Owning land remains a core goal for many entering farmers. Some may be able to purchase land with family help, through off-farm income, or as a group. For many current farmer-landholders, selling the land is a key pillar of their retirement planning. If the intention is to transfer the land to the entering farmer, whether now or in the future, there are several approaches that can meet the needs of both parties. A variety of options are available for mortgage financing, and your lawyer and financial advisors can help you explore and access those options. 

SELLING BELOW MARKET VALUE: Current farmers may decide to sell the land at full market value, or below market value, to the entering farmer(s), depending on financial needs. If you are thinking about reducing the sale price of your land, there are some important considerations:

  • If the land is sold below market value to an arm’s length party (e.g. not a family member), the sale must generally be reported at market value for income tax purposes.
  • If the proceeds reported on a tax return are significantly less than market value, financial penalties could apply. 
  • Where certain conditions are met, land that is Qualified Farm Property may be sold to certain family members for less than market value consideration, with the income tax being calculated based on this lower number.
  • The purchaser will be liable for Property Transfer Tax based on Fair Market Value (regardless of the sale price) unless a family farm exemption provides relief.

PRIVATE LENDING FOR MORTGAGES: If you need to sell your land at market value but don’t have immediate need for a large lump sum payment, you may consider owner financing, also known as a vendor take-back mortgage (VTB). A VTB is a type of mortgage in which the seller offers to lend funds to the buyer to help facilitate the purchase of the property. The seller is then paid a percentage of the sale price over time with interest, which can make the upfront cost more manageable and flexible for an entering farmer.

Seeking private investors from your community is another form of alternative mortgage financing. That could be through private loans, or an arms-length mortgage through a self-directed RRSP, where a person can essentially lend their RRSP to an entering farmer who is not directly related to them as a mortgage investment. A limited number of trust companies participate in self-directed RRSPs, such as Alberta-based Olympia Trust. Before pursuing any of these financing commitments, it is vital that you contact legal and accounting professionals to ensure your plan complies with all relevant laws and regulations. 

  • This path takes a lot of dedication on the part of the landholder. While private mortgages aren’t uncommon, many accountants may advise against this type of lending relationship.
  • Entering farmers may qualify for a portion of the cost of the land and a vendor take-back mortgage could be used to cover the remaining portion.
  • A VTB often represents a secondary lien on the property, as most buyers will have a primary source of funding other than the seller. 
  • Where the purchase price has not been paid in full, an income tax deferral may be available on the sale, subject to certain conditions.
  • The financial complexity of this type of agreement means it is especially important for each party to consult with an accountant, lawyer and possibly a property assessment agent to facilitate a fair and lawful transaction.
  • Work with a mortgage specialist to define terms tailored to your situation.


  • Entering farmer has the financial capacity to purchase land and repay private loans but may not qualify for a traditional mortgage. Off-farm income can reduce risk.
  • Before committing to a private loan, including a vendor take-back mortgage, all parties should have a clear understanding of the entering farmer’s finances and plan to pay off the loan.
  • The current farmer knows the farm business well and has confidence that it has the ability to generate enough income to pay the mortgage.
  • For a vendor take-back mortgage, the current farmer doesn’t need all the money from the sale of the land in one lump sum, and may not be counting on the transition to provide all the funds for retirement.
  • A vendor take-back mortgage is a serious commitment to an ongoing financial relationship between the current and entering farmer, and requires significant trust between parties. 
  • Parties have a willingness to engage in open communication around potential risk factors, including what happens if the financial picture changes for either party.

CO-OWNERSHIP: Pooling resources to buy land with other farmers is one way that entering farmers can become landholders despite the high cost of real estate. This section looks at individuals co-owning land together. Co-owning a farm is a big commitment – both financially and personally – but there are many benefits: people power, access to capital, and shared workload leading to better work/life balance. Establishing a legal co-ownership agreement provides clarity about the rights and obligations of the co-owners and protects everyone in case of disputes. There are different ways of structuring co-ownership of land, including joint tenants, tenants-in-common, and incorporation. Incorporation means the land would be held by a corporation, with the individuals as shareholders. This can provide a clear ownership structure with a shareholder’s agreement that covers exit strategies. Stage 3 addresses incorporation in detail. 

Joint tenants and tenants-in-common both mean that the individual owners are listed on the land title. A key difference is that if a tenants-in-common co-owner dies, the ownership does not automatically go to other owners; rather, that person’s share of property becomes part of their personal estate and can be transferred to their heirs. If a joint tenant co-owner dies, surviving co-owners inherit the deceased’s share. 

  • Decision Making Process: How will decisions be made among the partners? How often will the co-owners meet to discuss and evaluate agreements?
  • Land Use Plans: These can be a living document and be amended as time passes, but it is important that everyone be on the same page about what specific activities will be happening in which areas of the property. For example, what farm activities will each partner be focusing on? What structures can be built and who will be using and maintaining them? What shared systems are necessary for success (e.g. water usage, housing, on farm marketing, etc.)?
  • Stewardship: What are the shared principles on land management and practices that the group will honour?
  • Dispute Resolution: Conflict will absolutely happen – the Communication section of this toolkit has tips for navigating tough conversations. Be intentional about making time for one another even amidst the chaos of starting a farm. One farmer we spoke with recommended hiring a mediator to help set up the co-ownership agreement.
  • Finances: Be persistent when approaching banks for financing. Some mortgage brokers may deem a shared ownership agreement as risky, so having clear plans and willingness to go through a long process with lenders is necessary. 
  • Transfer of Assets: Is this an outright sale, or a more gradual transfer of assets? If the current farmer is considering adding the entering farmer to the title, talking to a lawyer is essential. Risks involved in joint tenancy include: one party being able to force a sale or otherwise put the ownership of the property at risk, tax implications, and the current farmer’s heirs potentially being able to contest the change in title.
  • Exit Strategy: What is the process if one individual wants to sell their share in the land? Do the other partners buy them out? Would a new partner be found? How? On what timeline? What would qualify a new land partner? 


  • Does each partner have the financial capacity to maintain the mortgage payments?
  • Do you share a common desire to live in community? What does that look like to each person individually?
  • Do you have clear goals? Are you willing to be honest about priorities and plans? 
  • What experience do you have working collaboratively and are you committed to developing the skills to maintain a strong working relationship?
  • Are your values and goals in alignment?
Read Case Story: Vendor Take-Back Mortgage – Claremont Ranch Organics (link opens in new tab)
Continue to Transition to Co-Operative Ownership
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