Environmental Zoning On Your Rural Property

Environmental Zoning On Your Rural Property

Share this post with family and friends:
Email this to someone
email
Share on Facebook
Facebook
Pin on Pinterest
Pinterest
Tweet about this on Twitter
Twitter
Share on LinkedIn
Linkedin

If you’re buying a rural home there’s a good chance you have a serious appreciation for nature, green spaces and wildlife. You may also have an affinity for protecting those spaces.

It is not uncommon for rural homes to come with a section that is protected by environmental zoning. In fact, 95% of Ontario’s population lives in a watershed managed by a Conservation Authority.  Each environmental protection authority or protected area having its own requirements, restrictions and at times, prohibitions.

There are 31 Conservation Authorities operating in Southern Ontario. Conservation authorities that would govern over an Environmentally Protected (EP) or Environmental Conservation (EC) zoned area include examples such as the Niagara Peninsula Conservation Authority, Grand River Conservation Authority, Halton Conservation and the Kawartha Lakes Conservation Authority. As you might have guessed, each one has its own jurisdiction ensuring the protection of environmentally significant areas in their area. They do so through the conservation, restoration and responsible management of Ontario’s water, land and natural habitats through programs that balance human, environmental and economic needs.

At times, a property may have a registered conservation easement on the land. If one is registered on the property in question you would have to adhere to what has been stipulated in this easement. For instance, some conservation easements restrict the building of any type of building on the property. Properties with conservation easements aren’t as common as properties with simply environmental zoning or conservation protections, but it is always a good idea to check.

With that out of the way, here are some important points about owning a property with environmental or conservation zoning classifications.

There May Be Land Use Restrictions

These restrictions can include things like:

  • Farming – as a way to limit the amount of potentially hazardous runoff or chemical sprays that could damage the surrounding environment. Some EP zoning can even go so far as to limit all agricultural activities.
  • Tree cutting – except for maintenance or limited personal use. Commercial tree cutting in this type of zone is often prohibited.
  • Subdividing or Severing – this is often the case if the property is located in a significant area such as the Greenbelt, Niagara Escarpment Zone or Oak Ridges Moraine Zone.
  • Building – this can be of any type within the environmentally protected zone. More on this below.

We recently had a client inquire about a very picturesque property in West Lincoln. It did have an existing home on it, however, this home was run down and not considered liveable at the time. Before setting up a showing we did some digging into the zoning,

According to the town, because the property is entirely zoned with environmental protections, one cannot develop the property in any way. There is an existing house on the property that is considered legal-non conforming.  In order to alter this existing home, your would need planning approval to do so. If someone wanted to say demolish the existing house and build a new one, you would need to either request a minor variance or apply for re-zoning. Both of which can be expensive and don’t necessarily guarantee success.

Environmental Conservation (Light Grey) and Environmental Protection (Dark Grey).West Lincoln Environmental Zoning

There May Be Building Restrictions

Typically, a property with an existing dwelling in an EP zone can be altered with permission from the local municipality and (importantly) the local conservation authority. Alternatively, the EP zone may not cover the entire property and the parts that are not considered EP or EC can be built on while adhering to restrictions of the other zone classifications (commonly Rural, Residential, Agricultural, etc.).

Here is an example:

The below image shows properties that have environmental protections as portions are considered to be Provincially Protected Wetlands. The main blue shows the protected areas while the more transparent blue shows a 30-meter non-interference buffer. The rest of the image shows mixed zoning with the primary being A-Agricultural. According to the NPCA, one cannot build any type of structure in the blue zone or the 30-meter buffer zone.

It is especially important to do your due diligence on vacant land to ensure you can build your dream home on the property. If a vacant land property is entirely EP or EC and restricts the building of any kind, you would likely have to seek a zoning change. This can cost thousands of dollars and does not guarantee success. It is also strongly advised that your lawyer ensure there are no registered conservation easements on the property that prohibits building.

There Could Be An Impact on Property Value

naturalized yard

When you are starting out on your rural home search you should always be thinking about the perceived future value of the property to other buyers.

It might be surprising to think that sometimes conservation zoning can have a negative impact on the value of the property. This depends strictly on how much of the land is considered protected, how it is protected and how restrictive the zoning regulations are. As with the above two examples, buyers may shy away from these types of properties if they are unable to use the land to say build a small barn or have a few farm animals on the property. Even more would be reluctant of having to apply for rezoning.

This is especially true with vacant land. All other things being equal – a vacant property that is entirely protected by a conservation easement preventing any building, of any kind, just isn’t going to fetch nearly as much as a similar property that allows for a home to be built on it. 

