Changes to Lending Regulation for Farmers.

Agricultural real estate has special treatment in Saskatchewan.  From ownership restrictions to special lending issues, a family farm, especially the home quarter, is a different beast than your regular residential real estate transaction. 

One such aspect is home quarter protection.  It is best to go to the Saskatchewan Farm Security Act for technical definitions, but in essence, the home quarter is the quarter section of land on which the homestead resides.  The homestead is the residence of the farmer.  Home quarter protection restricts the foreclosure of home quarter unless certain exceptions or exclusions apply.  A good overview can be found on the Farm Land Security Board website.

You could imagine that a lender would be hesitant to lend against property that isn’t allowed to be foreclosed upon.  As a condition of many lending transactions involving home quarters, it is incumbent on the financing client to obtain an exclusion order so that the protection does not impair collection activities if the client defaults on the mortgage. It may involved an application that you need to make to the farm land security board for them to assess whether the financing was in your best interests.

Certain transactions qualify under an class exclusion order.  Class exclusion orders are broad orders that remove the homestead protection from the home in certain types of transactions.  These exclusion orders were modified recently to change the situations where the class would apply. 

Non-Farm Mortgages – If you owned a home quarter, but you did not farm in a commercial sense, this class exclusion mortgage could apply to you.  However, the indicia of being a “non-farmer” was to look at the amount of income that you earned from farming activities.  The income threshold has increased from $5,000 to $20,000. 

New Funds/HQP Exempt Funds Class – In short, the Farm Land Security Board did not want to see new debt without protection being used to pay for debt that was protected.  The changed the manner that this was being administered by requiring a statutory declaration that the funds were not going to be used for any more than regular debt payments.

Always consult your lawyer, but more info can be found in the links above.