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.
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 [email protected] or at 1-800-268-8959.
Community Conservation Lands can request a packaged and apply for the program.
What Criteria Need To Be Met?
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.
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.
Conservation Land Tax Program vs. Conservation Easements
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:
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?
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
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.
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?
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?
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.
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
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
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
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
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
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
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.
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.
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.
Part 2 in our “Horse Farm Leasing” series. An article for Renters.
Have a Lawyer Review Your Lease Before You Sign It
It is a great idea to have a lawyer review your lease to make sure you, your horses and if applicable, your clients, are all protected.
Commercial and agricultural leases do not offer the same protections that residential tenants do. Even if you are renting the house on the property, it does not necessarily protect you from an eviction type situation.
Although it is the landlord’s right to put what he/she wants in a commercial or agricultural lease, you want to make sure the lease is fair and does not put you in any unfavourable situations if a disagreement should arise between you and the landlord. So always start with a lawyer you trust!
What Happens When The Owner Wants To Sell
There aren’t any hard rules on equestrian properties and leases in general. Least of all what happens if any owner decides to sell.
Under normal circumstances, if you are in a lease you should be protected from a sale during that lease. For example, if you are four years into a five-year lease and the owner sells, the new owners taking possession should have to keep you on as a tenant until the end of the lease when they move in.
According to Kurtis Andrews 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 during a year-to-year lease agreement.
As a way to protect yourself, it would be worth asking the owner to include a clause in the lease stating how much notice they will give you (e.g. 6 months, 3 months, etc.) if they decide to sell their farm.
Have Your Own Insurance and Confirm The Owner Has Their Own Insurance
You should absolutely have your own insurance. If you are running a boarding or training operation, you will need a commercial insurance policy. Make sure you are covered with continents insurance, liability insurance, loss in finances as a result of lawsuits or injury, and if applicable, workers compensation insurance as well.
The owner should have their own insurance that covers fire and water damage.
But remember, their insurance WILL NOT cover or protect you in any way!
Definitely speak with an insurance agent to understand your liabilities and risks. Ask for their recommendations on what insurance works best for your situation. HEP is the most popular insurance agency, you can contact them here.
Understand Your Maintenance Responsibilities
In the lease, the owner of the property will likely (or should) have a detailed list outlining who is responsible for what. The more detailed the list the more clear who is responsible for what. If you are unclear about where you stand, make sure to ask many questions upfront, before you sign.
It is reasonable for the owner to expect you to look after the barn in a good manner, with wear and tear to be expected as should be said in the lease agreement. They can also put as much responsibility on you to maintain the barn as they like. It is up to you to agree or not PRIOR to signing any agreement.
You will likely be expected to maintain fencing, footing, landscaping and the barn interior. For bigger priced items like roofing, plumbing, septic systems, wiring and putting in new footing, the owner is typically responsible for this.
If the owner promises you something upfront but doesn’t include it in the lease, don’t expect it to be done. For example, if the owner says he plans to put in brand new footing but doesn’t write it in, it may not get done. That is not to say that an owner isn’t going to do something they promise if it’s not in the lease, but just something to note.
Do A Pre-Inspection
It is a good idea to do a walk around the barn and property before you take over the place.
You could also do a couple of viewings of a barn before you decide to lease it. The first time you view there is often a lot of excitement happening and things get missed easily. The second time is when you go in with a clearer head and are able to take note of more things.
Once you sign the lease, you are agreeing to take the property as is, where is. So if you see something in your pre-inspection, like a fallen down fence that wasn’t there when you first viewed the property, that is something you’ll want the owner to repair prior to taking possession.
If The Residence Comes With The Barn
I mentioned this briefly earlier. Most of the time, when you rent the barn and home on the property you are doing so as a package. What I mean is, if for whatever reason you decide to cease operations at the barn, unless otherwise agreed to with the owner, you are not automatically allowed to stay in the home.
A lease agreement that covers both the barn lease and the home lease will be exempt from falling under the Residential Tenancies Act. Here is an excerpt from the Residential Tenancies Act:
(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;
Choosing The Right Owner
In Ontario, we do not have the fortune of having tons of barns to choose from when looking to lease. Even still, you want to make sure you are going to be renting from someone you will get along with.
Ideally, someone who knows about horses is a good place to start. However, you also want to make sure they aren’t going to be coming down to the barn telling you what to do every day either.
If you are in a situation where you are both renting from and training the owner of the barn and boarding their horses, you should ask that this transaction be conducted at two-arms length. That is, you pay them your rent, and they pay you to keep and train their horse. Why? Because it keeps things professional and clear both legally and financially.
The Ontario horse community is fairly small. People talk. You may be able to find out information about an owner by just asking around.
If a property has been sitting for lease for some time, and nothing appears to be wrong with the barn, property or the price, you might want to be wary of the owner.
You can also ask about why the barn is for lease, why the previous tenant left and judge for yourself from there.
This article does not constitute legal advice. When questions arise based on specific situations, direct them to a knowledgeable attorney.