On the other hand, an environmentally protected property can also add value to its owner or potential buyers. For instance, if the property has buildable land (or has an existing home on it) and space for other outbuildings, yet conservation has resulted in a beautiful forest growing at the back of the property, a clean stream running through it or wildlife protection, this would likely be perceived as valuable. This offers buyers land-use diversity while still providing the enjoyment of natural surroundings.

You May Need To Steward The Land

Caledon Farm

According to the Ministry of Natural Resources and Forestry, Many of Ontario’s most significant conservation lands are privately owned. 

It is our belief that anyone owning a rural property should steward their land. By this we mean you should try to look after the property and pass it on better than you had it. Maintaining forests, green spaces and conserving wildlife are some examples of how to do this.

It is even more important (if not mandatory) that if you own a property that is under environmental protection you look after the land. This means you may need to control manure run off with correct storage, control and remove invasive plant species, plant native species, possibly tree felling, maintain open spaces, and more.

There Could Be Possible Tax Benefits

There may be tax benefits to owning an environmentally protected property. However, one needs to meet very specific requirements in order to qualify.

For example, if you own a large enough property with a forest, and meet certain eligibility requirements, you may qualify for the Managed Forest Tax Incentive Program (MFTIP). People who qualify for this program can only pay 25% of the municipal tax rate set for residential properties. This is a voluntary program where as a landowner you commit to being a steward of your own forest and as a reward for this you get a reduction in your property taxes.

You can read more about the Managed Forest Tax incentive Program here.

Another possibility is the Conservation Land Tax Incentive Program. This program is a little more “exclusive” shall we say. In order to qualify your property or a portion of your property, you will need to meet certain conservation criteria and be accepted. Similar to the MFTIP, this is a voluntary program. However, one difference with this program is that areas are identified, and approved by the Ministry of Natural Resources and Forestry (MNRF) only. Also, you cannot turn your property into a naturally significant area. 

You can read more about the Conservation Land Tax Incentive Program here.

____

As a final but important note, make sure to check zoning with your local municipality. Do not rely on the listing information and do not take the listing agent’s word for it. This goes to both cooperating agents and you as the buyer. It doesn’t take much to contact the local municipality. They are usually happy to provide you with information and can provide clear maps, information and details about what can or cannot be done on a property. 

This article does not constitute legal advice. When questions arise based on specific situations, direct them to a knowledgeable attorney.

Share this post with family and friends:
Email this to someone
email
Share on Facebook
Facebook
Pin on Pinterest
Pinterest
Tweet about this on Twitter
Twitter
Share on LinkedIn
Linkedin
Understanding The Conservation Land Tax Incentive Program

Understanding The Conservation Land Tax Incentive Program

Share this post with family and friends:
Email this to someone
email
Share on Facebook
Facebook
Pin on Pinterest
Pinterest
Tweet about this on Twitter
Twitter
Share on LinkedIn
Linkedin

What is the Conservation Land Tax Incentive Program

The Conservation Land Tax Incentive Program (CLTIP) intends to reward private property owners that agree to protect conservation lands and natural areas of significance located on their property. 

Landowners of eligible properties qualify for up to a 100% property tax exemption for the portion of the property that qualifies. 

Similar to the Managed Forest Tax Incentive Program, the CLTIP is a voluntary program. However, one difference with this program is that areas are identified, and approved by the Ministry of Natural Resources and Forestry (MNRF) only. Also, you cannot turn your property into a naturally significant area. 

It is important to note that not every conservation or naturally significant area qualifies for this program.

 

What Are Identified Areas of Significance?

Without going into too much detail on each, areas of natural significance and conservation lands that have been identified by the MNRF include the following:

  • Provincially Significant Wetlands
  • Provincially Significant Areas of Natural & Scientific Interest (ANSIs)
  • habitats of a regulated endangered species (as defined by the CLTIP)
  • Land designated as Escarpment Natural Area under the Niagara Escarpment Planning and Development Act.
  • Community Conservation Lands – where charitable conservation organizations, who have a primary objective of natural heritage conservation, or Conservation Authorities.

Should your land meet the above, the MNR would reach out to the landowner in question with an application package. They do this annually in the spring. If you believe your land is eligible you can also contact the program at cltip@ontario.ca or at 1-800-268-8959.

Community Conservation Lands can request a packaged and apply for the program. 

What Criteria Need To Be Met?

  1. Property Eligibility
    • The property needs to be identified by the MNRF as being eligible (see above criteria).
    • The area of significance needs to be at least 1/2 an acre or larger in size.

  2. Your Eligibility
    • If your property meets eligibility, you will need to COMMIT to protecting the designated portion of the property that is eligible.
    • Allow inspections by the MNRF staff when requested.

