How to Sell a Farm Property in Ontario Step by Step

Selling a farm is not the same as selling a house in town. You may be dealing with several parcels, a farmhouse, barns, drains, tenants and tax rules that only apply to farmland.

This guide walks through the legal steps in the order they usually come up, from deciding what you are selling to closing day. It explains how things generally work in Ontario. Your own farm may raise different issues.

Step 1: Decide exactly what you are selling

Many farm sales go wrong at the start because the owner and the buyer picture different things. Are you selling the whole farm, or keeping the house and selling the land? Are you selling a separate lot for a retiring family member? The answer decides whether you need approval from the municipality.

In Ontario, a consent (also called a severance) under the Planning Act is generally needed to sell, mortgage or charge part of a property. The exception is land that is already divided, for example by a public road or railway, where no consent is needed to deal with the separate parts.

If you plan several severances in the same area, the consent authority may decide that a plan of subdivision is needed instead. Consents are granted by a municipal council or a body it delegates to, such as a land division committee. In parts of Northern Ontario where no one has planning approval authority, the Minister of Municipal Affairs and Housing grants them.

Step 2: Understand the limits on severing farmland

New residential lots may not be created in prime agricultural areas under the Provincial Planning Statement, 2024, except for a residence that is surplus to a farm operation. This is the main reason rural residential severances on farmland are refused.

The surplus farm dwelling exception allows one new residential lot after a farm consolidation. The lot must be the minimum size needed, and the planning authority must ensure that no new dwellings or additional residential units are permitted on the remaining farm parcel. Where the Greenbelt Plan applies, the authority must ensure a dwelling is never permitted on the retained farm lot.

Additional residential units in prime agricultural areas cannot be severed into separate lots and must stay with the principal dwelling.

If a consent is approved, it can lapse if the deal is not completed in time. How long you have to meet any conditions and complete the deal depends on the terms of your consent, so it is worth confirming with a lawyer. Because this timeline has been the subject of amendments, confirm the current deadline with the consent authority.

Step 3: Check buildings, drains and approvals

Buyers and their lawyers will ask whether barns, additions, a new septic system or a renovated house had the permits they needed. Building without a required permit is an offence under the Building Code Act, 1992, with fines of up to $50,000 for an individual on a first offence. Septic installations, repairs and upgrades also need a permit and an inspection.

Drains deserve a look too. Municipal drains under the Drainage Act are not registered on title but can restrict a property. Assessments are charged to whoever owns the property when the bill is issued, and unpaid assessments have priority lien status. Ask the municipality for written confirmation so you can give the buyer a clear answer.

• Permits and final inspections for buildings and septic work
• Written confirmation from the municipality about any municipal drain
• Conservation authority approvals if part of the land is in a regulated area such as a floodplain or wetland
• Survey and any prior consents for parcels that were split off

Tax, tenants and the type of buyer

Farm tax class matters to buyers. Eligible farmland is taxed at no more than 25% of the municipal residential rate, but the land must be assessed as farmland, used for a farm business with a valid Farm Business Registration number, and owned by Canadian citizens or permanent residents. New owners must check eligibility with Agricorp and apply or reapply.

On your side, the capital gains inclusion rate remains one-half, as the proposed increase to two-thirds was cancelled on March 21, 2025. For 2025, the lifetime capital gains exemption for qualified farm or fishing property is $1,250,000 of capital gains, which is a maximum capital gains deduction of $625,000, and indexation resumes in 2026. The limit is shared with small business shares, so confirm your own position with an accountant.

If the farmhouse is your principal residence, only one home can be designated per family for each year. Where the land under the home is more than one-half hectare, the excess generally does not qualify unless you show it was needed to use the home as a residence. Report the sale on Schedule 3 and designate the property on Form T2091(IND).

• If you are a non-resident, you must notify the CRA (for example on Form T2062) within 10 days of the sale. If no certificate of compliance is issued, the buyer may become liable for tax and may withhold 25% of the price (50% for certain property), less any certificate limit.
• If you are selling to a family farm corporation, certain transfers may be exempt from land transfer tax, but a holding corporation that rents the land to another farming entity does not qualify.
• Whether the Residential Tenancies Act, 2006 applies to a house or other housing on your farm, including housing for farm workers, depends on the facts and on recent changes to that Act, so it is worth confirming with a lawyer before you tell a buyer.

Step 5: What to do next

• Write down exactly what is included: land, house, buildings, equipment, crops and quotas
• Gather your title documents, survey, drain notices and permits
• Ask an accountant how capital gains and the principal residence rules apply to you
• Check with the municipality whether any severance is needed before you list
• Review every tenant arrangement in writing before signing an agreement of purchase and sale
• Speak to a real estate lawyer before you sign, so conditions and closing dates fit your plans

Frequently asked questions