Financing and Owning Raw Land in Saskatchewan
If you are thinking of purchasing raw land in Saskatchewan for personal or as an investment, you’ll want to read the basic limits that Canadian law puts in place. The Saskatchewan Farm Security Act is the legislation that governs the ways in which who own farmland in the province.
According to the Act, “farm land” is any real property outside the limits of a city, village, town, hamlet or resort village that is used (or could be used) for farming but lacks minerals and/or is not used for minerals storage and/or processing.These restrictions in the Act only apply to people who are not Canadian citizens or residents, as well as to entities that are partially or wholly controlled or owned by non-Canadians, which includes entities with shares available on any public stock exchange.
The Act limits ownership of Saskatchewan farm land by non-Canadian individuals or entities to a maximum of ten acres. Any purchase that would exceed that would need an Order from the Farm Land Security Board. If the purchaser does not obtain an Order but instead just goes ahead and purchases land in excess of ten acres, that Board has the right to mandate that the purchaser sell sufficient land to get down to the ten-acre maximum. For detailed information about your specific request, you can call 1-306-787-5047 or visit the Farm Land Security Board and Farm Ownership website.
There have been recent changes to the Act to boost restrictions with respect to mortgages or other debts associated with Saskatchewan farmland. As of December 24, 2015, there were restrictions placed on lenders wanting to finance farm land purchases. Lenders who wanted to provide that security had to either be a resident of Canada, a supplier of farm input that has set up a producer with inputs, or a lending institution under the supervisory authority of a Canadian governmental entity.
Just like a purchaser who wants to go over that ten-acre limit, a proposed lender who does not fill one of those three criteria would also need an Order from the Farm Land Board to issue the mortgage. Failure to secure that Order could lead to the mortgage losing validity, which means that the lender might not be able to enforce it in case of default.
How to Buy Land In Saskatchewan
If you’re buying land in Saskatchewan, the hardest kind of property when it comes to financing is unimproved land — raw acreage in Saskatchewan that is not connected to any improvement plans. This land has no streets or connection to a sewage system, utilities or other infrastructure. You’ll have to pay property taxes on this land, ironically, even though the existing amenities are virtually nil.
So how much higher is the down payment? Depending on the lender, this can go as high as 50 percent. In many cases, Private Lenders will require at least 50%-60% down payment plus applicable fees and costs. Fees will vary depending on the specific deal.
There are different ways to purchase land if you don’t have the required down payment. If you currently own other prime real estate in Canada with lots of equity, it can be added to the loan as collateral to either reduce or eliminate the need for a down payment. If you do not have a second property, you can consider a private mortgage with a Seller Vendor Take Back Mortgage. This is when the seller provides secondary financing to help cover any shortfall from the buyer’s financing and down payment. This option is often considered by seller’s that are in immediate need of selling their land.
Here are some questions, though, that you may want to consider before you fall in love with the piece of land:
- Does that land already have a proven water source? If so, what’s the depth? Wells are valued by the depth of digging required.
- Does the land have a wastewater removal system in place? Is the land suitable for a conventional septic system?
- Does the seller have a clear title for the property, with evidence that they own it legally and with a list of any liens? Has the lot been legally partitioned?
- Does the land have any environmental issues, such as soil contamination?
- Does the land have any easements that grant other entities access to some of it?
- Does the seller have an updated survey with boundaries, buildings, improvements and setbacks?
- Is the municipal or provincial government studying the land for rezoning or land use in the future?
- Does the land come with any restrictive covenants that would keep you from doing things you want, such as levelling the soil, clearing some trees or starting a home business?
- Does the land already have such services as mail delivery, telephone, Internet, or garbage and recycling pickup?
Before you make an offer on land, ensure that your intended use is permitted. You don’t want to end owning and paying for land that you can’t use. Amansad Financial has connections with a variety of private lenders who provide land financing in Saskatchewan, BC, Alberta, Manitoba, and Ontario. If you’ve got questions, or are ready to take the next steps, get in touch.
(Adequate Equity + Qualified Real Estate = Mortgage Approval)
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