Buildings and other improvements are not eligible for tax relief. 

Section 3.5 of the CLTIP program policy outlines permitted land uses and management of these protected lands. 

Conservation Land Tax Program vs. Conservation Easements

Nature Reserve

Sometimes there can be confusion about having a property with a conservation area versus one that has conservation easements registered on the property. 

It is important to note that when you purchase a CLTP eligible property, the conservation portion of the property has nothing to do with the title. Therefore as a new owner, you will have to apply to be part of the program, if you wish to be. 

Alternatively, a conservation easement on a property is registered on title and will pass from one owner to the other. Meaning any restrictions or requirements set out by the easement must be adhered to by the new owner/s. 

Helpful Resources

For more information on the CLTIP please see the below:

https://www.yumpu.com/en/document/read/43567665/conservation-land-tax-incentive-program-ministry-of-natural-

https://www.ontario.ca/page/conservation-land-tax-incentive-program#section-0

https://docs.ontario.ca/documents/3125/stdprod-068551.pdf

http://www.namonarchs.org/incentive-programs/conservation-land-tax-incentive-program/

Share this post with family and friends:
Email this to someone
email
Share on Facebook
Facebook
Pin on Pinterest
Pinterest
Tweet about this on Twitter
Twitter
Share on LinkedIn
Linkedin
Understanding the Managed Forest Tax Incentive Program

Understanding the Managed Forest Tax Incentive Program

Share this post with family and friends:
Email this to someone
email
Share on Facebook
Facebook
Pin on Pinterest
Pinterest
Tweet about this on Twitter
Twitter
Share on LinkedIn
Linkedin

What is the Managed Forest Tax Incentive Program?


Property owners that meet certain criteria can be eligible for a tax reduction on their property taxes based on their willingness and ability to participate in the Managed Forest Program. Essentially you become the steward of your own forest and as a reward for this you get a reduction in your property taxes.

Landowners who qualify for this program pay 25% of the municipal tax rate set for residential properties. 

This program is governed by the Ministry of Natural Resources and Forestry and is 100% voluntary. 

The MFTIP is a great opportunity to reduce your taxes while also helping the environment. However, there is quite a bit of commitment and effort that goes into maintaining and caring for your managed forest if you are approved.

Here is what you need to know. 

 

What Criteria Do You Need to Meet?

Managed Forest

1. Your Property Eligibility


Your property will need to be:

      • 9.88 Acres or more of forested land on a single property (with one municipal roll number)
      • Located in Ontario
      • Have 400 trees per Acre; or 
      • Have 300 trees per Acre with the trees measuring more than 2 inches in diameter; or
      • Have 200 trees per Acre with the trees measuring more than 5 inches in diameter; or
      • Have 100 trees per Acres with the trees measuring more than 8 inches in dimeter

The MFTIP does have classifications on which trees are eligible for this program as well. These are tree species found in the book “Trees in Canada” by John Laird Farrar.

Any areas used for the residence, those that are landscaped and any other areas used for the enjoyment of the residence are not eligible for the MFTIP and will be deducted from the total acreage.  For example, a property with a home on 50 acres may only have 49 acres of eligible area for the MFTIP, or less. This is a very simple example and other variables might come in to play here.

Areas used for recreation are typically not eligible either. Think golf courses and ski hills.

2. Your Own Eligibility


You will need to be:

      • A permanent resident or citizen of Canada; or
      • A Canadian corporation, partnership or trust; or
      • Be a registered conservation authority or trust

 

Applying For the MFTIP

Forest

If all of the above sounds a little confusing, and if you’re not sure whether your property would qualify or not, not to worry. You will be required to come up with a plan and this plan will need to be approved by a designated Managed Forest Plan Approver. You can also hire one to help you with the plan.

Here are some brief steps:

1. Come up with a Managed Forest Plan

This plan will need to encompass your commitment to follow a 10-year plan that details how you will manage the forest. The plan still needs to have a long-term outlook of at least 20+ years.

If you’re unsure of where to start, you can look at the Guide to Stewardship Planning for Natural Areas

All requirements are laid out in this Guide.

It is also important to note that you will have to submit a five-year progress report in the fifth year of your initial plan.

 

2. Have Your Plan Approved by A Managed Forest Plan Approver.

To see a list of the Ministry of Natural Resources and Forestry designated Approvers in your area, click here

There is typically a fee for this but you will have to contact the Approver directly as these costs can vary.

Again, you can also hire a Forest Plan Approver to prepare the plan for you from scratch if you do not want to do it yourself.

