Lecture 8 - Land Law

Land

Includes the physical land, the soil, buildings, fixtures, crops and minerals.

• When land it sold is is assumed that the land and everything on it is sold as well.

• Critical to be specific in sales agreement of what is and what is not included.

Fixture

Anything attached to the land or to a building on the land. Examples include: permanent fences, plumbing, light fixtures, buildings on foundations.

Crops on Land

A crop will not be automatically included in the sale of land if it:

1. Is swathed at the time of sale;

2. Is an annual crop even if still standing (wheat, flax, barely, oats, canola, corn, soybeans, etc.)

3. Is a perennial crop and is ready for harvest at anytime.

Mineral Rights

Different from province to province. In some places mineral rights are given to the original landowners but most of them belong to the government.

• Land and mineral rights can be viewed as separate. Can belong to two different parties.

• Sales agreement should clarify who the mineral rights are owned by.

Lien

a claim or charge registered against property by someone to whom the owner owes a debt. If the owner does not repay the debt, the property can be seized and sold to satisfy the debt. They are two types of liens; tax and builder’s.

Encumbrance

A legal claim, restriction, or right that affects a property, it limits how the property can be used, sold, or transferred.

Think of it like a “tag” or “condition” attached to the land that a new owner still has to respect.

Lease

A legal agreement between a landowner (landlord) and a farmer (tenant) that allows the farmer to use the land for agricultural purposes, usually in exchange for rent.

• A farm lease is like renting land to grow crops or raise animals.

• A person with a valid lease to a piece of land may have the right to continue farming the land even after it is sold.

• If someone is presently renting land that you plan to buy, he or she may farm it until the lease runs out if the lease is for three years or less.

• Or if it over three years it is registered with the Land Titles Office (registered for protection).

Mortgage

A loan that a farmer takes out using farm property (land, buildings, or equipment) as collateral. It works just like a regular mortgage, but it's specifically for agricultural property.

• A mortgage on a piece of land gives the lender rights to the land, as security or collateral for a loan.

Pros of Buying Land

1. Have the ability to subdivide for extra income.

2. Have the ability to lease for extra income.

3. If you buy farm land that has leases, you would not have to honour the lease if it is for more than three years and not registered in the Land Titles Office.

Cons of Buying Land

1. There maybe someone that already has previous rights to continue to use land that is bought (leasers). Cannot be discontinued until ends.

2. Want to subdivide, must get permission from Minister of Municipal and Indigenous Relations.

   1. Include application, plan of subdivision done by land surveyor or a legal description drafted by lawyer.

3. Only able to buy if you are Canadian or permanent residence.

4. Seller maybe able to exclude certain fixtures, however must be agreed on.

Pros of Leasing

1. Rights to use and control the land without interference for as long as the lease lasts (while following the terms).

2. Rights can continue even after the land owner sells or transfers the land (for the rest of the lease term).

3. Beneficial to enter into an agreement that has a “First Refusal Clause.” Gives you the chance to buy the land being leased.

   1. Or a “First Option to Buy Clause” where you can purchase the property on price and terms as set our in the lease.

4. Allows for someone to begin small farm operations (acquire land and increase income).

   1. Producers may also want to lease land to increase land based and reduce their per unit cost.

5. Gain increased flexbility in farm planning decisions

6. Acquire suitable land for growing particular or special crops.

7. Expand production without financing land purchases (reduce capital investment).

8. As a farmer, can help facilitate intergenerational land transfer.

9. As farmer (landlord), you can earn retirement of income on real property.

Cons of Leasing

• The buyer would not have to honour the lease if it is for more than three years and not registered in the Land Titles Office.

  • Than if the land is sold you could be stripped of your rights, but could have a lawsuit.

• Rent paid to landlord over time does not count as equity for renter.

• Any appreciation of land value goes down for the landlord.

• As tenant, you have no ownership or say on the land.

