Contents

Real Estate Law:

Condo Management Law:

Survivorship:

Commercial or Residential Leases:

Real Estate Law:

Condo Management Law:

Three laws protect condo owners when buying and living in a condo:

1. Condominium Act regulates how condo corporations are created, owned, and governed
2. Condominium Management Services Act establishes rules that condo managers and condo management companies must follow
3. Ontario New Home Warranties Plan Act establishes:

deposit protection

a warranty program that protects owners against many buildings’ defects

direction on resolving disputes with vendors

Condo managers must be licensed

Often a condo corporation will hire a condo manager to oversee the condo’s day-to-day operations. As of November 1, 2017, condo managers and condo management providers must be licensed by the Condominium Management Regulatory Authority of Ontario. To get their license, condo managers must either take official courses or have a certain amount of experience and pass an exam.

If condo managers or condo management providers are found to have breached of the code of ethics, they can be referred to a discipline committee.

Entering into an agreement

If the application is not rejected or abandoned, the condo corporation must enter into an agreement with you within 90 days unless another time is agreed upon in writing with you.

The agreement must outline any terms, conditions, roles and responsibilities between you and the corporation relating to the charging system, including:

• installation
• ownership
• costs (maintenance, repairs, insurance, etc.)

Survivorship

78005 Succession Duty Consents

Ontario Regulation 44/78 which was filed January 20, 1978, and which will appear in the Ontario Gazette of Property February 4, 1978, provides that succession duty consents are not required where real property interests pass by the law of survivorship, if the survivor is the spouse of the deceased.

For a Land Registrar to give effect to the said Regulation, he will have to be satisfied by affidavit evidence that the survivor and the deceased were spouses of each other at the time of death of the deceased. In the land titles system this affidavit evidence should be included in the affidavit of the applicant which supports the survivorship application. In the registry system the affidavit evidence may be included in the affidavit of legal age and marital status.

It should be noted that the provisions of the regulation apply to all registrations made from and including the filing date of the Regulation notwithstanding that the deceased’s date of death may have been before the filing date.

93006 Proof of Death – Transfer Services Establishment

A Transfer Services Establishment is authorized under The Funeral Directors and Establishments Act to issue a statement of death. Therefore, a statement issued by a Transfer Services Establishment is acceptable as proof of death in support of a survivorship or transmission application under the land titles system.

Paragraph No. 33020 (c) on page 5502 of Land Titles Procedural Guide is hereby amended by adding “or an authorized official of a Transfer Services Establishment” after the words “by a funeral director” in the second last line of the paragraph.

79031 Partnerships – Death of Partner

This Bulletin is intended to clarify the following situation with respect to partnership property.

Death of a partner – Upon the death of a partner, the surviving partner(s) may transfer the property without the personal representative of the deceased partner joining in the transfer provided:

the material that would support a survivorship application accompanies the transfer; and

the affidavit of the transferor states that the partnership has been dissolved by the death of the deceased partner and the transfer is necessary to wind up the affairs of the partner.

If the partnership agreement provides that the partnership is not dissolved upon the death of a partner, the personal representative of the deceased partner is entitled to be entered as an owner. In this case, in addition to the material required on a transmission application, the affidavit evidence must be produced to indicate that the partnership has not been dissolved upon the death of the deceased partner.

Commercial or Residential Leases:

Leasing and renting land are common practices in rural Ontario. The high capital cost of land makes leasing an attractive alternative to ownership. This Factsheet addresses the general issues to consider when entering into a leasing agreement. The terms renting and leasing are used interchangeably in this Factsheet.

Section 1. Lease Agreements

Human Components of a Successful Lease

Any form of business agreement requires a good deal of mutual respect and trust. Leasing land is no different. To be successful, the lease arrangement must satisfy both the landlord and the tenant. Before entering into a lease, the landlord and the tenant should consider more than just price. The compatibility of the landlord and the tenant and the fairness of the lease are important aspects to consider.

