Jason Bryk 

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Conveyance of Ownership or Ownership Like Rights in Houses Without Conveying the Underlying Land

May 2014 



Mr. and Mrs. Jones have farmed a Section of land for virtually all of their adult lives, but they are now thinking of retiring and would like to turn over the farm operation to their two sons who wish to carry on as agricultural producers.  The Jones family home is situated on a portion of one of the quarters of the Section, and the Jones (mother and father) wish to continue to occupy (and if possible, "own") the home while transferring ownership of the rest of the farm land to the sons.  The mother and father do not wish to retain any of the land itself underlying their home.  They also have no desire to transfer ownership of the home to anyone else during the course of their lifetimes, and upon the death of the last of them to pass on, they would want to transfer ownership of the home to their sons.  The sons are quite willing to go along with this arrangement.


The Jones family attends upon you as their counsel and ask you if you can document the transmission of "ownership" of the home to the Jones for a period ending with the death of both the father and mother.  The Manitoba Planning Act would permit the parents to "sever" the land underlying their home and surrounding without subdivision control approval, provided that the area of the land so severed was not less than 80 acres.  But as previously stated, the Jones do not wish to retain any of the land.  What considerations are relevant and what can you do?


Canadian case law over at least the last 100 years clearly indicates that the Courts have been willing, as long as the intentions of the parties are clear, to allow a home - which is otherwise clearly attached to and forms part of the underlying land - to be treated as if it was a chattel, separate and apart from the underlying land.  Therefore, one way to document the Jones' arrangement would be for the mother and father to transfer all of their real property to their sons, with their sons then transferring the home (and only the home) back to the parents, that is, excluding any of the underlying or surrounding land.  Land Titles records would show the sons as the owners of all of the realty, and arguably, the parents could register a caveat against the sons' title giving notice of their ownership of the home.  Presumably, the legal description contained in the parents' caveat would be all of the land contained in the sons' title, as the parents would not be claiming any ownership interest in the land underlying the home (at least in this scenario).  A variation on the foregoing would be for the sons to execute a written declaration of trust whereby they state that they are holding the home as trustees only, for and on behalf of the parents, with the parents then being able, again, arguably to caveat the whole of the sons' title to give notice of this trustee - beneficiary relationship.

It would almost certainly be necessary for the sons to additionally grant a right of access, to and from the home so as to allow legal ingress and egress to and from the adjacent public road or highway and - arguably - an additional caveat could be registered by the parents against the sons' title to give notice of this easement.



However:

  1. Would the foregoing arrangements run afoul of the subdivision control rules in The Manitoba Planning Act?  At first blush, one would think that the subdivision control rules would have no application to the arrangement, because no interest in land - only an interest (ie, ownership) in the home - is granted to the parents.  However, the definition of "land" in The Planning Act includes what are referred to as "messuages" and "hereditaments".  I have found a definition of "messuage" as being "a dwelling house together with its buildings, cottage and the adjacent land appropriated to its use".  This suggests that a "messuage" must combine both one or more buildings and the land underlying or adjacent to it (or them) reasonably necessary for its (their) normal use.  However additionally, I have found a definition of "corporeal hereditament" as being "a permanent tangible object that can be seen and handled and is confined to the land".  Thus, at least arguably, a conveyance of ownership of a (corporeal) hereditament (a house) is a "subdivision" within The Planning Act.  "Subdivision" is defined to mean "the division of land by an instrument…".  Therefore it appears that even though one can lawfully otherwise convey ownership of or create other interests in a home, exclusive of any dealing with the underlying land, such a "bare" dealing with the home may nevertheless constitute a form of "subdivision" within the ambit of the legislation, thereby necessitating compliance with the - no doubt time consuming, onerous and expensive - subdivision control rules.
  2. If the home itself alone, without including any of the underlying or surrounding land, is conveyed, or held in trust by the sons for the parents, then arguably, the parents do not acquire any interest in land.  If they don't acquire an interest in land, they shouldn't be filing a caveat against the sons' title.  Lest anyone think otherwise, the parents could not file a Personal Property Security Act fixtures notice against the sons' title on the basis that what has been conveyed to them is a "fixture", simply because the conveyance of "ownership" of the home does not constitute a security interest within the meaning of The Personal Property Security Act.  That is, there is no secured transaction.
  3. In all likelihood, the purported grant of easement by the sons to the parents to provide access to and from the home to the nearest public road is not in law an easement at all.  Thus, it is not caveatable.  This is because to create an easement against land (ie, against a "servient tenement"), there must (at least in this type of situation) be a dominant tenement, and the home alone, in effect, severed from the underlying land, would not - in this context - constitute land.

