• Timber! Potential Pitfalls When Purchasing Private Managed Forest Land in British Columbia
  • November 21, 2013 | Author: Craig Shirreff
  • Law Firm: McCarthy Tétrault LLP - Vancouver Office
  • Prospective purchasers of private managed forest land in British Columbia (land classified as “Class 7 Private Managed Forest Land”) should be aware that:

    • future property assessments for the land may be higher than the purchaser is expecting on account of timber previously harvested on the land; and
    • the purchaser may incur exit fees if the purchaser removes the property from the Private Managed Forest Land class.

    BC Assessment values private managed forest land based on the land’s bare land value, but also on the added value of the timber situated on the land. Importantly for a prospective purchaser, the timber value only becomes assessable when it is harvested, which creates a lag a purchaser may not identify until after closing. For example, timber harvested in the 2013 calendar year will not appear on the assessment notice for the underlying land until the 2015 assessment roll. Accordingly, a prudent purchaser of private managed forest land will require a vendor to make representations regarding prior harvesting activities and, depending on the circumstances, to provide an indemnity to the purchaser.

    If a prospective purchaser of private managed forest land intends to remove the land from the Private Managed Forest Land Class before the land has been so classified for 15 years, the Private Managed Forest Land Council may charge the purchaser an exit fee based on the difference between the actual property taxes paid and what the property taxes would have been but for the Private Managed Forest Land classification, with a discount for the number of years in which the land has been classified as Private Managed Forest Land. The purpose of the exit fee is to encourage owners’ long-term participation in the Managed Forest program. More information on exit fees is available at the Private Managed Forest Land Council’s webpage (www.pmflc.ca).