The Approver will:

– Visit your property and confirm eligibility
– Ensure your plan meets the MFTIP standards
– Revise your plan if necessary
– If eligible, approve your plan and complete approval forms

If you are purchasing a home with an existing Managed Forest in place, the plan will not transfer to you. However, you could ask the homeowner to see their plan as a guide and reference.

3. Complete and Submit Your Application

We won’t go into the nitty-gritty here as you can read everything you need to know about the application in the Stewardship Guide.

But here are a couple of important things to note:

– The application deadline is June 30th of any given year.
– You’ll need to provide your most recent Notice of Property Assessment with your application

 

What Could Get Your Removed From The MFTIP?

Tree Cutting

Severing The Property.

If at any time, you decide to sever your property, you will automatically be removed from the MFTIP by MPAC. Even if your property does still meet eligibility requirements, you will need to submit a new plan and application package.


Selling The Property.

The MFTIP is applied to the owner of the property only. Therefore should you sell, your property will no longer be eligible for the MFTIP and be removed from the program by MPAC.

The new owner will need to apply on his / her own merit with a new plan and application package.

An existing owner can choose to share the existing plan they have but the Ministry of Natural Resources and Forestry will not share any plans without permission from the seller.

Not Following Good Forestry Practices.

You can read all about good forestry practices here

This is where a large part of In short, you will need to be responsible for not only managing and maintaining your forest through thinning if needed, harvesting and re-planting but also for by protecting important ecosystems, wildlife and fish as well as the soil and any water that are found on your property.

The Ministry of Natural Resources and Forestry are is serious about this. Doing things like pasturing livestock on the designated managed forest, removing soil or incorrect harvesting (e.g. diameter limit cutting) are not permitted under this program. 

Can I plant trees on my property to benefit from the MFTIP?

Tree Planting

The short answer is yes, but of course, you will need to still follow the above criteria in order to qualify. This includes planting specific species of trees and having enough acres of forest.

Of course there is a cost to this so you will need to weigh the cost of tree planting to the tax savings you will receive under the MFTIP. It would be a good idea to contact your local Conservation Authority or a Managed Forest Plan Approver for advice on this.

 

Can I have buildings in the Managed Forest?

Unfortunately no. Any buildings or area used for residential purposes are deducted from the total area of the managed forest, even if there are trees on this area. 

Typically a minimum of a one acre area is deducted from the total area of managed forest but again this is going to be property specific.

Helpful Resources:

Here are some helpful places to start if you are interested in being part of the Managed Forest Tax Incentive Program.

 

  1. https://www.ontariowoodlot.com/forest-management/mftip/mftip-program
  2. https://www.ontario.ca/page/managed-forest-tax-incentive-program
  3. MFTIP Guide: https://docs.ontario.ca/documents/2720/mnr-e000245.pdf
Share this post with family and friends:
Email this to someone
email
Share on Facebook
Facebook
Pin on Pinterest
Pinterest
Tweet about this on Twitter
Twitter
Share on LinkedIn
Linkedin
The Country Home Flip

The Country Home Flip

Share this post with family and friends:
Email this to someone
email
Share on Facebook
Facebook
Pin on Pinterest
Pinterest
Tweet about this on Twitter
Twitter
Share on LinkedIn
Linkedin

 

 

For a long time, flipping homes has been something that many people want to do but only a few succeed at. The country house flip, or more popularly known, “the farmhouse flip” is a new-ish trend sweeping the internet.

Hundreds of YouTube Channels and websites are dedicated to just this. People buying dated and sometimes run-down country homes and farmhouses, renovating them and re-selling them for a profit.

A new HGTV show, ‘The Farmhouse Fixer’ will, similar to other HGTV shows and online “house hacking” trends, likely push the popularity of the trend even further. All these shows make flipping seem like a fun and easy way to invest in real estate. Maybe it is in parts of the U.S., but, here in Canada, things are quite different.

So, as a way to bring people back to reality, or at least provide a warning to those who want to tackle this endeavour … we are offering some point of advice and some recommendations.

Before we jump into those though, let’s start off with a big disclaimer, shall we…

I’m not a big fan of flipping homes to try to make a quick buck. In fact, we often tell people there is no “get rich quick” method to real estate investing. And we’ve often recommended clients look at alternatives to flipping when exploring ways to invest in real estate.

Yes, a good few have been successful with flipping properties. However, they often have big budgets and a tried and true method to follow. It is not for the faint of heart and it can be INCREDIBLY risky.

If you are buying a farmhouse or country home with plans to renovate and “flip”it, you should be buying the home because that’s where you want to live for a few years while you fix it up. That should be your strategy. You should not be getting into this to try and turn around to make money in six months or a year. Anything can happen, many things can go wrong and you should be very careful.

