Traditionally, home ownership in Canada is of two kinds - the first is freehold ownership, in which the resident owns the house and the land under it. The owners are responsible for the upkeep of the house and land. The second is ownership in a condominium corporation, where the owners own their individual units and jointly own the common areas. They maintain their own units and the common areas are managed by the condo corporation. However, there is a lesser known third kind of ownership which is land lease ownership. Apart from leasing land for housing, it can be leased for recreational, agricultural and commercial purposes from different types of lessors as discussed on this page.
Simply put, land lease housing is where the dwelling unit is owned by the resident, however, the land on which it is built is leased. The resident pays a rent or a monthly fee to the landlord for leasing the land. The purchase prices of these properties are typically much lower than freehold houses as the land is not being purchased.
Land lease properties might not always be listed on the common listing platforms but if you see a listed property that is significantly cheaper than the nearby properties, it is likely to be a land lease property. Buying a land lease property can be a tricky affair. A buyer must study all the aspects carefully and consider the following before buying:
For buying a house on leased land in Ontario, the Residential Tenancies Act (RTA) applies. The length of the lease is normally 20 years in accordance with the Planning Act of Ontario, but can be renewed at the end of the lease term. The lease is transferred to the subsequent buyers of the house when it is sold.
There are several planned land lease communities across Ontario that are developed by real-estate developers, many of them being retirement communities. The monthly rent for the land is paid to the landlord who owns the land of the leased community. The landlord may provide amenities and services to the tenants for common use such as a pool or a playground, and the fees for such facilities are usually included in the rent. Often, such communities are a part of a homeowners association (HOA), in which case the residents pay HOA fees to the association.
Another example of land lease housing is mobile home parks, where the mobile homes are owned by individual owners, while the land is owned by a landlord.
There are three main types of land leases in Canada
|Free up money for other purposes||Monthly rent for the land|
|More affordable||HOA Fees|
|Lower property taxes||Lower equity than freehold|
|Better amenities in the community||Tricky to get a mortgage|
Land lease and renting are similar in many ways and you need to consider what your goals are before picking what’s better for you. Some people may pick land lease over renting as they can build some equity in their house while paying a rent for the land. However, there would likely be some restrictions on how you can use the land and it may be difficult to sell such a house when the lease is nearing its end. If you are looking for more flexibility and freedom, and your end goal is to pass on the house to your heirs, you might be better off renting while saving for a down payment for a traditional freehold home.
One of the ways of owning a cottage in Ontario is buying one built on land leased from the First Nations. These cottages can be much cheaper than fully owned cottages, and often have great locations in close proximity to a lake. Ontario is home to the largest recreational lease arrangement located along Lake Huron near Sauble Beach, where the Saugeen First Nations have leased land to more than 1200 cottagers. The annual lease fees for waterfront properties can be around $9000, whereas the lease fees for inland properties can be around $6000.
You should keep the following in mind when looking for a land lease cottage -
87% of all land in Ontario is crown land owned by the provincial government. The public lands of Ontario are managed by the Ministry of Northern Development, Mines, Natural Resources and Forestry under the Public Lands Act (PLA). The provincial policies of Ontario allow for the sale or rent of crown land and recognize the importance of projects that can provide socio-economic benefits to the communities of Northern Ontario.
Crown land for residential development can only be leased within municipal boundaries. The value of crown land is considered equal to private land and the annual rent amount is based on the market value of the land. As per the Crown Land Rental Policy, following are the rents for some common uses of crown land, where the value of the property is known:
|Land Use Sub Category||Examples||Lease with option to purchase||Lease with no option to purchase|
|Residential Structures||house, mobile home, and outbuildings, etc.||10%||6%||5%||4%|
|Private Accommodation||cottage, recreation camp, etc.||N/A||10%||6%||5%|
|Commercial Recreation Accommodation||tourist camp, outpost camp, motel, tent and trailer park, etc.||12%||7%||6%||5%|
|Agriculture||crop growing, greenhouses, market gardening, animal, bird, or inland fish rearing, etc.||10%||6%||5%||4%|
Source: Ontario Ministry of Natural Resources and Forestry
|Land Use Sub Category||Examples||License of Occupation||Land Use Permit|
|Residential Structures||house, mobile home, and outbuildings, etc.||5%||4%|
|Private Accommodation||cottage, recreation camp, etc.||6%||5%|
|Commercial Recreation Accommodation||tourist camp, outpost camp, motel, tent and trailer park, etc.||6%||5%|
|Agriculture||crop growing, greenhouses, market gardening, animal, bird, or inland fish rearing, etc.||5%||4%|
A lease provides exclusive rights on such land without giving its ownership. The following specifics apply to leasing a crown land:
Apart from residential purposes, Ontario also allows for the Leasing of Farmland. This is a common practice in rural Ontario as this requires a much lower capital investment than buying land. It can be a great way for inexperienced farmers to get started and understand the farming business before buying land and committing to it. This way, the farmer can also invest more in the seeds, fertilizers and equipment rather than in land. There are three main types of leases -
There may be several tax implications in leasing farmland for both the tenant and the landlord. It is advisable to consult a tax accountant and discuss individual circumstances before deciding to lease.
Apart from leasing private land, crown land can also be leased for farming. In the Toronto region, the TRCA (Toronto and Region Conservation Authority) has also leased over 400 hectares of agricultural land for urban agriculture. These lands are located in urban regions and are a source of fresh and local produce for nearby neighbourhoods.
Infrastructure Ontario manages several government properties across Ontario, and it is possible to apply for leasing available vacant lands and spaces in buildings managed by them. The interested party must fill in the Infrastructure Ontario Building/Land Lease Request Form to start this process.