative as the chance to create an alternative to the estate concept of land ownership. We wanted to offer employment on an equal basis, with all those involved sharing the risks and the commitments. We hoped we could offer local employment with equal involvement. We have been fairly successful, as I hope to show, but we have yet to achieve this latter aim.

We decided that fundamental to any attempt to achieve our ideals was some arrangement to tie the land to the housing sites. We wanted to ensure that all who lived at Dalnavert took an equal interest in the land; to own a house was to live at Dalnavert; to live at Dalnavert was to belong to the co-operative. We did not want members letting out their houses to holiday-makers or even allowing their relatives, other than their immediate families, to live there permanently. We wanted to make Dalnavert a living, thriving community held together by a shared interest in and concern for the land.

We therefore agreed at the outset that the houses were for our own personal use only and that we would not let, sublet, or rent out for the holiday market. Owning a house site and having a share-holding in the co-operative would go hand-in-hand. We remained true to this ideal until 1994; the goodwill mentioned above did indeed operate for twelve years. The fact that we now have two additional members who have a close interest in the land but do not actually live on what was bought collectively in no way weakens this tie.

Allocating land for personal use

We allocated some ground for personal use - the high ground, excluding a birch knoll, which amounted to about 3.5 acres, and the land between the high ground and the Dalnavert burn which amounted to 10.5 acres. We split the high ground into half-acre plots for the seven houses and allocated an additional one and a half acres of ‘garden site’ for personal use as each member saw fit. Each of the seven members has a personal title to the house and garden sites. The birch knoll remains for communal use by all members of the co-operative.

Initial ideas

After we had split off the land for personal use, house and garden sites, we were left with approximately 120 acres for co-operative use. We negotiated a business loan with the Clydesdale Bank of up to 20,000, subsequently increased to 29,000. We offered the 120 acres as security and in addition, each of us gave the bank a personal guarantee of 2,000. The loan financed the purchase of six large poly-tunnels for growing heathers, bought all our fencing materials, paid for contract work for the main ditching, and, most importantly, it enabled us to employ the farm manager until such time as his efforts generated sufficient income to cover both his own salary and the co-operative’s running expenses.

It took us a number of years to come up with a viable formula for making this land work for us. We deer-fenced five acres and grew heathers for the commercial market, one year producing a total of 50,000 plants in 100 varieties. We rented out grazing land for cows and sheep. We slowly improved the land: fencing, draining, ditching, sowing and fertilising. We started to build up a breeding herd of Aberdeen Angus cattle.

2. Our Position in 1994

What had We Learnt?

By 1994 we had reached the stage at which we were beginning to have a clear idea of what would work best for the land and our own resources. We knew what the land could realistically cope with: a breeding herd of some 30 suckler cows, the calves being born in the early spring and sold off in the back end; and haylage production of 300 round bales. These feed the cows during the winter and save us from having to buy in extra feed other than 300-400 of concentrates. In addition, we could rent out grazing to some 90 tups in summer and 180-200 ewes in winter, but we stopped this once the herd grew in number. Heather production could run at around 20,000 plus plants. Initially our main outlet was via Scotstock, a wholesale marketing co-operative operating in Edinburgh, and subsequently via Jack Drake’s Nursery at Inshriach. (The owner is a member of the co-operative.)

Our Financial Viability

At the peak of heather production, and before the full development of the Aberdeen Angus herd, the overdraft was down to 10,000 and falling. Then Scotstock went into liquidation and the recession was at its height. The net result was that our overdraft started to increase.

We were also hit by four floods during the period 1989 to 1993. We were most seriously affected by the flood of 1990, which washed away 150 metres of flood barrier in an area that left the whole of our land very vulnerable indeed. This we had to repair to a high specification. Even with a 75% grant, the repairs added another 3,000-4,000 to our overdraft and meant that until the grant came in we were carrying an overdraft of nearly 30,000. Most of our fencing was also swept away.

However, the build up of the herd was now giving us greater security and we thought that this, together with slightly reduced heather production, would allow us to remain within the overdraft limit of 29,000.

We reviewed our assets. The land, which we had bought at approximately 250 per acre in 1982, was probably worth anything between 150 and 200 per acre in 1994, say a total of 21,000. In addition, we had heifers and calves worth 17,000, heathers worth 6,000, and farm machinery which we valued at 4,00, giving a total of 48,000. Being cautious, certainly 40,000. If we had to sell up, our guarantees would not be called upon. Our house sites and garden were (and are) totally safe; they could not be called in.