With that out of the way, let’s dive.

1. Have A Big Budget

Beautiful Living Room Flip

For Purchasing The Home

In today’s market, most homes come with a hefty price tag. Even if you’re not competing for it against multiple other offers, country homes still do not come cheap.

Even if you are looking at buying a teardown. Sellers know a good chunk of the value can be asked for the land, no matter how many improvements need to be made to the property. They aren’t wrong. Land is a finite resource, and land in a good location even more so.

However, banks do not see it the same way. Traditional lenders will not provide financing for the entire property if the majority of the value is in the land. Often times if a traditional A lender is willing to loan you money for a vacant land property, they can ask the buyer to provide 50% of the downpayment. More detail would need to be discussed with your mortgage broker.

We’ll cover the location in more detail shortly. But, to wrap up, you want a house that is in a higher-end area where you can warrant asking for your higher price in the end. Something not too rural. You should expect to pay a minimum of $850,000 for a property in a great location, even for a property that needs work.

 

For Renovations

To state the obvious, you will need a good budget for renovations.

This is where having the knowledge of renovations, renovation costs, or having an experienced and reliable contractor who can give you quotes is necessary. You don’t want to go into a project blind without having an idea of what things may end up costing you.

Depending on the house and what is needed, you might be able to get a Principal + Improvements mortgage to help with some of the renovation costs. However, there are so many caveats to this. You’ll need to discuss this with a mortgage broker first. If you are getting into a major renovation, then principal + improvements will likely not work. Instead, you may need to look into getting a construction loan.

If you can avoid doing some big ticket items like the roof, utility systems (septic, cistern or well repairs or installations), that is ideal. This leaves more capital to invest in the cosmetic aesthetic, and this is where buyers can become emotionally motivated by how beautiful the home you are selling is. Although necessary, no one’s breath is taken away by a new or well functioning septic system. Ideally, you want to focus your budget on kitchens, bathrooms, changing the layout or adding additions.

Once you start ripping away at walls, flooring and ceilings though, sometimes you run into surprises. Not the good kind either. Things like mold, water damage and old wiring that may have been missed earlier now become evident.

This is where the contingency fund comes in…

Contingency Fund

Have a contingency fund. Things will go wrong, you will go over budget (especially if you haven’t done this before) and can run into issues that may not have been apparent during your home inspection (if you were lucky enough to do one before your offer was firm in this market). The older the house, the more true this will be.

Country homes can have odd utility systems to contend with as well. Making sure septic, well or cisterns are in good working order before you buy the home would be absolutely necessary. Running into issues with these items can get very costly very quickly.

Remember To Account For Other Costs
Aside from the renovation costs, you will have ongoing monthly expenses as well as other miscellaneous costs.Mortgage, utility bills, taxes, lawyers fees, realtor commissions (when you sell) and possibly capital gains tax could apply as well.

 

Play The Long Game With A 2+ Year Plan

Mortgage Broker Country Home

You might be wondering how it can even be called a flip, then, if you have to hold the property for this length of time.

That is just the thing. There is no get rich quick option here, especially with country homes. This is why we say you need to want to live in the countryside and want to get into a major renovation project to do this. The market can change, projects can take a lot longer than initially expected and you may have to stay put for a while.

Your method should be more along the lines of buying a primary residence to fix up, hold for a little bit and sell at a profit in the future. This seems to be a more successful method for “flipping” a home. Both in terms of financial successes and keeping your mental sanity as well.

Capital Gains Taxes

For the property to be considered your primary residence you typically need to have lived at this home for 1 year to 18 months. There may be other requirements so definitely have a good accountant to help you.

The first time you do a project like this, you shouldn’t have any issues or owe capital gains taxes when you sell. However, if you were to start moving consistently every year, CRA will likely catch on to what you are doing and question you as to why you are moving so often.

Market Changes

As you know, real estate can be a fickle beast. The higher-end market can be volatile and is the most sensitive to external factors like government policies, interest rate changes, lending regulations and other economic influences.

Also, there is no timing the market! As such, you want to be flexible with your plan.

If you purchased a country home to fix up in 2016 and saw what was happening in 2020, you might decide that now is a good time to sell. And you’d probably be right. Had you tried to sell in 2019, perhaps you wouldn’t have done as well on the sale price as you could have today. Which, by the way, was not what most people thought during the first part of this year when COVID reared its ugly head.

In fact, during my research of property “flips” in the Greater Golden Horseshoe, I saw numerous listings that came back up for sale in 2020 after not selling in 2019. Many sold for the same asking price, some sold for more. This is a prime example of why patience is key.

