Selling land

General information, not tax or legal advice. Rules and rates change, and every situation is different. Talk to your lawyer and accountant before you act on anything here.

What land buyers pay for

A buyer of land is buying a future building. They work backwards from what they can build, what it will sell or rent for, and what it will cost to get there. Anything that makes that path longer, riskier or more expensive comes off your price. Anything you can prove ahead of time adds to it.

That’s why the work before listing matters more with land than with almost any other property. A buyer who has to find out the basics on their own will either discount for the unknowns or ask for a long condition period to find out, and the market can move while they look.

Zoning and the official community plan

Start with two questions: what can be built today under the current zoning, and what does the city’s plan say could be built in future? The zoning bylaw sets the uses, density, height and setbacks that apply now. The official community plan and any area plan show where the city wants growth, and that’s usually what a developer is paying for.

• Current zoning. Note the permitted uses, the allowable floor area (often shown as a floor space ratio, or FSR), height, setbacks and parking.
• Plans and policies. Check the official community plan, any area or corridor plan, and any transit-oriented area rules that apply near rapid transit. Provincial housing changes have added density in many areas, so check the current rules, not what applied a few years ago.
• History. Past rezoning, development or subdivision applications on the site or next door tell buyers what the city has already accepted or turned down.
• Constraints. Heritage status, view cones, road widenings, statutory rights of way, streams and setbacks can all shrink what can be built.

In Vancouver you can request property records and permit history from the City of Vancouver. In other municipalities, the planning department can usually confirm the zoning and plan designation. I pull this together before we set a price.

Rezoning first or selling as-is

If the plan supports more density than the current zoning, you have a choice. You can sell the land as-is and let the buyer take on the rezoning, or take the site through rezoning yourself and sell it with the approval in hand.

A middle path is to sell with a long condition or a price that steps up if the buyer gets the rezoning. That can work, but it ties up your land and leaves you relying on the buyer’s progress, so the deposits and deadlines need to be solid.

Land assemblies

Many development sites are put together from several lots. If your lot is part of a block the plan has marked for more density, it may be worth more sold together with your neighbours than on its own.

• Talk to your neighbours early. An assembly only works if enough owners agree on timing and price.
• Agree the split in writing. Owners usually share the price by lot area or frontage, but the split can be anything you agree.
• Be ready for one buyer contract. Developers want one deal with all the owners, and they’ll walk if one owner holds out or changes terms.
• Get your own legal advice. Each owner should have their own lawyer review the assembly and sale terms.
• Watch for one-lot offers. A buyer who approaches you alone may be building their own assembly. Ask what they plan and price it on that.

Environmental: site disclosure and Stage 1 and 2

Buyers and lenders will want to know the site’s history. Past uses like gas stations, dry cleaners, auto repair, fuel storage and many industrial uses can leave contamination, and cleaning it up can cost more than the land is worth.

• Site Disclosure Statement. Under BC’s Environmental Management Act and the Contaminated Sites Regulation, a Site Disclosure Statement (once called a site profile) is required in certain cases where the land has had one of the commercial or industrial uses listed in Schedule 2. Selling the property and applying for permits or approvals are two of those cases. Check with your lawyer whether it applies to you.
• Stage 1 (also called Phase I). A desk and site review by an environmental consultant: past uses, records, aerial photos, a site visit and neighbouring uses. No digging.
• Stage 2 (also called Phase II). Sampling soil and groundwater where the Stage 1 found a concern, to see whether contamination is actually there and how much.
• Public records. The Province keeps a site registry of sites with environmental records. Buyers will search it, so search it first.

If you already have reports, share them. If the history is a concern, getting a Stage 1 done before listing often costs less than the discount a buyer will apply for not knowing.

ALR land

Land in the Agricultural Land Reserve is mainly for farming. Non-farm uses, most subdivision and taking land out of the reserve need the Agricultural Land Commission to agree, and many applications are refused. Price ALR land on what it can be used for today.

• Confirm whether all or part of the parcel is in the ALR, and whether any past applications were made.
• Check what the ALC and the local zoning both allow. The stricter rule applies.
• Your buyers are mostly farmers, owner-users and long-term holders, so market it to them.

Servicing and access

A site without water, sanitary sewer, storm drainage, power and road access is worth much less than one with services at the lot line. Buyers will want to know what’s there and who pays for upgrades.

• Find out the size and location of the mains, and whether they have capacity for more density.
• Ask the city what off-site works a development would likely need, such as road, sidewalk, lane or utility upgrades.
• Rural sites may rely on wells and septic. Have records of water supply and any septic permits ready.
• Confirm legal access. A site that relies on someone else’s land needs a registered easement.

