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OVERVIEW
The Saskatchewan Farm Security Act (the "SFSA") restricts the ability of non-resident persons and non Canadian-owned entities to directly or indirectly hold , or have interest in, Saskatchewan farm land. The SFSA contains prohibitions with reference to the value and the acres of land holdings, both of which are very low thresholds. Both thresholds are exceeded when transacting on a single quarter section (160 acres) of farm land.
The land holding restrictions under the SFSA are complex and often apply to transactions and holdings that may not intuitively amount to Saskatchewan farm land holdings. Failure to comply with these restrictions can have significant implications for transactions and farming operations, including the requirement to immediately divest Saskatchewan farm land holdings.
This primer provides an overview of key land holding restrictions under the SFSA.
IMPORTANT DEFINED TERMS
The restrictions on farm land holdings under the SFSA rely on several defined terms and any analysis of the applicability of the restrictions will depend on the scope of these defined terms.
Defining farm land
Subject to narrow exceptions, farm land generally means real property in Saskatchewan that is situated outside of a city, town, village, hamlet, or resort village and that is used or is capable of being used for the purposes of farming.
Defining a land holding
A significant factor in determining whether the land holding restrictions apply is ascertaining the scope of the term "land holding" and whether a given holding amounts to a "land holding". Guidance on the scope of a "land holding" can be taken from both the SFSA and caselaw.
The term "land holding" is defined under s. 76(e) of the SFSA. However, the definition only provides a list of items that are included in the term "land holding" and does not provide a restrictive definition. Accordingly, while the definition of "land holding" in the SFSA can assist in ascertaining the scope of the term, its actual scope is broader than the items specifically enumerated.
Pursuant to the SFSA, the following items are included in the term "land holding":
- farm land, as defined under the SFSA;
- any interest in farm land held under an agreement to purchase or lease;
- any interest in farm land held under any agreement that may
directly or indirectly:
- result in vesting of title to farm land;
- confer the right to possession of farm land;
- confer any right or control ordinarily accruing to the owner of farm land;
- confer the right of obtaining the right of capital appreciation in the farm land; or
- confer any other right that is prescribed in The Saskatchewan Farm Security Regulations, RRS c S-17.1 Reg 1 (the "Regulations");
- shares in a corporation having a land holding;
- for the purposes of certain sections of the SFSA, any interest in a limited partnership where that limited partnership has a land holding;
- any interest in farm land other than that described in the points above; and
- certain conservation easements.
IMPORTANT DEFINED TERMS
In addition to enumerating items that are specifically included within the scope of "land holding", s. 76(e) specifically excludes from the scope of "land holding" farm land or any interest in farm land held by way of security for a debt or other obligation unless the debt or other obligation is of a class prescribed in the Regulations. Subsection 2(4) of the Regulations clarifies that a "land holding" includes any interest held by way of a debt or obligation funded other than by:
- a resident person;
- a bank, credit union or other financial institution that is supervised or examined by a governmental authority in Canada; or
- a farm input supplier that has provided inputs to a producer.
The Saskatchewan Court of Appeal has also established principles for assessing whether a holding is a "land holding" under the SFSA. For example, the Saskatchewan Court of Appeal has stated that an agreement may create a "land holding" if it confers the right to influence and control the bundle of rights that make up property ownership.
Defining aggregate land holding
An "aggregate land holding" of a person is defined under the SFSA as including all land holdings of that person and all land holdings of that person's spouse and children.
Defining non-Canadians
A "non-Canadian-owned entity" is defined as (i) a person that is not a Canadian-owned entity, or (ii) a person that has shares listed on an exchange.
A "Canadian-owned entity" is defined as (i) a corporation or any other entity in which all the shares or interests are legally and beneficially owned, and all the memberships are held, by resident persons or other Canadian owned entities, or (ii) prescribed corporations or entities.
A "resident person" is defined under the Regulations as meaning a Canadian citizen or a permanent resident of Canada within the meaning of the Immigration and Refugee Protection Act (Canada).
GENERAL LAND HOLDING RESTRICTIONS
Restriction on the value of land holdings and the acres of land holdings by non-resident persons:
Subject to specific, narrowly-available exceptions, no non-resident person may (i) have an aggregate land holding with an assessed value for municipal taxation purposes in excess of $15,000, excluding any assessment for buildings and similar improvements; or (ii) have an aggregate land holding in excess of 10 acres.
Restriction on land holdings by non-Canadian-owned entities:
Subject to specific, narrowly-available exemptions, no non-Canadian-owned entity may have or acquire an aggregate land holding in excess of 10 acres.
If a Canadian-owned entity becomes a non-Canadian-owned entity, the entity must reduce its aggregate land holding to 10 acres or less within one year after becoming a non-Canadian-owned entity or within any greater period that the Farm Land Security Board (FLSB) may allow.
Acquisition on behalf of another:
No person is permitted to acquire a land holding on behalf of a non-resident person or a non-Canadian owned entity if that acquisition of the land holding by the non-resident person or non-Canadian-owned entity would be in contravention of the land holding restrictions.
Restriction on certain persons:
The following persons may not acquire a land holding in Saskatchewan:
- a publicly listed entity;
- each of the following:
- a pension plan;
- the administrator of a pension plan while that person is acting in that person's capacity as an administrator;
- a trust other than a trust that, in the trust instrument creating the trust, lists 10 or fewer individuals, all of whom are resident persons and are certain close family members of the settlor, as beneficiaries of the trust;
- a person or class of persons prescribed in the Regulations.
EXCEPTIONS
The SFSA contains specific exemptions in the context of inheritance, certain relatives, acquisition of land by creditors, and land holdings held by a non-resident person who, during any five years, was a resident person and who acquired the land holding while he or she was a resident person.
The SFSA also contains modified rules for land acquired on May 6, 1980, or earlier.
EXEMPTIONS ORDERS
A non-resident person or a non-Canadian-owned entity may apply to the FLSB for an exemption from the land holding restrictions under the FLSA. The FLSB is empowered to grant such an exemption if it is satisfied that it is appropriate to do so and may impose any terms and conditions that it considers appropriate on the exemption.
DIVESTMENT OBLIGATIONS
A person having a land holding in contravention of the SFSA is required to reduce its aggregate land holding to an aggregate land holding permitted by the SFSA. Subject to specific narrow exceptions, there is no grace period and the divestment requirement is immediate.
OFFENCES AND PENALTIES
An individual who contravenes any provision of the land holding restrictions is guilty of an offence and is liable on summary conviction to:
- a fine of not more than $50,000;
- imprisonment for a term of not more than six months; or
- both the fine and imprisonment.
A person other than an individual that contravenes any provision of the land holding restrictions is guilty of an offence and is liable on summary conviction to a fine of not more than $500,000.
Every director, officer, or agent of a person other than an individual who directed, authorized, assented to, acquiesced in, or participated in an act or omission of the person that would constitute an offence by the person is guilty of that offence and is liable on summary conviction to the penalties provided for that offence whether or not the person has been prosecuted or convicted.
In addition to the offence provisions, the SFSA allows the FLSB to impose an administrative penalty of up to $10,000 if the FLSB is satisfied that a person has contravened a provision of the land holding restrictions.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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