Beekeeping and Property Taxes – How many hives are enough?

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

Beekeeping, not bookkeeping.  The Assessment Review Board (“ARB”) recently issued a decision in which the number of beehives kept by a property owner was the deciding factor in denying him farm classification for his property.  The ARB agreed with the position taken by the Municipal Property Assessment Corporation (“MPAC”), the not-for-profit corporation mandated to classify and assess the value of land in Ontario for property tax purposes, that a property must have no fewer than 50 beehives to be assessed as “farm land” where beekeeping is relied upon as the relevant farming activity.

Land in Ontario can be used for farming purposes without being classified as farm land for property tax purposes.  The default classification for property is residential.  In the beekeeping case before the ARB, the property at issue consisted of 73 acres of land.  The owner contended that 1 acre, on which his residence was situated, should be left in the residential property class.  The remaining 72 acres, he argued, should be placed in the farm property class because he carried on a commercial beekeeping operation on the property.  In 2019, the tax year under appeal, the owner had kept 20 beehives.

The requirements for classification in the farm property class are set out in the General Regulation made under the Assessment Act (the “Act”), the legislation that governs property taxation in Ontario.  The Act does not define “farm land”, but one of the prescribed requirements is that Section 19(5) of the Act applies to the land.  Section 19(5) provides special rules for valuing “farm lands used only for farm purposes”.  The ARB has previously identified several factors to be considered in determining whether a property is “farm land” including: whether the land has physical characteristics of a farm; whether there is a farming operation being carried out by a bona fide farmer; the surrounding uses of the land; and the history of uses of the land. 

This was not the first time the ARB had been asked to find that beekeeping supported a classification of property as farm land.  In fact, as recently as 2020, the ARB had denied an appeal where the owner argued that the presence of two beehives made a one-hectare area on the property at issue “farm land”.  In that case, an expert witness testifying for MPAC explained that:

… land has to have “50 or more hives” before MPAC will assess it as a commercial bee keeping operation.  Keeping less than 50 hives is not considered a bona fide farming operation and is considered to be recreational or hobby farming.  He advised that the 50 bee hive limit is not arbitrary as it is consistent with the bee keeping industry, which includes the Ontario Beekeepers’ Association, the Canadian Association of Professional Apiculturists, the Canadian Honey Council and Ontario’s Ministry of Agriculture, Food and Rural Affairs and Agricorp.

The ARB acknowledged that keeping two beehives may well be a farming activity or purpose, but concluded that it only rises to the level of a “recreational or hobby farm”. 

In the more recent case, the appellant owner argued that both the ARB, in its 2020 decision, and MPAC, in its policy, focused on the wrong factor.  The relevant factor should not be the number of beehives kept, the owner argued, but gross farming income.  He submitted that the provincial laws governing the classification of farm land and regulation of farm businesses “state they are determined by meeting gross farming income requirements.”  In order to qualify as a farming business within the meaning of the Farm Registration and Farm Organizations Funding Act, a farm operation must have gross farming income of at least $7,000.  As the appellant owner’s beekeeping operation had grossed $7,500 in 2019, he argued that his operation was a bona fide farm operation that made his property “farm land”.

The ARB rejected this argument.  While gross farming income may be an essential factor in eligibility for registration of a farm business in Ontario, farm income alone is not the relevant measure of a farming operation for property tax classification purposes.  The ARB came back to the 50-beehive threshold, which it agreed was a rational and not an arbitrary dividing line for the purposes of property classification between a bona fide farming operation and farming activity only to the level of recreation or hobby farming.  The ARB referred to a 2017 decision of the Federal Court citing evidence that at least 50 beehives (colonies) are required to augment a person’s income significantly, elevating an operation beyond a hobby to a commercial enterprise. 

All was not lost for the appellant owner, though.  While he had only 20 beehives in the period relevant for the 2019 tax year, he had increased his hive count to at least 50 in the time period relevant for the 2020 tax year.  As such, MPAC agreed that a portion of the property was “farm land” in 2020, resulting in a reduction in the assessed value of the property by $46,000.  

Read the ARB decision at:  2021 CanLII 26724

 

Subdivision Control – A Checkerboarded Past and Future

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

There was a time in Ontario when property owners were at liberty to subdivide their property without municipal consent.  An owner in the nineteenth century to whom the Crown granted a 200-acre parcel could divide the parcel into smaller pieces and convey them to new owners by depositing deeds in the Land Registry.  200-acre parcels became 100-acre parcels, 100-acre parcels became 50-acre parcels, and so on.  The creation of land parcels was largely a matter of the personal circumstances and preferences of individual landowners. 

