Things To Consider Before Buying Farmland In Ontario

There are many reasons to buy farmland and Ontario farmland is considered to be some of the most productive in the country. Whether you intend to expand your farming business, live with your family on a hobby farm or be a hands-off investor in the agricultural sector, there are legal issues that you should take into account before making a purchase.

Our Richmond Hill real estate lawyers can walk you through the process and answer any questions that you have.  So what are some things to consider before buying farmland in Ontario?

HST applies to the sale of most farmland

In general, the sale of farmland is taxable.  There are some exceptions, including:

  • a sale from a related person or spouse made for the purchaser’s individual use and enjoyment (the farmland must have been previously used for the business of farming and not for any other commercial purpose)
  • a sale by a partnership, trust or corporation to a partner, beneficiary or shareholder
  • a sale of personal use property (this exemption is only available to property owned by a trust or an individual – not a corporation –  and the farmland must not have been used primarily for the business of farming.

If you are purchasing a farming business that includes the purchase of farmland, you and the seller may be able to jointly elect to have no HST payable on the sale. This factor should be part of the negotiations regarding the purchase price.

Are there any restrictions on your ability to own or use the land? 

Ontario, unlike most provinces, does not have any restrictions on the ownership of farmland by foreign (non-Canadian) investors.  However, there may be local by-laws or zoning restrictions that will limit what you can do with a particular piece of farmland.

If the land you are interested in purchasing is located in a designated Prime Agricultural Area, you may be unable to use the land for a non-agricultural purpose without specific government approval.  Agricultural uses include:

  • croplands (any crops including sod)
  • pastures for feeding animals
  • feedlots
  • aquaculture
  • horse farms, including indoor and outdoor riding areas and tracks
  • greenhouses for growing plants
  • Christmas tree farms and nurseries
  • Barns, manure storage, sheds for storing farm equipment, accommodation for full-time farm labour and other associated buildings.

Other uses may be permitted on designated land if they fall into the categories of:

  • agriculture-related use, or
  • on-farm diversified use

but these uses are generally restricted to a small portion of the farmland and cannot interfere with the use of surrounding land as farmland.

Know your obligations as the owner of farmland

Line fences, which mark the boundaries between neighbouring farms, are governed by the Line Fences Act.  While the Act does not force owners to build line fences, it may impose obligations on an owner when one neighbour wants to build or repair a fence and the other neighbour does not agree to assume a share of the costs.

Merging titles for adjoining parcels

Some farmers who have purchased an adjoining parcel of farmland have encountered problems when they have later tried to sell one of the parcels because the adjoining titles, if registered in identical names, were merged. If this is a concern for you, be sure to bring it to the attention of your lawyer so the problem can be avoided.

Contact our Richmond Hill real estate lawyers to get the help you need regarding the above issues and learn about other things to consider when buying farmland in Ontario. Please note the content in this article is only intended to act as a general overview on a legal topic and does not constitute legal advice. We encourage you to consult with a lawyer regarding this topic if you require legal assistance.