I don’t have a crystal ball, you don’t have a crystal ball and neither does a HGTV host. You have to be flexible and react to the market you’re in. If you see things slowing down, or something catastrophic has happened, stay put. Don’t sell and wait it out. You want to try to react to things as you see them and act accordingly as best you can.

Appreciation

Time in the market is ideal! Not only to avoid capital gains taxes but also for appreciation as well. In a perfect world, you want to hold properties for some time so you can let appreciation do some of the heavy lifting for you.

 

Choosing The Right Property

Country Home Flip

The Buy

It seems that gone are the days of buying a cheap property in a prime, popular area.  You just can’t find a property in a popular area for cheap enough to do the flip at a lower price range.

Judging from recent sales, the”farmhouse flip” doesn’t work in cheaper, overly rural areas… as you might expect.  Typically, in the Greater Golden Horseshoe,  we saw a purchase of $700,000-$850,000 in 2017/2019 and a resale for $1,200,000-$1,500,000 in 2020, depending on the property and location.

The Property

Aside from the right price, you need to be selective about the type of country home you choose. Naturally, you want to choose a home with potential and ideally property that has something special about it. A distinct feature that makes it stand our or perhaps a beautiful lake or escarpment view for example.

You see, living in the countryside is still somewhat of a niche lifestyle that not everyone is up for. Going too rural limits the number of buyers that your property will appeal to when it comes times to sell. On that note, you also don’t want to buy an acreage that is too large. The most popular property size seems to be in the .5 to 10-acre range.

The Sale

When you take your home to the market, you need to make an impression.

Buyers have to see the value in your increased price. Did you just throw any old laminate flooring down, add in some new lights, painted and now want $400,000 more for the house? That is a recipe for failure.

Buyers have their agents go back into the property history, look at the original images and see where you’ve added value. They are very informed these days and to be frank, expect close to perfection, especially at the higher end price points.

Your aim should be to wow buyers.

By this I mean do something that stands out from the rest of the homes on the market.  Accentuate unique features like original beams, stone or brick walls, or gorgeous views. You could also try vaulting ceilings, opening up ceilings completely to expose trusses (if possible), adding in an addition with large windows or glass walls, maintain the character of the house while adding modern twists, opening up walls or adding in new doorways to change the layout as well as changing the exterior, to name just a few examples.

Adding special features like fireplaces, cozy exterior seating areas, outdoor kitchens, modern sheds or studios to a country property can really help too.

When one truly adds value to design, convenience and lifestyle features to the property, this is where most flips have success.

Choosing The Right Location

Niagara on The Lake Country House

If you’re a savvy real estate investor you will know that choosing the right location is one of the most important factors for investing successfully.

As I have said, and if you had seen our examples, successful country home “flippers” saw most success when they purchased a home in a popular country home location. Again, in a location that is not too rural. As a good gage, about an hour’s drive to Toronto seems to be the sweet spot.

You can consider looking in areas like:

  • Flamborough, Puslinch and Campbellville are fantastic IF you can find a property cheap enough to start within these areas.
  • Lincoln and Grimsby are very popular Niagara Region locations. However, they are both smaller towns so it can be tough to get a good property here to begin with.
  • Areas like Erin and Rockwood in Wellington Country are beautiful spots.
  • Mono is a great place to explore as well.
  • Around New Tecumseth and Clearview in Simcoe County would be worth looking into as well.

The Renovations & Your Involvement

Renovated Kitchen and Dining Room

Unless you are a contractor yourself or are a very handy person with an eye for attention to detail that borders on OCD, don’t do the work yourself. Hire a trusted contractor to help you!

I know… Instagram channels and websites with “easy house hacks” showing you how to create faux wainscoting are fun but this is not the time to test out your woodworking skills. If time is of the essence for your project you definitely want to know what you are doing. Or hire someone that knows what they are doing.

You could though give project management a go instead of hiring a project manager. Again, though, you need to have a good eye for detail.

Shoddy work is noticeable, especially in a luxury home. If you even utter the words “Ehh, no one will notice”… they will. Or at least a realtor with a good eye will notice and getting your top end price at that point will be more difficult. When I am showing a client a renovated home, I don’t even want to see a bad grout or tiling job let alone work that has clearly been done by an amateur. I know that sounds harsh but a buyer paying a premium for the property will want – and deserves – to be handed over a home that has been impeccably finished.

Be Realistic

Downsizing to a Country Home

Flipping homes takes an incredible amount of knowledge and skill. This will be even more so if you are trying to flip a country home.

As I have already mentioned, there is no get rich quick method here. Yes, it seems that more people these days want to live in the countryside but you are still dealing with a niche product especially when you factor in the size of the property and price. Don’t forget, it is a smaller pool of people that can buy a 1.5 million dollar home in the first place, and not all of those looking at this price point and going to want a home outside of a major city.

