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.
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:
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:
The common types of land lease house in Canada are:
|Leasehold houses are often cheaper than freehold, and require a lower investment, which can free up money for other kinds of uses and investments.||Although the leasehold properties cost less than freehold, you will still have to pay a monthly rent for using the land.|
|Land lease houses are often more economical compared to freehold, which can make them a more affordable option, especially for retirees and first-time homebuyers.||Land lease houses aren’t a great option for those looking to build equity as the land is not owned. Additionally, the property’s value may depreciate if the lease is about to expire, and the equity might be lost at the end of the lease term if the lease fails to renew.|
|The homeowners may have access to better facilities if the property is a part of a planned leasehold community.||The homeowners may have to pay an HOA fee for the available facilities, even if they don’t use those facilities.|
|As the land is not owned by the homeowners, the property taxes that they have to pay are usually lower than a freehold.||Traditional lenders such as banks may not be willing to give you a mortgage to buy a leasehold property. Additionally, you may have to pay a higher interest for borrowing and the mortgage tenure would always be dependent on the time left on the lease.|
|Leasehold might be an alternative for those looking to buy a second property such as a cottage but cannot afford a freehold.||Finding buyers for a leasehold property may be challenging, especially when there is very little time left on the lease.|
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:
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:
To access crown lands for recreation, one must follow the steps outlined below:
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.