Early in the twentieth century, Ontario began to enact planning legislation intended to impose some governmental control over land use.  In 1946, Ontario passed the first version of the Planning Act, which gave municipalities the power to create and impose formal Official Plans.  Later, municipalities were given the ability to pass subdivision control by-laws that would make municipal consent a condition of severances of land.  Eventually, municipal consent was made mandatory for nearly all severances, with or without a by-law in place.

Section 50 of the Planning Act governs subdivision control today.  Section 50(3) states that, without municipal consent, and unless a special exception applies,

No person shall convey land by way of a deed or transfer, or grant, assign or exercise a power of appointment with respect to land, or mortgage or charge land, or enter into an agreement of sale and purchase of land or enter into any agreement that has the effect of granting the use of or right in land directly or by entitlement to renewal for a period of twenty-one years or more…

Section 50(21) of the Act provides the legislative hammer with which subdivision control is enforced: 

An agreement, conveyance, mortgage or charge made, or a power of appointment granted, assigned or exercised in contravention of this section or a predecessor thereof does not create or convey any interest in land …

A transaction that contravenes the Planning Act is ineffective; no interest in land is created or conveyed despite the intentions of the parties.

The transactions that require municipal consent involve the conveyance of an interest in one piece of land when the party making the conveyance retains an abutting piece of land (note that parcels that touch only at a point like squares of the same colour on a checkerboard are not considered abutting parcels).  Without municipal consent, the owner of a 100-acre parcel generally cannot sell off a 50-acre portion of the land and retain the other 50 acres.  The owner also cannot split the 100-acre parcel into two 50-acre parts and transfer those simultaneously to two different purchasers (a procedure that was once considered a loophole in the Act).  Without a severance consent, the owner is generally limited to dealing with the whole 100-acre parcel.

And it usually doesn’t matter that the 100-acre parcel, or whatever the area is, was formed from what were previously smaller parcels.  If Owner A owns a 50-acre parcel and purchases the 50 acres next door (taking title in the same name), the two 50-acre parcels merge and cannot be re-split without a severance consent.  It doesn’t matter that the two 50-acre parcels may continue to have distinct tax assessment roll numbers or may even somehow appear as separate PINs (parcel identifier numbers) in the Land Registry; for purposes of the Planning Act, they have merged unless they were previously divided with municipal consent.

The Local Planning Appeal Tribunal (the “LPAT”, formerly the Ontario Municipal Board) recently reversed an amendment to the Official Plan of the County of Bruce (the “OPA”) intended to sever a 60-hectare farm parcel into two parts.  The owners of the property had applied to the County for the amendment on the basis that it was a “correction of title” to restore the two separate parcels that had previously existed.  The owners believed that the Land Registry Office had combined the parcels by placing both within the same PIN during the administrative conversion from the former Registry system of land registration to the current Land Titles system.  For that reason, the owners believed that the County could re-separate the lands even though the Provincial Policy Statement (the “PPS”, the over-arching provincial planning policy in Ontario) would prohibit the creation of a new lot within a prime agricultural area.

The LPAT disagreed with the owners, writing:

The Tribunal is sympathetic to the Applicants’ frustrations arising from their discovery that they cannot sell the Severed Lands without the Retained Lands, as a separate parcel, notwithstanding the fact that the two parcels were once purchased separately from the Crown. However, such circumstances are not unusual and the Act governs, and has governed, such aspects of the ownership of Lands in Ontario for decades. So too have the fundamental planning considerations which the Tribunal must have regard to been in place for applications such as this, and which now require that the Tribunal ensure that [the OPA] is consistent with the PPS, and also is consistent with, and conforms, to the other goals, objectives and policies of the County OP, and represents good planning in the public interest. The issue is not merely a correction of title as the Applicants submit.

