Disclaimer and Limitation of Liabilities:
The Issues and Resolutions provided on the Farm Land Security Board (FLSB) HQP FAQ site are examples of questions coming to the Board. The resolutions are not to be read as legal opinions. All situations have unique details that must be considered in determining how HQP affects a mortgage.
This document is only a guide; readers must apply their own diligence and consult with a lawyer before deciding how to proceed.
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- Home Quarter Protection (HQP);
- Home Quarter (HQ);
- Homestead (HS);
- Solely New Funds/Excluded Debt Class Exclusion Order (SNF/ED CEO);
- Revolving credit (r/c);
- Farm Land Security Board (FLSB); and
- The Saskatchewan Farm Security Act (SFSA).
All farm land is not subject to Home Quarter Protection. Only the farm family's homestead is subject to HQP.
Farmland cannot gain HQP after the mortgage is given.
The Act, section 44(15), (16) and (17), states:
(15) Where, under The Farm Security Act, a mortgage executed prior to the coming into force of this Act was not subject to section 7 of that Act, then that mortgage is not subject to this Part.
(16) This Part does not apply to a mortgage where:
a) the mortgage is executed after the coming into force of this subsection; and
b) at the time when the mortgage is executed, the farm land that is subject to the mortgage is not a homestead.
(17) Where farm land that is the subject of a mortgage is not a homestead when this subsection comes into force, this Part does not apply to the mortgage.
- If the farmer's homestead is less than 160 acres other land cannot be designated. The definition of homestead includes all subdivisions of the home quarter but no farmland outside the normal 160-acre home quarter. A farmer with less than a 160-acre home quarter cannot designate other land as homestead land.
- A farmer whose yard site is subdivided continues to have HQP on the entire 160-acre home quarter.
- A mortgage of the subdivided bare land portion of the home quarter continues to enjoy HQP, and therefore must be excluded from HQP.
- The Act does not allow the farmer to designate a home quarter. Only the homestead quarter "…occupied by the farmer…" has HQP.
- A farmer can lose HQP. HQP requires the homestead be occupied by the farmer. Moving off the farm will bring HQP into question. The court will decide this question if the mortgage is foreclosed.
Only the mortgage is excluded from HQP. HQP stays in place respecting all other debt including other mortgages. The term "waiving home quarter protection" is misleading as it incorrectly implies that other creditors can piggyback on a mortgage creditor's HQP exclusion order.
If the farmer lives in town and has a house on the farm caution says "yes" to exclude the farm homestead mortgage from HQP. The Act's definition of homestead includes the phrase "…house and buildings occupied by the farmer as his bona fide farm residence …" If the farm yard site includes a residence ensure the mortgage is excluded from HQP.
A Revolving credit mortgage can be excluded from HQP. The Solely New Funds/Excluded Debt Class Exclusion Order (LINK) applies to revolving credit mortgages. Also, when an existing revolving credit loan is being increased, a co-application can be submitted to the Board for its decision whether to exclude the mortgage from HQP.
Amending the mortgage loan repayment terms
Once a mortgage is excluded from HQP, normal changes to its repayment terms or lengthening its amortization do not affect the exclusion order.
As long as the new repayment terms do not require a new mortgage and no new security is added, the mortgage will continue to be excluded from HQP.
An exclusion order is required when the mortgage loan is to pay out interim construction financing, credit card or other debt. When the original creditor is refinancing an interim loan or credit card debt originally used for construction purposes, the mortgage purpose is refinancing – not construction – and an exclusion order is required.
Guarantor mortgages do not qualify for the Solely New Funds Excluded Debt (SNF/ED) class exclusion.
Clause 4) of the SNF/ED Order states:
4) the homestead secured under the mortgage is registered in the name of the borrower or is being acquired by the borrower with the subject advance;
When the loan is given to a company or a person not holding title to the home quarter, always apply to have the mortgage excluded from the Protection. The two most common examples of this are:
- When the farmers are holding the HQ in their personal names and the loan is given solely to their farming company. The farmers are shareholders but they are not borrowers; instead they are guarantors, guaranteeing a loan to their company;
- When the borrower' parents are asked to provide a guarantor mortgage in support of one of their children's loans, the parents are not borrowers, they are guarantors.
Apply for a HQP exclusion order in both cases.