Canada: Proposed Changes To Saskatchewan Farm Land Ownership Restrictions To Tighten – How Far Do They Go?

Last Updated: November 5 2015
Article by David Gerecke and Sean Bryden

Over the past few years, it has become progressively more difficult for foreign individuals and entities to invest in farmland in Saskatchewan, whether directly via ownership of land, or by lending to those who will be the owners, a topic of our earlier articles found here and here.

This difficulty has partly been a result of sections in The Saskatchewan Farm Security Act (the "Act") restricting foreign ownership, but also in large part due to the ability of the Farm Land Security Board (the "FLSB"), which is charged with overseeing compliance with the Act, to interpret whether something is within the "spirit" of the legislation in situations where a foreign investor has attempted to exploit loopholes in the Act. It appears, however, that the FLSB may find that it needs to exercise this ability less frequently, as many of these loopholes may soon be disappearing as a result of proposed amendments to the Act.

Recently, Bill 187 has been proposed to the Saskatchewan legislature, which, if adopted, would make some significant amendments to the lending and foreign ownership of farmland portions of the Act.

Among the proposed amendments would be stricter requirements on what constitutes a Canadian entity. The current Act provides that Canadian entities will include "agricultural corporations", which need only to be majority owned by Canadian residents. The Bill eliminates the concept of agricultural corporations, so that, other than individuals, only "Canadian-owned entities" will be entitled to own farm land.  "Canadian-owned entities" must have 100% Canadian ownership (legal and beneficial). Pension plans and certain trusts would also now be prohibited from owning farm land in Saskatchewan.

The proposed amendments would also give the FLSB more teeth in regards to its ability to enforce the Act, by stiffening penalties for those who are in contravention, and adding a new "administrative penalty" section, which would allow the FLSB to levy fines against individuals and entities that fail to disclose information or provide answers requested by the FLSB as part of the process of determining whether they are in contravention of the Act.

Perhaps the biggest changes contained in the Bill, and likely the motivating factor behind proposing the amendment, are the sections amending and clarifying foreign lenders and their ability to take security in Saskatchewan farmland in the wake of recent cases before the courts, such as the Skyline Agriculture Financial Corp. et al. and The Farm Land Security Board decision which we discussed here.

As seen in Skyline, foreign investors have recently been attempting to develop creative structures to enable them to invest, and to enjoy many of the benefits of ownership (such as appreciation in capital value), other than through outright purchase of the land.  Under the Bill, conferring such rights on a foreign individual or entity would automatically offend the Act, including in instances where the foreign entity is taking these interests in land to secure a debt.

This does not mean, however, that all foreign lenders are prevented from taking security in Saskatchewan farmland. So long as a foreign lender is registered and licensed as a lender in Canada pursuant to applicable Canadian laws, and the loans being granted and the security being taken do not confer all or substantially all of the rights to the land usually reserved to an owner, such lenders would be free to continue to take security against farmland. Further, section 88 of the Act, which allows foreign lenders to take ownership for a minimum of two years (with the potential for extensions) through foreclosure, for example, is not changed under the Bill, so the ability of foreign lenders to realize on their security is not being changed.

To summarize, the focus of the proposed amendments is twofold.  First, the amendments would buttress the FLSB's ability to take action itself to require compliance with the farm ownership restrictions.  Second, the amendments would enshrine in legislation the positions that the FLSB has taken in situations where a foreign entity has sought to "circumvent" the land holdings requirements of the Act, reducing the need for the FLSB to interpret the "spirit" of the legislation in cases where these situations arise. While there are still several hurdles that Bill 187 must clear before the amendments would become law, it appears likely that the provisions of the Act preventing foreign ownership of Saskatchewan farm land will be strengthened.

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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David Gerecke
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