• The tenant (farmer) does not have a guaranteed or long-term right to stay on the land they are renting.

• Short term-leases may discourage long term farming practices that promote soil conservation, land health and improvements.

Water

Bodies of water that are on your land that are permanent (ex: lakes, rivers and streams) are considered part of your land.

• However, they are owned by the Crown. The dividing line between your property and the Crown’s property is usually the banks of the water body, where the soil changes or where the vegetation starts.

• Non-permanent bodies of water on your land like sloughs or swamps belong to the owner. Title to this water will pass with the land when you sell it.

Fee Simple (Interest in the Land)

When the owner is entitled to the entire property, with unconditional power of disposition during one’s lifetime and on one’s death. This type of ownership is unlimited as to duration, disposition and descendibility.

• Related to interest of the land and how long you can own and possess it.

• Registered as the owner of Certificate of Title.

• Can sell, giver and alter the land how you wish.

  • Unless usage is required by the government.

Certificate of Title

The official document issued by the Land Titles Office that proves legal ownership of a specific piece of land or property.

• Shows who owns the land, what legal rights they have, and if there are any restrictions on it.

Life Estate (Interest in the Land)

When someone is given the right to use or live on land for their lifetime, but they don’t fully own it forever. When that person dies, the land goes to someone else.

• A parent owns a farm.

• The parent gives the farm to their spouse for the rest of the spouse’s life, this is the life estate.

• When the spouse dies, the farm goes to the child the remainderman, who becomes the full owner (fee simple).

• Created through wills or by the Homesteads Act.

Leasehold Estate (Interest in the Land)

An interest in the land that last for a specific period of time. The person renting the land has the right to use the land for a specified period, but eventually these rights will revert to the holder of the fee simple.

Homesteads Act

A provincial law designed to protect the family home from being sold or mortgaged without the consent of both spouses or common-law partners.

• This legislation ensures that one partner cannot unilaterally dispose of the family residence, thereby safeguarding the right of the non-owning partner to continue living in the home.

• Surviving spouse or common-law partner is entitled to live in the family house, even if the will says otherwise.

• Also covers 320 acres of land so that the partner can continue to work if they wish.

Sole Ownership (Farm Land)

When you are the sole landowner. You can control how the land is used and disposed of. Main Fee Simple of Certificate of Title.

• However, land that is considered a “homestead”, can only be sold, mortgaged or leased if your partner of common-law partner consents to doing so.

Joint Tenancy

When two or more persons can own an estate in land at the same time. To create a joint tenancy, the words “as joint tenants” must appear on your Status of Title.

• Must all be co-owners at the same time and own equal shares.

• Each person is entitled to use and enjoy the property.

• When one person dies, the share is automatically passed onto the remaining joint tenants to share.

  • Cannot become part of their estate. Therefore popular for married couples.

Tenancy in-common

When two or more persons can own a piece of property at the same time. In one aspect, it is the same as joint tenancy because all involved have an interest in the whole property.

• Each tenant has the right to use and possess the property.

• However, tenants can have unequal shares.

• Property becomes part of the estate when they die.

Easements

Other individuals and companies may have a right of access to your land in the form of an easement.

• An easement is created when you grant the owner of an adjacent property a right to enter, cross or use your land for particular purposes.

• An example is if a federal or provincial entity required entrance to your property.

• Valid easements can be registered against your title at the Land Titles Office, to let others know that these rights exist.

Land Restrictions

1. Municipalities create laws that regulate the farm lands.

   1. Such as: Fires and explosive material, buildings, garbage and old vehicles, barns and animal pens location, use of landfill and removal of topsoil, subdividing, etc.

2. Clean Environment Act prohibits contamination to the air, water and soil.

3. Occupier’s Liability Act (provincial) makes you responsible for seeing that land you occupy is safe for other who come on it.

Sale Process

Starting the sale: seller and buyer come together through mutual interest.

 Negotiation: The seller and buyer see if an agreement is possible. Are they in the same range of prices and terms.