Our View of the Future

Given the way the recession had hit small businesses nation-wide, we felt we had survived very well. Provided we were not washed out every year by major floods and faced with having to find around 5,000 (even with a 50 per cent grant) to repair the damage each time, we were well set with the Aberdeen Angus herd and the annual production of 20,000 heathers.

In addition we developed the Dalnavert burn into a brown trout fishery over a stretch of about a kilometre. The total cost amounted to 11,000, approximately 7,000 for labour, and 4,000 for other costs. The project was supported by the Rural Enterprise Programme (REP), which funded 50 per cent of the cost. We supplied the other 50 per cent in the form of our own labour.

As part of the Cairngorms and Strathspey area we are automatically part of an Environmentally Sensitive Area (ESA) under the scheme run by the Scottish Office Environment, Agriculture and Fisheries Department whereby farmers are paid to farm in a way that is not damaging to wild life. To receive payments, we have to accept certain restrictions on how we farm. These include: not using excessive fertilisers; restricting grazing; keeping certain areas totally free of grazing; cutting grass in ways which minimise disturbance to breeding birds; undertaking tree planting; and preserving wet areas and their water margins. We have an agreement which will last for ten years, provided a review after five years is satisfactory. We should benefit by an average of around 2,500 per annum.

Reviewing the previous 12 years, those of us who had been in the co-operative since the start reckoned we had had our investment back many times over in terms of the house and garden sites and the quality of life. We had shown that there was a possible alternative to the large landowners: it was possible for ‘ordinary’ people to manage land; and we had employed one of us full-time since the outset.

If all went well with the cattle, the heathers and the fishery, there might be enough work for us to employ one and a half, possibly two people full-time. In short, while never complacent, we thought we were reasonably well set.

3. 1994-1998

Membership and Housing

Around 1994 two members wished to sell their houses. The market was flat to say the least. They both failed to sell their houses within two or three years and blamed the co-operative, its burdens and at one stage the other members. To cut short a long, sorry and sometimes bitter story, the outcome was that one member parted amicably, returning his shares to the co-operative in return for the co-operative releasing the house from the burdens. The other member eventually sold his house, taking his shares with him. He is therefore still a shareholder and has the right to attend AGMs, but is no longer a director. The matter remains unresolved to this day. Neither of the new owners has joined the co-operative but we hope they will eventually.

Taking Stock and Looking Ahead

With the departure of the two members mentioned above, good will has returned with a vengeance.

All seven members accept the burdens. These are:

  1. Our houses should be tied to the land.
  2. Each householder gives the bank a guarantee of 2,000 against bankruptcy.
  3. Presently we each pay a monthly levy of 10 into the co-operative. This is non-returnable.
  4. We all undertake not to rent out our houses for holiday letting and accept that if we sell our houses we automatically sell our share in the co-operative at the same time. The co-operative has first option on any house sale and we try to ensure that those coming into the co-operative will wish to see its aims upheld.
  5. The shares are not transferable either to members within the co-operative or to outsiders. The shares pass to the new house owner on completion of the sale.
  6. Each householder undertakes to give the co-operative a total of five days work per year, spread in any way he or she wishes (five days per household, not per individual), and in any particular area, whether it be ditching, fencing, felling trees, potting heathers, haymaking, etc. Naturally we all try to respond to the needs of the co-operative as they arise.
  7. We hold monthly meetings. Between us we act as chairman, secretary, minute secretary and treasurer.
  8. We operate on the basis of one family, one vote. One named director in each family exercises that vote. All family members are welcome to attend and take part in all our meetings.
  9. We operate under Company Law and our accounts are audited annually.
  10. We take joint responsibility for employing one of us full time.

Financial Outlook

Our main sources of income are cattle grants (8,000), calf sales (6,000), ESA grant (3,000) and heather sales (4,000). Miscellaneous income includes renting out some twenty acres of rough grazing for horses on an annual contract. We also run a small "Hide Away" caravan site. The brown trout fishery should start to produce an income soon. We now produce a trading surplus of around 10% on a turnover of around 24,000; Our overdraft, which is down to an average of 20,000, takes a significant proportion of that surplus.

