Land Lease in Alberta

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The commonly known home ownership structures in Canada are freehold ownership and ownership in a condo corporation. While freehold owners own the house and also the land on which it sits, and are solely responsible for its upkeep; owners who own a unit in a condo corporation jointly own the common areas with the other unit owners. Apart from these two types of ownership structures, there is another lesser known way of owning, which is known as leasehold ownership. In this kind of an ownership, the resident owns the house, but leases the land on which it sits. In Alberta, apart from housing, land is commonly leased for agriculture and grazing.

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As opposed to traditional freehold ownership, in a leasehold ownership structure, the property is owned by the resident but not the land on which it is. The land can be owned by individuals, companies, first nations communities, institutions or governments. Buying a leasehold property might be a bit different from buying a freehold, and you should keep the following in mind:

• The land is leased and the resident typically pays a monthly rent to the land owner for the entire duration of the lease.
• As the land is not sold, the price of leasehold properties is usually lower than freehold ones.
• If the property is a part of a planned community, you may have to pay an HOA (Homeowners’ Association) fee on top of the rent.
• It may be difficult to secure a mortgage from traditional lenders such as banks for buying a leasehold property. You may be able to get a mortgage from an alternative mortgage lender, but the mortgage rates might be higher than that for freehold. Additionally, if the lease term is about to come to an end, it may be difficult to get any kind of financing for the purchase.
• Leasehold properties often have a surrender clause. A surrender clause may require you to surrender all structures built on the land when the lease expires. Sometimes, the leaseholder may still own the property even after the lease expires; however, unless the property is a mobile home, it may not be possible to move it off the property.
• If the conditions of the lease are not met, the leaseholder may be evicted.

Land lease properties are uncommon in Alberta; however, one significant leasehold project is the University District in Calgary, which is a leasehold community being developed on land belonging to the University of Calgary. Following are the requirements of a lease in Alberta:

• Leases can be registered in Alberta only if they are for a term longer than three years. The lease is executed as per the Land Titles Act and registered by following a registration process.
• The lease shall legally describe the land in a way that the information is sufficient to identify the land.
• Covenants can be included in the lease and a lessee's right to purchase the land by paying a certain amount may also be expressed in the lease.
• If a land is mortgaged or encumbered, the lease is not valid and binding against the mortgagee or encumbrancee unless they have consented to the same before the registration of the lease or they adopt it eventually.

The common types of land lease house in Canada are:

1. Properties built on Institutional Lands: These are properties built on lands belonging to public institutions such as universities, or municipalities.
2. Planned Communities: Communities developed by real estate developers where the homeowners can buy the houses but the land still remains the developer’s property. Such ownership structures can be seen across retirement communities, and more recently in some urban areas.
3. Properties built on lands belonging to First Nations: The First Nations of Canada have reserved lands across the country and some of them have been leasing the land out for private use. This kind of leasehold structure is particularly popular in case of cottages as it makes owning a cottage much cheaper than a freehold.

Alberta has about 100 million acres of crown land in total, which has a designated priority for agricultural use. According to the Government of Alberta, there’s about 5 million acres of crown land in Alberta which has been leased for agriculture and grazing. Agricultural leases allow for the leasing of provincial crown land for agriculture related activities such as growing crops, harvesting hay and grazing livestock. Agricultural dispositions can be in the form of farming and grazing leases, licenses and permits.

Image Source: Public Land and Grazing Rent and Assignment Fee, Alberta

One of the key agricultural dispositions are the grazing leases, which were first issued in Alberta in the late 1881. As per Statistics Canada’s 2016 Census of Agriculture, Alberta has the largest cattle herd in Canada, accounting for over two-fifths of the national total. The cattle industry is an important part of Alberta’s economy, cementing the significance of grazing licenses. The administration of grazing licenses is governed by the Public Lands Act, RSA 2000, c P-40; and the licenses give the leaseholders exclusive rights over the land for grazing purposes.

The Public Lands Modernization (Grazing Leases and Obsolete Provisions) Amendment Act was adopted in 2019, which revised the province’s grazing disposition rental rates and fee framework. This framework divides the land into two grazing rental rate zones, with a minimum grazing rent (per Animal Unit Month) as follows:

• $2.30 in Zone 1
• $1.30 in Zone 2

The rate is subject to annual fluctuation depending on cattle markets.

In 1998, an organization called the Alberta Grazing Leaseholders Association (ALGA) was established, the main objective of which is advocating the rights of grazing leaseholders and protecting their assets and income.

The Alberta government requires agriculture leaseholders to allow recreational access to the leased crown land, unless the activity poses a risk to the land, crops or livestock. The leaseholders may be thought of as stewards looking after the land and a leaseholder can deny access under the following circumstances:

• The access is by any other means than on foot.
• There are livestock present on the land in a fenced field.
• The recreational activity involves hunting in an area that is very close to pasture where livestock may be present.
• Crop has not been harvested on the land.
• There is a fire ban in effect.
• The recreational users plan to camp.
• The proposed recreational activity is not allowed under government conditions or the recreation management plan.

To access crown lands for recreation, one must follow the steps outlined below:

1. Find out if the land you are planning to access is private land or crown land. A private owner may not allow access to their land for recreational purposes; and for accessing crown land, Recreation Access Regulations must be followed. You can use the Recreation Access Internet Mapping Tool to find out the leaseholder contact information and recreation conditions for a land you are planning to access.
2. Contact the leaseholder at least two weeks before your planned visit so that you could discuss important information and confirm your plans.

Leasing a land can allow a lessee exclusive rights over the land without having to buy it. Leasehold structure can also allow landowners to generate revenue from land they cannot sell; for example land belonging to institutions or First Nations communities. Land lease houses can be an affordable option for retirees looking to downsize or first-time homebuyers looking to get into the market. That said, before buying a leasehold property, one should carefully consider factors such as time left on the lease, additional fees they may have to pay and surrender clauses.