Farm Fixtures: A Saskatchewan Perspective

( Disponible en anglais seulement )

25 mars 2013 | David G. Gerecke, Q.C., Kit McGuinness

Our February 28th blog post (“Farm Fixtures: Feed Bunks, Portable Cattle Squeezes, Feedmills and Granaries”) provided an excellent overview of the law surrounding farm fixtures in Canada. This post intends to build on it by offering perspective from one of Canada’s most productive provincial agricultural economies: Saskatchewan.

From the creditor’s perspective, taking security over fixtures in Saskatchewan can be a tricky issue. This is because the affixing of chattels, such as grain bins, to the ground may turn them into fixtures. This common law principle of annexation was affirmed in Saskatchewan by the Court of Queen’s Bench in Skalicky v. Baraniski 1994 CanLII 5149.

In that case, the Court found that the act of bolting grain bins onto concrete pads “by itself suggests an intention on the part of the persons to locate them there permanently.” As such, the bins were found to have become fixtures and thus no longer personal property.

That result can impact significantly on lenders who have taken security over grain bins or other personal property that might be affixed to land or buildings, perhaps even having financed their purchase. If the personal property lender has also taken a mortgage on the land, it may have no impact. However, at least in Saskatchewan, it is common for farmers to obtain their mortgage financing from a different source than their operating and equipment financing.

Where one party has taken security in the bins as personal property and has registered only at the Personal Property Registry, and another lender has a mortgage over the land, the party with the security in the bins can end up with an unpleasant surprise, with the mortgage lender obtaining priority over the bins that have been bolted onto concrete pads by virtue of the fact that the bins, as fixtures, have come to form part of the land. As well, a subsequent judgment creditor could obtain priority.

Such results can spoil the expectations of even experienced lenders.

What can creditors taking security in bins (and other types of farm fixtures) do to protect their priority? The following steps should be taken:

  1. The lender must take a security agreement and register a financing statement at the Personal Property Registry, preferably with the bins identified by serial number, which is a common practice.
  2. Obtain the legal description of the land where the borrower will be placing the bins, and obtain title searches.
  3. Before the bins are affixed to the land, the lender should advance the loan and ensure that that borrower has obtained property in the bins (i.e., purchased them). If there is already a mortgage registered on that title and the loan will not be advanced before the bins are affixed to the land, the lender needs to obtain the advance consent in writing of the mortgage lender, or the mortgage lender will get priority.
  4. The lender should always register a fixtures notice against title to the land on which the bins will be located. A person who obtains an interest in the land after the bins become fixtures will take priority if a fixtures notice has not been filed. As well, the creditor taking the bins as security who fails to file a fixtures notice can lose priority to a subsequent judgment creditor.

Thus, it is particularly important for creditors lending on security of grain bins and other farm goods that can become fixtures to ensure that they have taken the necessary steps to ensure they obtain the expected priority position. Otherwise, when the bin gets bolted down, the priority may float away!

Readers should note that the broad concepts in Saskatchewan’s legislation are not particularly unique with regards to filing a fixtures notice over title. All four western provinces have similar provisions within their PPSA legislation. However, there are language differences between Saskatchewan’s PPSA and that in other provinces in relation to fixtures, so it is advisable to consult an experienced lawyer in the relevant province.

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