The subdivision provisions of The Planning and Development Act, 2007 (Saskatchewan) (the “Act”) might, in some circumstances, affect the validity of a lease.
Consider the following example. Company A owns land that includes a number of standalone buildings. The land is described on one Certificate of Title. Company B offers to lease one of those buildings from Company A. Company A and Company B enter into a lease for a term of twelve years. To protect its leasehold interest in the building, Company B registers an interest on the Certificate of Title at the Saskatchewan Land Titles Registry (the “Registry”).
This may seem like an innocuous and fairly standard transaction. However it might violate the Act.
The Act states that:
- every subdividing instrument must be approved by the appropriate subdivision authority; and
- a subdividing instrument cannot be registered at the Registry without subdivision approval.
“Subdividing instrument” is broadly defined in the Act and, for example, includes a lease that affects only part of a parcel of land (as opposed to a lease over an entire parcel of land). The Act deems such instruments to, in effect, cause a subdivision of land.
There are exceptions to the requirement for subdivision approval, including where:
- the lease affects an entire parcel of land;
- the lease affects only part of a building (i.e., there is other space in the building that is not subject to the lease) and does not include other land;
- the term of the lease (including any renewal terms) does not exceed ten years;
- the lease was entered into before the coming into force of the predecessor statute to the Act; or
- the lease relates to surface rights and well sites.
In the above scenario, the lease between Company A and Company B would be caught by the Act and would not be saved by any of the exceptions listed above. Company A and Company B ought to have obtained subdivision approval prior to entering into the lease. As Company A and Company B did not do so, the lease might be considered invalid.
Prior to entering into any lease, the landlord and the tenant should first consider whether the Act applies and, if so, whether subdivision approval ought to be obtained.
If you wish to obtain further information, or would like legal advice regarding the provisions of your lease, please contact Kelly A. C. Waddell.
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