We intend to expand the Aberdeen Angus herd to around 40, which will give us approximately the same income as a herd of 30 together with the heathers. This move will leave us vulnerable to the effects of BSE and the fluctuations of the beef market, but we are going to keep faith with beef. We are confident the market will return and we want to be in a strong position.

Expanding the beef herd will also decrease our reliance on heather production. When we started, Highland Heathers produced only 200,000 heathers; they now produce 2,000,000. We cannot compete. If our local market collapses, then to all intents and purposes the whole of our market collapses.

We are also looking for another activity, which could start from a low cost base. Our two greatest assets are the land and an abundant supply of water.

Objectives

We have three clear objectives, agreed by all seven members:

  1. to pay off the overdraft out of our personal resources, with the co-operative repaying us over a number of years.
  2. once that is done, to surrender our shares at no cost and set up a trust on the land in perpetuity.
  3. to set up a housing association so that we can bring in new young members. When we all started the ‘joining fee’ was 5,000, with a free house site thrown in; the joining fee now is effectively 80,000+, the price of any of the houses here. No young farm manager, coming in to replace the present farm manager when he retires, could afford that. New members could choose a balance between renting and buying into the house from the association. When they leave, they can take their share of the value of the house with them

The result would be an organisation with three main parts:

bulleta Trust for the land, whose members would be those living at Dalnavert, together with interested third parties;
bulleta Management Committee responsible to the trust for the good running of the business side of the operation and the good management of the land, including all the environmental considerations;
bulletand a Housing Association.

What would we do differently if we were starting afresh now?

We are agreed that if we were starting afresh now we would do some things differently. With the benefit of hindsight three points are very clear:

bulletWe should have paid off, out of our own resources, the initial setting up loan, some 17,000 in 1983. The co-operative could have paid us all back within a few years and remained in the black. Our idealism let us down: we were determined not to be benevolent landowners, deliberately propping the venture up.
bulletAs for the housing, either we should have accepted that we could not tie the houses to the land since goodwill would vanish the moment personal interest reared its ugly head or we should have given 99-year leases on the housing sites, with the co-operative retaining the freehold.
bulletWe should have set up the land trust immediately we had paid off the setting up costs. (We could have done this without the trustees accepting liability, by regarding the directors’ contributions as directors’ loans, which can be repaid even if some or all of the directors become trustees.)

The advantages of belonging to the co-operative

There is no doubt we have all felt a great sense of achievement at the way we have survived. When we started to construct the co-operative we were told that within a few years at most we would all have split up and the land developed as holiday homes. The large local landowners thought we could not possibly do what we said we would do and tried to stop our formation via the local authorities, the regional planning office, even starting legal action via the courts.

The strength of the membership of the co-operative has seen us through the difficult times. One individual struggling against the recession, the floods and the collapse of Scotstock would no doubt have been forced out. As a co-operative, the strength of the group has proved far greater than the total strengths of the individual members. Without that strength and support we would not have survived the bad times and would not have enjoyed the good times so much either. We have all enjoyed working physically together as well as sharing the problems when we have our meetings.

All of us have enjoyed the experience enormously. We have shown that we are viable, despite all the problems (the collapse of Scotstock, the floods, the recession and at times differences of opinion amongst ourselves - a sign of a health community!).

The area is one of great beauty. We are on the banks of the Spey between the Monadhliaths and the Cairngorms. We can fish, bird watch, walk, climb or simply sit and revel in the marvellous scenery.

The wild life is impressive. Osprey are regular and frequent; goldeneye breed on the burn; goosander and merganser are on the Spey; hen harriers, jack snipe, short-eared and long-eared owls, peregrines, and many other species are over the land; 111 species have been recorded at Dalnavert, of which 47 have definitely bred. Even more impressive but less well known are the moths and butterflies. The whole Cairngorm area has a list of 638 species, of which 399 have been recorded at Dalnavert itself. Red deer, roe deer, pine marten and otter are amongst the mammals that pass through regularly; trout and salmon are there to be caught in the river.

The co-operative owns a rifle and we shoot deer over our land for the pot; we will not rent this shooting out. We do not shoot game birds.

The fact is that those of us who live here cannot think of a better place to be, recession, BSE or no. Peace, quiet, wonderful scenery and wildlife - and the human company is not bad either.

 

 

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