“Quick” Guide to a Land Match Agreement

Posted by Darcy Smith on August 03, 2016

Land Match Agreements - navigating the regulatory labyrinth

You’re ready for a land match. You’ve found that dream piece of land, or the perfect farmer for your property. Now what? The first step to drafting a solid land agreement is figuring out which one will match your needs. And yes, this is a bit of a rabbit hole to dive into.

Lucky for you, we’ve made our way through the regulatory labyrinth and come out the other end relatively unscathed – and with some helpful information. From leases and licenses to MOU’s, the information below will help you define your needs and get you one step closer to a successful agreement!

Lease

A lease is a type of interest in land giving the lessee exclusive occupation and usage rights (as if they were the property owner) to a property or portion of property for a determined period of time in exchange for rent paid to the property owner.

The property owner retains the right to sell the land, while the tenant has exclusive possession of the land under the terms of the lease. Exclusive possession means that the owner gives up the right to enter the land or building being leased except with the permission of the person leasing. This permission may be written into the lease to allow, for example, the land owner to check on the condition of the land every so often. When the term of the lease is over, the land reverts to the owner.

Click here to download the Young Agrarians Lease Template:  Lease

When is a lease the right land agreement?

A lease will be the most appropriate type of land agreement in the vast majority of situations. Leases are commonly used, provide legal security for both parties, and can follow a variety of templates. From a farmer’s perspective, a lease is the most desirable type of long-term farmland access agreement because it creates a situation very similar to that of owning the land, and can be registered with the title to the land.

Registered Lease on Title

Because lease agreements are an interest in land, they can be registered with the Land Title Office on the title of the property in order to give added security. Registered leases “run with the land” meaning that when the land is sold, the lease is transferred to the new Land Owner along with the title to the land. Registered leases must be notarized (by a notary or lawyer), and can be filed by an individual or directly by a lawyer or notary.

Many people – both land owners and land seekers – mistakenly believe that short term leases do not offer any protection in the event of a sale. However, if the lease does not exceed three years and the tenant is occupying the premises, an unregistered lease will apply even in the case of sale and will be transferred to the new owner. This means it is only necessary to register leases that exceed three years.

A registered lease is intended to protect tenants in the case of sale. However, if a land owner goes bankrupt and lenders seize the land, the status of a registered lease is not guaranteed. The lease should include clauses to detail what happens in the event of bankruptcy.

What should you know about registered leases?

Often, a land owner wants to lease out just a few acres of a property. What does this mean for registered leases? (Did we mention a labyrinth earlier? Welcome to the twistiest, turniest part!)

  • In BC, a lease on a portion of a parcel of land cannot be registered, unless the land under consideration is on ALR land.
  • In BC, a registered lease on a portion of a parcel on ALR land does not need to be approved by the ALC.
  • A contract on a portion of a parcel will still protect you in a court of law if the terms are limited to three years.
  • Leases on a portion of a parcel of non-ALR land may require subdivision if the lease term is longer than three years.
  • Once land has been approved for subdivision, it can carry a registered lease on title even if the subdivision process is not complete.
  • “I want to learn more about subdivision,” said no one, ever. Kidding! We say it all the time – but that’s a whole other post. Stay tuned!

Licence

Unlike a lease, a licence is not an interest in land, and does not grant exclusive possession. Instead, this type of land agreement gives a person permission to do something on or with someone else’s property, usually when a very specific use of the land is desired.

When could a licence work for you? A good example is a grazing licence, which allows the licensee to graze their sheep on the land, but doesn’t give permission for other activities such as growing vegetables or servicing farm equipment. You could also have a licence agreement allowing you to grow vegetables, but not conduct any other activities. A licence is a limited agreement and should only be considered in specific situations.

Click here to download the License Template:  License

Contract

A contract is a legally binding agreement with specific terms between two or more persons or entities. It entails a promise to do something in return for a valuable benefit known as consideration. Here’s a brain teaser: all leases are contracts, but not all contracts are leases. Essentially, any type of legally binding agreement is a contract, and a contract can be drafted for many situations, unlike a lease, which has a specific application.

In order for a contract to be legally valid, it must:

  • be an offer coupled with an acceptance;
  • include an exchange of considerations, where something of value must come from each party (e.g. one person pays rent in exchange for using someone’s property);
  • include subject matter that is not illegal;
  • and involve parties that are competent to contract (e.g. an adult or other legal entity like a cooperative) and who have a mutual intention to be legally bound.

When should you use a contract as a land match agreement?

You might choose to develop a contract with a lawyer if you want something more legally robust than the MOU but have opted not to pursue a lease agreement. A contract might also be suitable if you need an additional agreement to supplement a lease or licence, and you would like it to be legally binding.

MOU

A memorandum of understanding (MOU) is an agreement between at least two people that obliges each party to do or not to do specified things. MOUs are typically used as temporary agreements between a farmer and land owner, or where the future ownership of the land is uncertain.

You might use an MOU, for example, when agreeing on the process for entering into a long-term agreement (e.g. outlining the obligations and responsibilities of parties in setting up a lease), or when the agreement represents a trial period between a farmer and Land Owner prior to entering into a more binding agreement, such as a lease. This type of land match agreement might also be appropriate for urban farming in residential front yards.

Is my land match agreement legally binding?

Leases and licences are both legally binding agreements. A MOU is generally less detailed than a lease or licence and is not necessarily intended to be legally binding. However, if it meets the criteria for a contract, it can be legally binding under contract law. For either a licence or a MOU to be considered a contract (i.e. an agreement that is legally binding), it must meet specific terms (see the section on Contracts above). In a contractual licence or MOU, the land owner cannot terminate the agreement at will if the terms of the agreement are followed. A non-contractual license or MOU (referred to as a bare or gratuitous) can be revoked at will.

*For all types of land match agreements outlined, it is possible for a Land Owner to enter into multiple agreements for one parcel of land or a single agreement for part of a parcel of land. For example, a Land Owner might have a licence with a farmer to allow for grazing on one part of the land, and a lease with another farmer to grow vegetables on another part of the land over the same period.

Feeling a bit like Alice lost in Farmland? Feel free to reach out to us at land@youngagrarians.org – we live and breathe lease agreements these days. We also recommend consulting a lawyer. A little $$ now saves a lot of trouble later.

Here’s to happy land matches!

 

Image credit: Joe Shlabotnik