Checklist of a Successful Lease

Compatibility – Can you get along and discuss differences? ___yes ___no

Honesty – Do you trust the person you are dealing with? Have you had business dealings together before? ___yes ___no

Clarity – Are the obligations of each party clearly defined in the written lease? ___yes ___no

Equitable Terms – Do both parties agree to the terms of the lease? ___yes ___no

Flexibility – Can you adjust the lease if changes occur? ___yes ___no

Suitability – Does the lease fit the crop and encourage good agricultural practices? ___yes ___no

Advantages and Disadvantages of Leasing Land for Agricultural Use

There are advantages and disadvantages to all leasing arrangements.

Advantages

Lower Capital Investment

• Capital investment is shared between landlord and tenant.
• Landlord supplies land, buildings and perhaps some of the operating expenses.
• Tenant supplies labour, machinery and usually the major portion of the operating expenses.
• Operators can increase the size of their business with limited capital investment.
• Since leasing is an alternative to ownership, it is really a means of “financing” a land base.

Increasing Financial Efficiency

• When funds are limited, it is often more profitable to spend this money on seed, fertilizer, chemicals and machinery than on buying land.
• Investing scarce funds in land may severely restrict the money available for operating capital, thus lowering the efficiency of the farm business.

Obtaining Farm Experience

• Renting enables the beginning farmer to gain needed experience in the financial operation of a farm business before committing to a long-term investment in land.
• Renting enables an operator to learn more about land in an area and allows the flexibility to change farms or leave farming.
• Renting may enable an inexperienced farmer to obtain the managerial assistance or mentorship of a more experienced landlord.

Sharing Risk

• By renting, both the landlord and the tenant can share in the risks and profits of farming. This is particularly important to a farmer with limited capital. The extent of the risk-sharing depends upon the nature of the lease agreement.

Family Arrangements

• A family business arrangement might include a lease agreement whereby someone rents land from a parent or rents land from a third party and shares the machinery investment with the parent.

Providing Retirement Income

• A retiring farmer might consider leasing all or a portion of his or her land base rather than selling.
• Ownership of land provides a hedge against inflation.
• The income from the rent provides a form of “pension” income to live on during retirement.
• A farmer approaching retirement could gradually phase out of farming by renting a portion of his or her land and farming the rest of it.

Disadvantages

Lack of Security of Tenure

• Short-term leases create uncertainty for the tenant.
• Since machinery investment is matched to the land base, the cancellation of a lease could result in having machinery over capacity and a higher cost per acre.
• Short-term leases provide more flexibility for landlords since it is possible to change tenants quickly or to sell the land. However, short-term leases can work to the detriment of the landlord since they may not encourage sustainable farming practices by the tenant.

Lack of Efficiency, Conservation and Incentive to Make Improvements

• Short-term leases may discourage production efficiency. For example, some tenants may not use the optimum amount of fertilizer under a crop share lease unless the landlord shares in the expense of fertilizer.
• Most soil conservation practices are a long-term investment. Most tenants with a short-term lease are interested only in practices that will show results during the term of the lease.

People Problems

• As with any business venture involving two or more persons, disputes and disagreements can arise.

Availability of Credit

The tenant farmer usually has a more difficult time obtaining intermediate and long-term credit than does the owner-operator because:

• the lender may require land as security for the loan
• leased land does not build equity
• the lease is short-term

Lack of Bargaining Power and Managerial Control

• There may be situations where the landlord has greater bargaining power even though the tenant is a capable manager.
• The landlord may insist on making most of the management decisions even though his or her contributions to the lease may be substantially less than the tenant’s. For example, the landlord may insist on certain crops being grown that the tenant feels are not the most profitable.

Lost Opportunity for Capital Gain

• Land prices have generally increased over time, although they do decline occasionally.
• Land appreciation is an added benefit to the landowner, even though the capital gain is not realized until the property is sold.

Potential Loss of Tax Deferral or Exemption

• Leasing land can in some cases prevent the use of both the tax-deferred transfer to children and the $1,000,000 capital gains exemption.
• Consult an accountant.
• See Section 2. Tax Implications of Land Leases.

