Land Lease in Ontario

In Canada, most homeowners hold either a freehold title, owning both the home and the land, or a unit within a condominium corporation, where individual units are privately owned, and common areas are shared. Less commonly known is a third option: land lease ownership, where the homeowner owns the home but leases the land beneath it. Beyond housing, land in Ontario can also be leased for recreational, agricultural, and commercial purposes, as explored on this page.

In land lease housing, the resident owns the dwelling but leases the land it sits on, paying a monthly fee to the landowner. Land rent in Ontario land lease communities is subject to the provincial rent increase guideline, which is set annually by the Ontario government. The guideline for 2026 allows up to a 2.1% increase. The 2.1% cap applies to land lease communities first occupied before November 15, 2018. Sites first occupied after this date are not subject to the provincial rent increase guideline.

The purchase prices of these properties are typically much lower than those of freehold houses, so if you spot a property listed for a price well below comparable properties, it may be a land lease home.

Buying a land lease property can be a tricky affair. A buyer must study all the aspects carefully and consider the following before buying:

• Time remaining on the lease: It affects the mortgage and property value. If the land lease is about to expire, you may not be able to secure financing to buy such a property.
• Terms of the surrender clause: If the land lease expires, you may have to surrender all structures built on it, unless the lease is renewed. In some cases, you may be allowed to keep owning the house, but it is practically impossible to move a house from the land unless it is a mobile home.
• HOA fees: You might have to pay HOA / Strata / Community fees every month if the property is located in a planned community. The fees can vary depending on the amenities and services available to you.

The Residential Tenancies Act (RTA) applies to buying a house on leased land in Ontario. Note that while the RTA does apply to land lease communities, the standard lease form required for most Ontario rentals does not apply to land lease community sites; these tenancies use their own lease agreements governed by Part X of the RTA.

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. Such a 20-year lease automatically disqualifies such properties from the standard 25-year mortgage amortization. But many lenders consider land leases un-lendable regardless.

Several planned land lease communities exist across Ontario, developed by real estate companies such as Sun Communities and Parkbridge. Many are retirement-oriented, with well-known examples such as:

• Briar Hill in Alliston, and
• Laurelwood in Waterloo.

The monthly land rent is paid to the community's landowner and typically includes access to shared amenities such as a pool, clubhouse, or recreational facilities. Additional community association fees may apply for the upkeep of common areas.

Mobile home parks are another common form of land lease housing in Ontario, where individual residents own their homes while leasing the lot from the park operator. The "service fees" cover municipal-style services (fire, police, garbage) and are distinguished from the "HOA/Community fees", which typically cover lifestyle amenities like pools or clubhouses.

There are three main types of land leases in Canada

1. Planned Communities: Commercial real estate developers develop communities where the residents can buy only the house, while the land remains the developer's property. Retirement communities are often based on such models. Similar developments can also be seen in some urban areas.
2. Institutional Land: Lands belonging to public institutions and municipalities that have dedicated land parcels available for leasing.
3. Land belonging to First Nations: First Nations of Canada have been leasing reserve lands for private use, and are particularly popular with those looking to own cottages at a lower price.

Advantages -

1. Free up money for other purposes: Being cheaper than freehold, land lease homes require a lower investment, freeing up money for other investments and purposes.
2. More Affordable: Due to home prices being lower than freehold, the mortgage amount is typically lower, making it a more affordable option, especially for first-time buyers and retirees looking to downsize.
3. Lower property Taxes: Property taxes depend on property value, and are lower because of not owning the land. However, property tax related to land value may be included in the monthly land rent or billed as a separate service fee, depending on the lessor.
4. Better Amenities in the Community: Land lease houses are often a part of a planned community, which comes with amenities and facilities that the community can enjoy.

Disadvantages -

1. Monthly Rent for the Land: You need to pay monthly rent for the land on which the house is located.
2. HOA / Community Fees: Land lease houses are often part of a planned development where the residents need to pay monthly HOA fees for the maintenance of common amenities, even if they don't use them.
3. Lower Home Equity than Freehold: The homeowner does not build any equity in the land, and thus, the equity is much lower than in freehold houses, making it an unattractive investment option. The homeowner may also be at risk of losing all equity at the end of the lease term. The value of a home may also significantly decrease as the lease term approaches its end.
4. Tricky to get a mortgage: Many lenders may be unwilling to finance a land lease home, and those who do might ask for a higher percentage of the purchase price as a down payment compared to when buying a freehold house. The lease tenure might also affect the mortgage tenure. For example, if the lease tenure is 20 years, you would not be able to get a mortgage amortization for 25 years. For the same reason, it may also be difficult to find buyers for such homes when you decide to sell. Because you do not own the land, some lenders may require a chattel loan rather than a traditional mortgage. These often come with higher interest rates and require larger down payments (typically 20–35%).

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 one of the largest recreational land lease arrangements in Canada, located along Lake Huron near Sauble Beach, where the Saugeen First Nation has leased land for almost 3,000 seasonal cottages. Annual lease fees range from approximately $4,300 to $9,600, depending on location, with an additional service fee covering roads, garbage collection, and fire and police services. Buyers should contact the Saugeen Land Office directly for current rates, as fees are subject to change at each lease renewal.

You should keep the following in mind when looking for a land lease cottage -

• Some restrictions on use may apply. For example, you may not be able to use the cottage for more than a certain number of days during some months.
• In addition to the lease fees, you may have to pay a service fee for services such as garbage picking.
• Banks do not give mortgages for buying land lease cottages. Private mortgage lenders might give you a loan, but most people buy such cottages using cash or a Line of Credit.
• You cannot use the cottage for commercial purposes, for example, rent it out to other people.

87% of all land in Ontario is crown land owned by the provincial government. The crown lands of Ontario are managed by the Ministry of Natural Resources (MNR) 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:

Annual Rent as a % of market value

Source: Ontario Ministry of Natural Resources (MNR)

A lease provides exclusive rights on such land without giving its ownership. The following specifics apply to leasing a crown land:

• The lease term is usually 20 years, but a longer term may be negotiated.
• The proposed project must significantly improve the land.
• The intended land use should not have any future environmental or financial liability.
• It is possible to use this land as collateral.
• The granted right may be transferred if approved by the ministry, and renewal may also be negotiated.
• A land survey is required.

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 -

• Cash Rental Lease - The tenant pays a fixed amount of rent to the landlord every year.
• Crop Share Lease - Sales from the crop are divided between the tenant and landlord. There is a greater degree of profit and risk sharing in such an arrangement.
• Flexible Cash Rent Lease - The tenant receives the entire amount from the sale of crops but pays the landlord a rent amount determined by the yield and price of grain in that year.

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 279 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.