On June 24, 1988, Grant Devine’s Conservative government responded to the dire circumstances of Saskatchewan’s farm economy by enacting The Saskatchewan Farm Security Act (SFSA). The 1980s had seen several misfortunes visit Saskatchewan farms: low commodity prices, record high interest rates, persistent drought, grasshopper infestations, spiraling input costs, and plummeting land values. The SFSA was intended to staunch the economic dislocation of Saskatchewan's farmers by consolidating and modernizing Saskatchewan’s historic farm legislative protection and by introducing innovative new legislation.
The Act co-opted historic legislation that had protected certain farm assets from creditors’ seizure for over 100 years. Since 1888, when the North-West Territories passed an Exemption Ordinance, a farmer's machinery and livestock had been essentially exempt from seizure, unless the farmer was a corporation or had granted an interest in such assets to secure their purchase price. Exemption protection was retained under the SFSA to protect a non-corporate farmer’s livestock, crops, machinery, tools, homestead, and one motor vehicle from seizure and sale by most creditors.
Legislation was also retained, as first enacted in the 1930s, mandating strict procedural requirements before a creditor could seize farm machinery—the breach of which provided severe penalties: return of the machinery, followed by payment to the farmer of 1.5 times the machinery’s fair market value. The SFSA also retained legislation in which vendors selling articles to farmers were restricted to seizing the sold assets and were disallowed any action against the farmer for a shortfall after sale of the article. Similarly, mortgages securing the purchase price of farmland offered no remedies to mortgagee other than recovery of the mortgaged land, a restriction mortgagees first encountered in the 1930s. Borrowing the principle from predecessor legislation, the Farm Security Act enacted in 1944, the SFSA expanded the requirement that any mortgage on a farmer's homestead required the consent of the Farm Land Security Board. Failing to obtain this consent, called an Exclusionary Order, meant that the mortgagee could not register a Final Order of Foreclosure so long as the farmer, farmer's spouse or children (under the age of 18) continued to reside on the homestead.
New protection was also introduced under the SFSA. Farmers who lost their land through an order for foreclosure or cancellation of agreement for sale, or who had voluntarily transferred their land to their creditor, were given a right of first refusal to repurchase their land at the price the mortgagee was able to negotiate for it on the market. Also new was Saskatchewan's first requirement that guarantors—individuals guaranteeing the debt of a farmer—had to receive independent legal advice before a guarantee was valid. New homestead protection was introduced, allowing any farmers who had defaulted on a mortgage executed before June 24, 1988, to have a three-year reprieve from any foreclosure action if they were making a sincere and reasonable effort to meet their mortgage obligations.
The Act also introduced regimented pre-foreclosure proceedings, requiring a newly created board, the Farm Land Security Board, to prepare a financial report concerning the farmer’s operations. This report was provided to the farmer, the mortgagee and Mediation Services in contemplation of mandatory mediation sessions during which the farmer and the mortgagee were obligated to negotiate in good faith to explore settlement options. If negotiations were unsuccessful, the board was required to prepare a court report which formed the primary evidence before a presiding judge, who had to determine if farmers were making a sincere and reasonable effort to meet their obligations or had a reasonable possibility of meeting their obligations. Only upon a judge’s order could a foreclosure action be initiated.
In 1992, when the NDP government of Roy Romanow was elected, the farm economy was still in crisis. The Romanow government created a Debt Advisory Committee to recommend amendments to the SFSA in order to ensure that farmers had an assurance of continued tenancy of their land. Based on the Committee’s recommendations, the SFSA was amended to give farmers a right to lease back their farmland for six years after they had lost it, either by a Final Order of Foreclosure or by voluntary quit claim. The six-year leaseback rights were introduced on September 20, 1992, and applied to farmland subject to foreclosure or quit claim until June 1, 1997. The 1992 amendments to the SFSA also allowed creditors under provincial control, principally credit unions, to ask farmers to waive their exemption protection for crops, livestock and farm machinery to allow farmers more access to credit. A 1988 case, LeBlanc v. Bank of Montreal, held that chartered banks were not subject to Saskatchewan’s exemption protection because the province could not pass legislation that conflicted with the federal powers given to chartered banks under the Bank Act. To gain an equal footing with banks, provincial lenders successfully sought an amendment to the SFSA to allow farmers to seek independent legal advice and waive exemption protection for farm assets so long as the creditor was providing new financing to the farmer.
The SFSA is one of Saskatchewan’s most significant pieces of legislation. Within a short time of its enactment, it was the most judicially interpreted legislation in provincial history—reflecting decades of Saskatchewan's legislative attempts to preserve the viability of its farm community.
Donald H. Layh