Q: I farm in Saskatchewan. I want to know how right of first refusals work on land. I lost some land to a bank and want to try to buy it back.
A: A right of first refusal is a well-defined concept of law. It is usually a contractual right that two parties agree to but in Saskatchewan there is also a right given under legislation that applies in a limited fashion.
One party is the landowner. The other party is someone interested in buying that land, but not right away. Under a contractual provision often found in a farm lease, if the landowner gets an offer to buy his land, the other person has a right to buy it at that price.
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There is usually a time limit for the buyer to say whether he wants the land at that price, and if so, there is another time limit within which he has to pay.
Otherwise, the landowner may sell to the person making the offer.
Under contract law, such rights were purely contractual in nature and did not give rise to an interest in the actual land. No caveat could be registered against title to protect the right of first refusal.
In Saskatchewan, there is also a statutory right of first refusal. This is a right given under a piece of legislation called the Saskatchewan Farm Security Act (SFSA). Enacted in 1988, the SFSA was a reaction to an economic crisis in agriculture in the province at that time.
It applied when a farmer lost his land to a mortgage holder through foreclosure or had voluntarily transferred the land back to a mortgage holder or vendor to settle an outstanding debt.
If that happened, this law gave the farmer a chance to buy the land back through a right of first refusal.
The bank had to receive a bona fide, genuine offer to buy the land from a third party. The bank could accept that offer, but only subject to the original farmer’s right of first refusal.
The bank then had a duty to provide the farmer who had lost the land with a notice of the basic sale terms.
The law then gives the original farmer the right to match that offer. It is important to note that the exact offer must be matched. There is no “picking and choosing.”
In other words, if a bank gets an offer to buy two quarter sections for $100,000, the original farmer cannot say he only wants to take one at $50,000.
The farmer has two 15-day time limits, both strictly enforced. The first starts on the date the farmer received notice about the offer. The farmer must notify the bank within 15 days if he wants to buy the land at that price. If not, the sale to the third party goes through and there is no further right of first refusal. Then the second time limit kicks in.
There is a further 15 days for the farmer to come up with the total purchase price of the land or an “irrevocable letter of credit from a financial institution.”
If the farmer does this, he gets the land. If he fails to come up with the money, then the sale goes through to the third party.
This legislation is helpful as it allows farmers a chance to regain land lost due to a debt crisis.
The right is assignable. Sometimes a farmer who has suffered debt problems will have trouble getting financing to repurchase that land. That farmer is allowed to transfer the right of first refusal to a spouse, child or corporation in which he has an interest.
These provisions are highly technical and often tricky so I rec-ommend good legal advice. Many farmers who have tried to represent themselves have ended up losing the chance to repurchase their land under this unique Saskatchewan law.
Rick Danyliuk is a practising lawyer in Saskatoon with McDougall Gauley LLP. He also has experience in teaching and writing