The writer is not aware of any case which has considered the issue of whether or not conveyance of an interest (in particular, an ownership interest) in a house, conceptually divorced from the underlying land, would - or would not - be a "subdivision" within the meaning of The Planning Act.  The writer doubts that it was the Legislature's intent to "catch" this type of a "subdivision" (assuming that it is a subdivision), yet given the current wording in the legislation, it is possible that a Court might hold that subdivision approval is needed for this type of an arrangement.

But consider this alternative - instead of the sons conveying ownership of the home (separate and apart from the underlying land) to the parents, the sons could instead long-term lease the home, severed or divorced from the underlying land, to the parents.  The parents could then - arguably - file a lease caveat against the sons' title.  There would be no subdivision control problem because the definition of "subdivision" in The Planning Act specifically does "not (include) a lease respecting only floor space in a building".  A lease could also contain a (non-registerable) license (not an easement) to the parents (co-extensive with the continuing existence of the lease) for access to and from the closest public road.  The lease would no doubt specify a nominal rent and would obligate the parents to be responsible for the payment of taxes, insurance, maintenance, etc.  However, again, it is necessary to be concerned about whether or not the parents' lease caveat would really be giving notice of an interest in land.  The subject matter of the lease is - presumably - only a chattel.


Neither the lease approach nor the conveyance of the home as a chattel divorced form the land would allow the parents to mortgage their rights in the home to a financier utilizing the "usual" LTO prescribed form of (freehold) real property mortgage.  A lender willing to advance value to the parents against the home would have to take (where a lease was used), a leasehold mortgage.  Arguably, such a leasehold mortgage would, at least in part, be a species of security agreement and the lender could register a Personal Property Security Act fixtures notice against the sons' title.  The leasing solution is probably the safest way to deal with the Jones' situation, unless and until an amendment is made to The Planning Act to make it completely clear that conveyance (not just a lease) of a building, divorced from the underlying land, is not a species of "subdivision".


Assuming the same basic fact situation as outlined at the beginning of this paper (the Jones parents wish to retire, pass the farming operation to their sons but retain their home), another approach would be for the Jones to incorporate a corporation to which they would transfer ownership of all of the buildings and improvements on the farmland except for their home and also except for all of the land.  The Jones would then lease all of their land to their corporation.  The corporation would grant a licence to the Jones providing for access to and from their home to the nearest public road.  The corporation would then register a caveat giving notice of its lease rights against the title to the whole of the land (which would include the land underlying the Jones' home).  Transfer of ownership of the corporation from the Jones parents to their sons would be effected by the sons acquiring shares (no doubt "equity" shares) in the corporation.  There should be no problem with the corporation's lease caveat because clearly, the lease constitutes an interest in land.  However, the question remains as to whether or not the Jones' retention of ownership of the home alone (divorced from the underlying land) constitutes a subdivision.  Similarly, does the conveyance by the parents to the corporation of ownership of all of the buildings and improvements other than the home constitute a subdivision?  As stated above, the writer doubts that conveyances of buildings alone was intended to be "caught" by the subdivision control rules in The Planning Act.  But so far, we just don't know for sure.


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