Development cost charges and amenity contributions

A buyer will deduct every fee and charge their project has to pay. The big ones are:

• Development cost charges (in Vancouver, development cost levies). One-time charges for water, sewer, drainage, roads and parks, set by bylaw and usually paid at building permit or subdivision. Regional and transit charges can apply too.
• Amenity cost charges, a newer provincial tool some cities use for community amenities such as recreation centres, libraries and daycares.
• Community amenity contributions negotiated in a rezoning, where the city still uses them.

Rates change and differ by city and area, so I get the current numbers from the city before pricing.

Subdivision

If the land could be split into more lots, that may be worth more than selling it whole. Subdivision is approved by the municipality’s approving officer, and it usually needs a surveyor’s plan, servicing for each new lot, and sometimes road dedication or parkland. ALR land needs ALC approval to subdivide. If you’re not going to do it yourself, show buyers how it could work, with a sketch plan and the zoning’s minimum lot sizes.

Survey and geotechnical

• Survey. A current survey by a BC land surveyor shows the boundaries, area, easements and any encroachments. Buyers price on site area, so a surprise here moves the price.
• Geotechnical. Soil type, bearing capacity, groundwater, slopes and fill. Poor soils, a high water table or steep slopes add to foundation and shoring costs, which buyers will deduct.
• Trees, streams and floodplain. Protected trees, watercourse setbacks and flood construction levels can all limit the building area.

Title and charges

Pull a current title search and a copy of every charge on it before marketing. Buyers’ lawyers will read each one.

• Statutory rights of way and easements, which can limit where a building goes.
• Restrictive covenants, including old building schemes or no-build areas.
• Mortgages and liens, which are paid out on completion.
• Leases or licences, such as billboards, cell towers or parking, and how they end.

GST on land sales

GST can apply to a land sale, and getting it wrong is expensive. In general, land used in a business or sold by a company is taxable, while some sales of vacant land by individuals who didn’t use it in a business can be exempt. When the buyer is registered for GST, the buyer usually self-assesses instead of paying it to you. Your agreement should say whether the price includes GST, and you should get the buyer’s GST number before completion. See the CRA guidance on real property and GST/HST, and have your accountant confirm how it applies to you before you sign.

Who buys land

Different buyers value the same site differently. Marketing it to the right ones is how you get the best price.

How land is priced

Land rarely sells on what the assessment says. Buyers use one or more of these:

• Price per buildable square foot. The price divided by the floor area the zoning or plan allows. This is the most common yardstick for development land, and it lets buyers compare sites of different sizes.
• Residual approach. Start with what the finished project would sell for, subtract construction, fees, charges, financing, marketing and the developer’s profit, and what’s left is what the land is worth to that buyer.
• Comparable sales. Recent sales of similar sites, adjusted for zoning, size, servicing and location.
• Per acre or per lot for rural, agricultural and industrial land.

Construction costs and interest rates move the residual number a lot, so a price that worked a year ago may not work today. I run the numbers the way buyers will, so you know where offers are likely to land.

Marketing and offers

• Prepare an information package with the zoning summary, survey, title, reports and servicing details, so buyers can make firm offers faster.
• Decide how to take offers. An open listing, a set offer date or a call for expressions of interest each suit different sites.
• Compare offers on more than price. Look at the deposit, the length and type of conditions, the completion date and the buyer’s track record.
• Use a confidentiality agreement before sharing detailed reports, if the site or your plans are sensitive.

Conditions

Land buyers usually want longer condition periods than building buyers, because they need time to check zoning, servicing, soils and their own numbers. That’s normal. What matters is setting terms that protect you while they look.

• Agree on a fixed condition date, with any extension paid for by a further deposit.
• Ask for a deposit that grows as conditions are removed, and that becomes non-refundable at set points.
• Ask the buyer to share their reports with you if they walk away.
• Be careful with conditions tied to a rezoning or permit. They can run for a long time, so set an outside date.
• Agree who can talk to the city, and what the buyer can apply for before completion.

Timelines

From the decision to sell to completion, a simple serviced lot can take a few months. A site that needs reports, an assembly or a rezoning condition can take a year or more. Prepare the package before listing, expect a condition period of a couple of months or longer, and plan your holding costs and tax around a completion date that may move.

Questions people ask

Why do land buyers want long conditions?

They need time to confirm zoning, servicing and soils. Reasonable deadlines and deposits protect you while they do.