If you decide to tackle a country home flip, do so because you are passionate about renovating homes, love country living, and will be ok financially no matter the outcome.

 

 

Share this post with family and friends:
Email this to someone
email
Share on Facebook
Facebook
Pin on Pinterest
Pinterest
Tweet about this on Twitter
Twitter
Share on LinkedIn
Linkedin
Leasing Out Your Horse Farm – Key Components To Your Lease

Leasing Out Your Horse Farm – Key Components To Your Lease

This entry is part 3 of 3 in the series Horse Farm Leasing
Share this post with family and friends:
Email this to someone
email
Share on Facebook
Facebook
Pin on Pinterest
Pinterest
Tweet about this on Twitter
Twitter
Share on LinkedIn
Linkedin

Part 1 in our “Horse Farm Leasing” Series. An article for owners that covers the 10 key components to have in your lease agreement when you are renting out your horse farm.

There is no standard lease agreement for renting out your horse farm. Each lease is going to be tailored to you and your property as are the clauses you decide to include.

We highly recommend contacting a lawyer to either write up the lease for you or review the lease prior to signing it with a new renter!

Although you can customise your lease agreements, here are the 10 key components we think every horse farm lease agreement should include.

1. The Rental Amount & Rent Due Date

This is fairly standard (and obvious).

Your lease should outline the agreed upon rental amount and what day each month those payments are due. Most often payments are made on the 1st of every month, but this isn’t always the case or necessary.

It is important to outline the payment date mainly because, if that date is missed, even by one day, you may want to start the eviction process.

Nothing revolutionary here but a key component nonetheless.

2. Length of the Lease & What Happens At The End of The Lease

You can make the lease length as long as you like. Three or more years is typical.

It is important to outline what happens after the lease ends as well. Give the lessor the option to extend the lease or allow them to switch to a year-to-year or month-to-month basis. Typically we like to see a new lease signed for at least a year once the old one expires. This offers a bit more security for the horses, boarders and trainers. Of course, you’ll only agree to this if the renter has been good and if you don’t have any plans to sell in that year.

Here, you would also indicate how much notice you would like prior to the end of the lease if the lessor decides to vacate the property. 60 to 90 days would be normal for their notice to you.

3. Insurance Requirements of the Tenant

This might be the most important part of the lease. If you are relinquishing your horse farm to a renter, you want to make sure you are NOT going to be liable for damages, injuries, lawsuits, and accidents.

Naturally, you should have your own insurance that covers buildings and other liability – just to be safe. Definitely speak with your insurance agent to understand when you might be liable for something.  For instance, if a barn fire is caused as a result of faulty wiring – is that something you are liable for or not?

We recommend putting language in the lease that clearly stipulates your insurance DOES NOT cover or protect the tenant in any way.

On that note, it is recommended that you require the tenant to have insurance throughout their term as part of the rental agreement. And to provide proof of this insurance prior to giving them possession.

They should have an insurance policy that covers extensive liability (commercial if they are running a boarding operation), loss in finances as a result of lawsuits or injury, and if applicable, workers compensation insurance and some form of contents insurance as well.

Find out more about insurance with HEP here.

4. Outline Who is responsible for Repair and Maintenance Obligations.

It takes a lot of work to list the items that are to be repaired by you versus those that need to be maintained by the tenant. But doing the work upfront makes it clear who is responsible for what, and it helps to avoid any headaches in the future.

As a landlord, you can technically put as much or as little responsibility on yourself to maintain the property as you like… but remember, it is your asset and you want to make sure it is looked after. No one should look after it better than you – as such, you might want to maintain control of the maintenance or repair of larger items. That is, it would be reasonable for you to maintain utility systems like septics and wells. The same would go for items like roofing, plumbing and wiring. But it is not uncommon to see leases that ask the tenant to look after maintaining some of these items as well.

However, if there is damage caused as a result of incorrect use, you can put language in the lease that would make the tenant responsible for paying the bill for repairs as a result of damage by them. For example, if a tenant were to run water sprinklers in the outdoor arena all day and night causing a problem with the well, this is something you might ask them to foot the bill for.

Manure removal, fence repairs, weeding paddocks, snow removal, lawn maintenance, gutter cleaning and interior barn maintenance should be the tenant’s responsibility.

There will also be language to protect the tenant where “wear and tear” is a reasonable expectation to having horses on a property.

Occasionally, you might also see a lease that asks the tenant to be responsible for repairs up to a certain maximum amount, e.g. $500 of cost to repair, but you as the landlord agree to cover anything that exceeds this amount.