Offer to Purchase or Offer for Sale: The buyer will formally propose to buy the seller’s land by making an “offer to purchase”. This is usually in the written form and sets out the terms and conditions that the buyer is prepared to meet.

Signed: The accepted offer is a contact for sale – more commonly referred to as a sales contact or sales agreement.

Counter offers

If the person receiving the offer proposes a change in terms, he/she will make a “counter-offer”. It is a new offer or offer for sale, and the original offer will become void. The counter-offer can be accepted – or another counter offer.

Acceptance or Rejection of the Offer

An offer to purchase or offer for sale (or counter-offer) is accepted when the other party agrees to its exact terms and conditions. If this party does not want to do so, there is the choice of counter-offering or rejecting the offer altogether.

Contract for Sale

Once an offer is accepted, it becomes a binding sales agreement.

Clearing the Title

Required to transfer a “clear title” means that all rights to and full ownership of property pass to the buyer.

• No mortgages, liens, or caveats.

• This information is attached to the land title and can be found by conducting a “land title search” at the nearest Land Title Office.

• The seller is generally responsible for finding and eliminating claims of others to the property, and by doing so, clears the title.

Payment and Transfer of Title

During the final stage of the sale, the buyer will pay the agreed purchase price and, in return, will receive title to and possession of the land.

Crop Sharing (Leasing Agreement)

In a crop share lease, the landlord and farmer split the crop income. The landlord usually gets one-third, and the farmer gets two-thirds. The landlord provides the land and buildings, while the farmer provides the work, equipment, and pays most costs. They often split input costs (like fertilizer) the same way they split the crop.

Cash Lease (Leasing Agreement)

The tenant pays a set amount of rent (usually per acre) to use the land. The tenant keeps all the crop income but also pays all the farming costs, except for property taxes and building insurance, which the landlord pays.

• Favored in Manitoba for its simplicity and predictability, as the tenant pays a fixed annual rent, typically calculated on a per-acre basis to the landlord.

• Tenant assumes all production and marketing risks, keeps all crop income, and covers most farming expenses,

• Property taxes and building insurance would still the the landlord’s responsibility.

Pros of Crop Sharing

The landlord and tenant share both the risks and profits based on their agreed split.

• Rent depends on how much crop is produced and the selling price, and it's paid after the crop is sold.

• Sometimes, the landlord helps pay for input costs. If the landlord has farming experience, they may help the tenant manage.

• A skilled tenant can earn more, and is more likely to care for the land long-term, improving soil and productivity.

Cons of Crop Sharing

If the tenant is a skilled farmer, the extra profit must still be shared with the landlord.

• The landlord may have some say in what crops are grown.

• If the tenant manages poorly, the landlord could earn less than with other leases.

• The landlord’s income also depends on the tenant being honest about the crop results.

Pros of Cash Lease

• The landlord gets a guaranteed rent, no matter how the crop turns out.

• The tenant has more freedom to make farming decisions.

• If the tenant is a skilled farmer, they keep all the extra profits, and they don’t have to share detailed records with the landlord.

Cons of Cash Lease

• Tenant assumes all production and marketing risk.

• Rent might have to be paid in advance of crop sales.

• Leases are generally short term due to uncertainty about grain prices.

• The landlord doesn’t gain if prices are high or the harvest is very good.

Flexible Cash Lease (Leasing Agreement)

Combines features of both cash and crop share leases. The tenant keeps all crop income, but the rent paid to the landlord changes based on crop prices. This means the tenant and landlord share the risk of price fluctuations.

Pros of Flexible Cash Lease

• In this lease, the tenant has more control over farming decisions.

• The risk of price changes is shared between the tenant and landlord.

• The tenant keeps all the benefits of their farming skills. Longer lease terms can be negotiated, which encourages the tenant to use better farming practices.

Cons of Flexible Cash Lease

Tenant assumes all production and marketing risks.