Farm Lease Agreements

What’s a lease?

A lease is an interest in land and gives a person all of the usage and occupation rights of a landowner to a property or portion of property for a determined period of time in exchange for rent to the landowner. A formal description of land, identity of people involved, terms and length of agreement are agreed upon. A lease agreement can provide security for both parties and can be registered with title of land if desired. The property owner retains the right to transfer ownership or sell the land while the tenant has exclusive possession of the land under the lease and the responsibility of maintaining it according to the terms in the lease. When the lease is over, possession of the land reverts to the landowner.

Registering on the title

Because it’s an interest in land, lease agreements can be registered with the BC Land Title and Survey Authority on the title to the property and when registered is subject to the same Land Title Act requirements as a fee simple lot. A registered lease is legally recognizes as a lease and cannot be interpreted otherwise adding security to the contract. Registered leases “run with the land “meaning that when the land is sold, the lease is transferred to the new landowner along with the title to the land. An unregistered lease may still be recognized as legally valid but may not legally be seen as an interest in land.

Leasing part of a property aka “that subdivision clause”

Under Canadian Law, (Land Title Act, R.S.B.C. 1996, c. 250) section 73(1) of the Land Title Act, states that leases on part of a property exceeding three years or with an option to extend past three years are considered subdivisions and before they can be registered, the subdivision process must be followed and granted approval by an Approving Officer.

Approving Officers are appointed under the Land Title Act. There are four separate jurisdictions:

  • Municipal Approving Officers, whom municipal councils appoint to rule on subdivision proposals within municipal boundaries (Land Title Act, Section 77)
  • Regional District and Islands Trust Approving Officers, who are appointed by the Regional District Board or the Islands Trust council to rule on subdivision proposals within the boundaries of those local governments that have assumed the rural subdivision approving authority (Land Title Act, Section 77.1.) Currently none of these has approving authority.
  • Ministry of Transportation and Infrastructure Provincial Approving Officers, whom Cabinet appoints to rule on subdivision proposals outside municipal boundaries and within those regional districts and the Islands Trust boundaries that have not assumed the rural subdivision approving authority (Land Title Act, Section 77.2.)
  • Nisga’a Approving Officers, who are appointed by the Nisga’a Lisms Government to rule on subdivision proposals within Nisga’a Lands, including Nisga’a Village Lands (Land Title Act, Section 77.3.)

For additional information about roles and authorities in subdividing in B.C., see  Ministry of Transportation website here 

Two types of subdivision are possible:

  • Standard fee simple where the parcel of land is permanently divided into separate lots.
  • Leasehold subdivision where portion of the land is temporary divided and expires at the end of lease. Approval for this cannot be transferred independently from the remainder of the property.

In 2007, an amendment to section 73(1) was made to state that leases three years or more that do not meet the subdivision requirements may not be unenforceable. The aim of this was to ensure that long-term agreements to lease un-subdivided land are enforceable between the parties even if the leases do not comply with the subdivision and registration requirements set out in the Act.

What does it all mean?
The Land Title Act requires subdivision of land into smaller parcels for leases longer than 3 years. While ignoring this requirement may not result in charges against you, you should be very careful before entering into a long term lease agreement without following the subdivision requirements. Subdivision approval will be based, in part, on local zoning bylaws. If the property is in the Agricultural Land Reserve (ALR), permission for subdivision is also required from the Agricultural Land Commission. Looking at having a rolling lease* may be an option to consider to work with the current parameters while trying to establish long-term tenure.

* Rolling Lease a lease that is automatically renewed each year for the full term of the lease. I.e. a rolling five-year lease will renew annually for another five years.

Leasing whole parcel of land

One lease on the entire parcel of land is not considered a subdivision, and permission from an approving officer and the Agricultural Land Commission is not required.

Termination of a lease

A lease can be for any amount of time. A termination clause should be included in your lease agreement. A lease terminates:

  • at the end of the specified term
  • when the tenant voluntarily gives up the lease with permission of the landlord (surrender)
  • when the tenant purchases the leased property from the landlord (merger)
  • when a court orders the lease terminated (court order)
  • when the landlord defaults on any mortgage on the land and the mortgagee begins foreclosure proceedings (foreclosure)
  • when the landlord gives notice to the tenant (notice)
  • when the landlord re-enters because the tenant has not been following their commitments outlined in the agreement (re-entry).

Note:

  • A registered lease does not end when the land is sold unless there is a clause in the lease stating so.
  • A lease can pass to the successors on both sides unlike a licence or MOU, unless the contract stipulates it is to pass to heirs.

Sub-lease

A sub-lease is a lease agreement between the tenant and a third party for part or all of the leased land and activities, a provision for this should be articulated in the original lease. The original lease between the tenant and the landowner still prevails and the primary tenant is still liable for the obligations in the original lease including payment of rent unless released from liability by the landowner. An assignment of lease where a complete transfer of the lease to a new tenant takes place is not a sublease. A sub-lease can be registered with the BC Land Title and Survey Authority and is under same parameters of a lease regarding subdivision clause if for part of a land and be sub-leased for three years or more.

Types of lease agreementss

Please see Young Agrarians Land Access Guide page 29 for detailed description of types of leases. Lots of fantastic information in this guide!

What to include in a lease?

Please see Lease Agreement Sample 1 (Young Agrarians & LLAF) for a lease example which encompasses all provisions to include in an agreement

Additional info for understanding leases

Land details pertaining to leases

  • BC LTSA has information on how to access cadastral maps of BC to determine district lots which may be useful information to include in your lease
  • BC Online has information on accessing the BC Assessment database to help you understand and identify a Parcel Identifier (PID) Number which may be useful information to include in your lease

Lease agreement guides

Lease agreement samples

LLAF and Young Agrarians have adapted a lease document from Farm Folk City Folk and The Land Conservancy of British Columbia “A Guide to Farmland Access Agreements”. We have updated the legal language and put in a plain English side-bar to support the user to understand how to work with the template.

Other lease agreement samples

 

Also see: sample agreements