5.  Care of Horses

You can get pretty detailed here. Asking the tenant to guarantee good care of the horses from head to toe, literally, is an option.

Even though it might seem obvious, It is still advisable to include this your rental agreement. Make sure it is noted that it is the sole responsibility of the tenant to look after the care of the horses – without exception.

You can write in that the tenant agrees to ensure – all horse’s hooves are trimmed, horses are fed, all immunisations are up to date and administered routinely, horses are exercised, horses are monitored daily, horses needing veterinarian care are attended to promptly, etc.

Here, you can also detail how many horses can be kept on the property at any one time. You don’t want your fields overgrazed so stipulating the number of horses you allow on the property is reasonable.

6. Utilities

Nine times out of ten, the tenant will pay the utilities on the property. Especially on one that is an operating training and boarding facility.

If you’ve owned the property for a while without a full barn, the increase in number of horses and boarders will drastically increase your utility costs. It is advisable then that you charge rent plus utilities.

If you are still using part of the barn you can do partial utilities (e.g. 20,80 or 40,60 whatever the appropriate ratio is that works).

If you live on the property and are renting out just the barn, it would be worth installing a separate hydrometer. Newer built barns often come with separate meters already.

7. Responsibility, Liability and Warranty

As a landlord, you don’t have control of the day to day runnings or activities at the barn, BUT you are still at the end of the day, the owner of the property.  As such you will definitely want to include clauses related to your responsibility and liability (or lack thereof).

In simple terms, you’ll want to state that you assume no reliability of risk. The tenant agrees to hold you harmless from any damage, claims, penalties, costs, injury or sickness that may result from equine-related activities or their use of the property and buildings.

They further understand that you make no guarantees or warranties about the premises and that it is the responsibility of the tenant to do their due diligence on the property prior to signing the lease.

8. When the Residence Comes With The Facility

If you are renting out the residence on your property to the trainer as well, this will not fall under the Residential Tenancies Act. It will be exempt from the RTA because the use of the house is based on the use of the facility.

However, this is only the case if you stipulate this as such in the lease! You should state all terms relating to the use of the residence in the same lease as the barn. You need to have all terms under ONE lease.

Residential Tenancies Act Exempt:

(h) living accommodation located in a building or project used in whole or in part for non-residential purposes if the occupancy of the living accommodation is conditional upon the occupant continuing to be an employee of or perform services related to a business or enterprise carried out in the building or project;

(j) premises occupied for business or agricultural purposes with living accommodation attached if the occupancy for both purposes is under a single lease and the same person occupies the premises and the living accommodation;

So, if for whatever reason you need to evict someone from the barn, or they decide to cease barn operations, they are not legally protected from remaining in the home as well.

9. Who is Responsible for Modifications & Upgrades

Typically the lease will have some sort of language where the tenant agrees to take the property “as is”.

Big upgrades like installing drainage systems, putting up new fencing, putting in new footing would typically be done at the landlord’s cost. Unless you have plans to do these items, they wouldn’t be included in the lease as items you are going to upgrade.

You might want to have the tenants ask for permission before making any alterations to the property. I wouldn’t be overly concerned with changes like adding hooks to stalls for hay nets or minor changes like that but larger changes to items like stall doors, flooring, painting, should be discussed first.

10.  Termination Stipulations

You’ll want to stipulate reasons for possible causes for early termination – like non-payment of rent, inability to properly care for the horses and serious damage to the property.

If you decide to sell the property, let the tenant know immediately! There isn’t a strict rule on this with regard to equestrian properties and leases but we can go off of typical commercial and farm leases. If for example, they are in year 4 of a 5-year lease agreement and you sell the property in that year, the new owners will have to wait to move in until the lease is up with your current tenant.

If you decide to list at the end of their lease, you should give them as much notice as possible! Once the property sells, let them know if they need to vacate again, by giving them plenty of time to find a new barn. 

According to Kurtis Andrew Law,  a lawsuit for an agricultural tenant was settled and required thereafter landlords to give tenants 6 months’ notice should you wish to end their tenancy while they are on a year-to-year lease agreement. I would use this as a good benchmark.

 

These are only ten out of many other possible clauses you might need for your specific horse farm. So again, be sure to have a lawyer look over your lease agreement to ensure all your i’s are dotted and t’s crossed. Or better yet, have them write one up for you

This article does not constitute legal advice. When questions arise based on specific situations, direct them to a knowledgeable attorney.

Share this post with family and friends:
Email this to someone
email
Share on Facebook
Facebook
Pin on Pinterest
Pinterest
Tweet about this on Twitter
Twitter
Share on LinkedIn
Linkedin