A blog about all things rural and agritourism related
An Alternative Solution to Farm SeverancesJune 4, 2014
Tags: 100 year lease, farm culture, farm severances, long term leases, Rural culture Categories: rural culture
Most farmers have encountered the restrictions in farm severances that have been enforced over the past years. This planning policy requires that farms must be a minimum of 100 acres (40 hectares). And the result is that farmers have been unable to sever surplus houses from farms they purchase. As with most policy it is like a pendulum, swinging from extremes until it comes to equilibrium. I believe its times to come to equilibrium with alternative planning policy.
But first some background. This planning policy was put into place to protect farmland from being cut up and carved into for non-farmer estate lots. It was also there to protect “the right to farm” and keep neighbourly relations in rural areas in tact as non-farmers moved into these houses.
- farmland parcels remain large for viable farming operations,
- farmers maintain the “right to farm” without too much complaining from non-farm neighbours
- protects options for the future of farming for both large and small operations
- surplus farmhouses get torn down and degrade through unsuccessful rental agreements
- the rural municipal tax base is significantly reduced as farmhouses disappear
- the rural neighborhood becomes more fragmented and isolated as neighbors become further and further apart
- the rural heritage of the farmhouse architecture is quickly being lost
- deed restrictions can disrupt succession planning for farm families.
As you can see there have been some unintended consequences to this planning policy. So what can we do about it now? And quickly before it’s too late? Some municipalities are allowing severances where the farmhouse is additional to the farm operation. This allowance may involve combining lots into larger 200 acre parcels, but not always. This is a mediocre temporary solution, but is does not maintain the original intent of the policy to maintain 100 acre parcels for farming operations, nor the flexibility of smaller parcels. It also will start to further isolate farmers and fragment farm communities.
My solution comes at this problem from a slightly different angle. I believe that long-term land leases are an alternative solution. It is a practice that has been around in Europe’s major cities for many years as monarchies, government, and wealthy families have typically owned the majority of the land in cities and have prevented the general public from land ownership, but allowed home ownership on this land. Essentially a landowner could provide a long term lease (100yrs) that would give a renter/homeowner confidence and surety to invest in the house with the ability to sell the lease and get their investment back as they would with a house in town or small lot. I believe that this solution can take care of most of the advantages and disadvantages listed above. It would also maintain the 100 acre plot for future farming. This would give a person reason to look after and existing farmhouse, or build new and increase the rural tax base. The lease agreement would need to address a number of issues, such as the “right to farm”, the right of first refusal, shotgun terminations, options to renew, etc.
This idea involves a number of industry reforms, but policy is the venue to undertake these reforms and creates demand for related services and products. The following industries have surfaced as roadblocks during my research and implementation of this theory.
Planning Policy – currently limits the length of lease to a maximum of 21 years without an option to auto renew at the end. This is clearly not long enough to give any renter/homeowner confidence to maintain or invest in a property. Thus this is where the policy would need to change to start the reform from the top down.
Mortgages & banking – as of right now mortgages or difficult to obtain for houses on leased land. Banks don’t like to be the second on a mortgage (after the farm mortgage holder), nor do they like seizing an entire farm (they are not in the business of looking after livestock or land while they wait to sell). The amortization period is also limited to 5 years less that the time remaining on the lease (ie a maximum amortization of 16 years with a 21 year lease).
Real Estate – long term leases are not something the industry is familiar with in North America. The value of leases is not understood and could be considered risky without education. However this type of real estate is prolific in Europe, especially England and could be adopted here learning from their system and years of experience.
Reform will take work from the bottom up and the top down, so consider this next time you buy another farm with a house on it. Don’t tear down the house until you consider your options.
Please feel free to contact me for more information, if you want to help with this movement, present it to your municipality, or try it out yourself.