Compliance with the Planning Act is essential to any property transaction in Ontario.  Given the drastic consequences of contravening the Act, legal advice is not optional

Read the LPAT decision at:  2021 CanLII 6240

Utility Easements and Swimming Pools – A Costly Combination

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

In conducting a title search on a property, it is not uncommon to discover one or more registrations for easements for public and even private utility services.  A municipality may have an easement for a sewer line through a property or an easement for access to maintain a sewer in an adjacent property.  Oil and gas companies have easements for pipelines.  Electricity distributors have easements for electricity transmission and distribution lines.  Telephone companies have easements for telephone lines.  A neighbour may have an easement for a private water line.  In all of these cases, there will be some restriction on the use that may be made of the land encumbered by the easement.  The “servient” owner of the affected land, whether by the terms of a contract or through the Common Law, is generally prohibited from substantially interfering with the rights of the “dominant” owner for whose benefit the easement exists.

Some minor utility easements will have little effect on property use, such as those running parallel to a road allowance where building is already prohibited by setback requirements in a zoning by-law.  Other utility easements can have a major impact on land use.  For instance, the easement for a large diameter high-pressure natural gas pipeline or for an overhead electricity transmission line can effectively sterilize a property.  Within urban centres, such easements may be condemned to serve as “green space”.  In agricultural areas, these easements can often continue to be used for cultivation and other agricultural purposes but not for any other non-agricultural development.

In standard forms of Agreement of Purchase and Sale for land, buyers agree that they will take title to the property subject to minor easements for utility or telephone services or easements for public utility lines that do not have a material effect on the use of property.  While the seller is generally obligated to provide clear title to the property, those easements are an exception.  In some cases, a buyer will know about easements affecting a property before signing the Agreement of Purchase and Sale.  In other cases, easements will only be disclosed after the deal is signed when a title search is conducted.  Sometimes the discovery of an easement can scuttle the closing of a transaction.

In a case decided in 2016, the Ontario Superior Court of Justice ordered that sellers return a $50,000 deposit to a buyer in a failed transaction involving a $1,685,000 home.  The Agreement of Purchase and Sale included the exceptions to clear title mentioned above, but the buyer refused to close the transaction after discovering that there was an easement for a TransCanada Pipelines natural gas pipeline running through the backyard directly beneath the property’s pool, cabana and patio.  There was an agreement registered on title that provided TransCanada with the right to remove the pool and cabana if necessary to deal with its pipeline.

There were actually two TransCanada easements registered on title to the property.  While the sellers had disclosed the existence of one of the easements (registered in 1959), which did not affect the pool, cabana and patio, they failed to disclose the second easement (registered in 1992), which did affect those components of the property.  The sellers had constructed the pool, cabana and patio in 2011 without TransCanada’s consent, and had subsequently entered into the agreement by which TransCanada could require removal of the pool and cabana in order to allow construction to be completed.

The Court ruled in the buyer’s favour, finding that he was entitled to rescind the agreement to purchase the property because of the undisclosed easement and agreement which could “affect, in a significant way, the [buyer’s] use and enjoyment of the property.”

The Court of Appeal for Ontario just released a decision in another utility easement/swimming pool case.  This time, homeowners constructed a swimming pool on a part of their property that was subject to a 1972 general municipal utility easement.  The terms of the easement reserved to the landowners the right to use the surface for any purpose which did not conflict with the Municipality’s rights.  The easement also specifically prohibited planting of trees and the erection of any building or structure.

The homeowners had purchased the property in 2012.  They knew about the utility easement, but believed it was abandoned or never used.  They were wrong.  The easement contained an electricity distribution line servicing a neighbouring property.  The homeowners built their pool in 2014 without a building permit, which resulted in prosecution under the Building Code Act.  In 2018, the easement rights holders (the Municipality and the local electricity distributor) applied to the Court for orders declaring that the pool encroached upon the easement and requiring the removal of the pool.

A judge of the Superior Court granted the application, ruling that the pool “actionably” encroached on the easement because it contravened the express prohibition in the terms of the easement.  Without that express prohibition, though, the judge would have found that the pool did not have to be removed because it did not meet the test for “substantial interference” with the easement; the pool could only “cause some unspecified or unknown, but probably quite minor, degree of inconvenience” to the rights holders in exercising their easement rights.

On appeal, the Court of Appeal upheld the finding that the construction of the pool was an actionable encroachment.  The words of the easement document were clear – do not under any circumstances plant a tree or build a structure within the easement lands. 

Whether you own a property or plan to buy one, don’t ignore easements.  And, no, that caution doesn’t just apply to properties with swimming pools.

Read the Court of Appeal's decision at: 2021 ONCA 1.