Purchasing a cottage on leased land in Manitoba: Understanding the landscape and the legal framework

In Manitoba, many recreational properties, especially cottages in areas like the Whiteshell Provincial Park and other Crown land subdivisions, are located on leased land rather than on owned freehold land. In this arrangement, a cottager owns the structure, but the land itself remains Crown land under a long-term lease administered by the Manitoba government.

When a cottage is on leased land:

• You do not own the land—you own the building and any improvements.
• The land is under a long-term lease (typically a 21-year renewable lease with the province).
• You pay annual lease fees to the Crown instead of property taxes (in many parks, municipal taxes may not apply).
• There is no land transfer tax upon sale of the cottage because the underlying land is not transferred.

This structure creates a unique real estate market that blends elements of property ownership with long-term tenancy rights.

The Process for Transferring a Cottage on Leased Land

1. Agreement Between Buyer and Seller

A sale starts with a negotiated purchase price for the cottage and any associated improvements. The fact that the land is leased may be reflected in the price. Because the land isn’t being sold, what changes hands is the leasehold interest and the physical cottage.

2. Assignment or Transfer of the Lease

Unlike a traditional land sale, the buyer must apply for an assignment of the lease with the Manitoba government (usually through the Parks or Land Management office).

• The seller completes an assignment form and submits it to the applicable government branch.
• The buyer must consent to the terms of the lease and agree to assume future lease obligations.
• Processing can take a few weeks to a few months, depending on the time of year and quality of the application.

In many cases, completing this assignment is a ministerial (administrative) process rather than a traditional land transfer.

3. Registration and Legal Documentation

Even though the land isn’t transferred, your interest in the leased land and transfer of the cottage need be documented properly. This will include legal documents prepared by an experienced real estate lawyer in the leased land sector, and signed by the sellers and the buyers to ensure:

• enforceability of rights

• legal transfer of the cottage, contents, and other buildings

Common Challenges and Pitfalls

1. Financing Difficulties

Getting traditional mortgage financing for a cottage on leased land is one of the biggest hurdles for buyers:

• Many banks and lenders are reluctant to issue financing because you don’t own the land and the property could lose significant value if the lease isn’t renewed (although this is a remote risk, it is a possibility).
• Instead of a traditional mortgage, some lenders may issue a chattel mortgage, collateral loan or secured loan. Irrespective of whether the lender issues a traditional mortgage or loan, the lender will take an assignment of the lease as security which is registered with the Manitoba government. (Or Manitoba government for consistency?)
• Credit unions are sometimes more flexible than major banks, but in many cases borrowers must provide higher down payments or rely on equity from another property.

The financing requirements associated with leased land properties can make it more challenging for buyers to qualify and may discourage some first-time purchasers. Consulting with an experienced lawyer who focuses on leased land real estate can significantly streamline the process. An experienced lawyer can guide you toward lenders and traditional financial institutions that actively provide financing for leased land, helping to reduce uncertainty and avoid unnecessary delays.

2. Title Insurance and Legal Risks

Title insurance protects property buyers (and their lenders) against certain title defects, fraud, or registration issues. But leased land adds nuance:

• Standard title insurance policies are designed for fee simple ownership and may not cover all aspects of a leasehold interest.
• Legal risks specific to leased land, such as lease enforceability, unclear lease terms, or rights upon non-renewal—may be excluded from standard coverage unless a specialized leasehold title policy is obtained.
• Without proper insurance or legal review, a buyer could face significant exposure if there are problems with the lease or its renewal conditions.

Given these complexities, thorough lease review and legal advice are essential to ensure your title insurance policy is tailored for coverage of a home/cottage on leased land.

 3. Administrative and Regulatory Complexity

The process for transferring a cottage isn’t as standardized as a traditional real estate closing:

• The process to transfer a lease to a buyer with the province of Manitoba is very specialized. If a buyer’s lawyer is not familiar with the process, it can lead to application rejections by the province, which will ultimately cause delays and increased costs for the buyer.
• Provincial rules often require that cottages meet certain development timelines (e.g., “lock-up” construction standards) for lease eligibility.
• There can be renewal requirements at the end of a lease term, and although most renewals are straightforward, the risk of non-renewal, even if unlikely, remains a consideration.
• Some buyers may not realize that many conventional real estate protections do not automatically apply because the land is leased. Legal oversight of lease documents and municipal requirements is crucial.

Final Considerations

Purchasing a cottage on leased land in Manitoba offers access to some of the province’s most scenic recreational areas, often at a lower upfront land cost. However, the legal status of the land, financing restrictions, title implications, and administrative processes make these transactions structurally different and more complex than typical property purchases.

Whether you’re buying or selling, working with professionals, lawyers, lenders, and real estate agents experienced in leasehold properties is critical. Proper planning and due diligence will help ensure you understand not only the joy of cottage ownership but also the obligations and limits that come with a leasehold interest.

How Fillmore Riley LLP Can Help 

If you’re looking to buy or sell a cottage on leased land, connect with the experienced team at Fillmore Riley. As exclusive counsel to one of the largest banks in Canada offering financing of cottages on leased land in Manitoba, we have extensive expertise in navigating the leased land process for current and future owners.

Our strong working relationships with the Manitoba government, combined with our deep understanding of financing requirements, allow us to deliver efficient, knowledgeable, and personalized service.