Written Lease Agreement

The most important thing you can do as a tenant or landlord is to put your agreement in writing. This one action would eliminate most disagreements that occur. Even though the handshake has been a long-standing method of doing business in the rural community and a verbal lease agreement is a valid contract, it has serious disadvantages. However, many farmers and landowners are reluctant to use a written lease for several reasons:

• Tenants and landowners alike do not want to give the impression that they distrust their neighbors by requiring a written lease.
• The added time and cost to prepare a written lease may not seem justified when dealing with other farmers or community members. The disadvantage of a verbal lease becomes apparent when a disagreement about the terms of the lease occurs, because it is exceedingly difficult to prove what the original understanding between the parties was.

Without a written agreement:

• Settling a misunderstanding between the parties once the land is in use (through mediation by a third party, arbitration, or litigation) can be extremely costly.
• It is more difficult to protect the interests of both parties against any claims of a third or outside party to a right to the land or the crop. It is much easier to protect your interests from third-party claims by documenting the details of the agreement at the time you enter it.
• The risk of losing significant time and business goodwill is high for both landowner and the lessee.

A written agreement is not a sign of distrust – it shows that both parties want to protect and clearly document the agreement they are making.

Advantages of a Written Lease Agreement

Under the Ontario Statute of Frauds, all documents that create an interest in land must be in writing. A written lease is advantageous to both the landlord and the tenant since it provides both with a record of what they have agreed to. If a dispute occurs, a written lease can prevent costly legal action by providing for alternatives to a court proceeding. In the case of crop share leases, where the landlord and tenant are sharing costs, this is especially important. A written lease:

• clarifies the expectations, obligations and responsibilities of both parties gives the landlord some protection in the event of an environmental liability
• provides a valuable guide to heirs if the landlord or tenant should die
• provides documentation for tax purposes

What to Consider Before Entering into a Lease Agreement

Insurance – Landowners may consider requesting proof of crop insurance, especially if the rent has not been prepaid. The tenant and landlord should also discuss insurance for protection from any potential environmental damage. If the tenant plans on storing any harvested crop on the landowner’s property, there should also be insurance provisions for protection from theft or damage.

Securing the lease payment – Registering any unpaid portion of the lease payment with Service Ontario under the Personal Property Security Registration will help protect a landowner’s interest as a creditor in the event of non-payment by a tenant. Landowners may register online or by calling Service Ontario.

A tenant may also want to have the lease registered against the title to be protected in the event that the land changes ownership. There may be very good reasons to consider the registration of the lease: for instance, any payments relating to the real estate can, in some instances, be considered “personal property” and fall within the registration provisions of the Personal Property Security Act; any interest in those payments would be subordinate to any other interest by way of a lease, so long as the lease is registered first.

Most properties in Ontario are registered under the Land Titles system, which dictates that leases for a period not exceeding three years do not require registration where the tenant is in actual possession of the property described in the lease. For properties under the less popular Land Registry system, the period is increased to seven years. In the absence of registration, a subsequent purchaser of the land could take ownership without having to honour the terms of the lease.

Title search – Tenants may also perform a search on the title of the land to be leased to make sure they are entering into an agreement with the person who is the owner of the land. A title search may be done through the Ontario Land Registry Office.

A Lease Agreement as a Succession Planning Tool

A long-term lease agreement (not to be confused with a sale and leaseback arrangement) may be used as a succession planning tool. Landowners and potential farm successors thinking about alternatives to traditional financing options might want to consider a long-term leasing arrangement. Lease arrangements may include land, buildings and/or equipment. Owners and successors may choose to have multiple lease arrangements or a single inclusive lease. Leases in Ontario can be of any length of maturity, however, leases longer than 21 years must have the approval of the municipality to be valid.

Like any lease, the terms must be negotiated to the satisfaction of both parties. One of the biggest difficulties after setting the initial lease payment amount is determining what the annual increase should be. For longer-term leases, an impartial setting, such as the annualized core Consumer Price Index, which is published by Statistics Canada, may be used. It is advisable to talk to a succession planning professional to help set out some of these terms.