What Do You Need to Know Before Buying Land on PEI?

If you’re thinking about buying land on PEI, there’s more to consider than just the price tag. Here’s a practical overview covering eligibility, financing, and the key due diligence steps every buyer should work through.

Are you allowed to buy it?

Before anything else, it’s worth confirming you’re actually eligible to purchase the land you’re looking at. Two key restrictions apply to many buyers:

• Whether the Prohibition on the Purchase of Residential Property by Non-Canadians Act applies to you
• Non-residents of Prince Edward Island face limits on how much land they can purchase before an application to the Island Regulatory and Appeals Commission (IRAC) is required. See Marsha’s blog post [link] for a full breakdown of those rules.

Financing It

Financing land is meaningfully different from financing a home. In most cases, buyers come to the table with existing equity - cash savings, proceeds from a sale, or funds drawn from investments. Traditional mortgage financing for raw land is uncommon.

That said, some lenders will consider a mortgage on a land purchase if construction is set to begin immediately - this most commonly applies when a mini home is being placed on the lot. It’s not the norm, but it’s worth exploring depending on your plans.

What Key Factors Come into Play

Beyond eligibility and financing, there are several due diligence items that can make or break a land purchase. Here’s what to look into before you commit:

• Has a soil assessment (PERC test) been done on the property? 

A soil assessment (also called a perc test) evaluates the soil’s porosity and determines what kind of septic system the lot can support. A Category 1 result is ideal. Category 2 may require some fill. Category 3 typically means a specialized (and more expensive) septic system - which can significantly affect your overall development budget.

• Has the property been surveyed?
  

Many raw land purchases on PEI involve older lot lines, disputed boundaries or easements. If a survey doesn’t exist and the boundaries of the property are in question, a survey might be beneficial but comes at an added cost. If a survey already exists, sometimes the pins showing the property boundaries are missing and can be located for a cost as well.

• Does it require a septic or well? 
  

Depending on where the property is located, there may be municipal services for the lot, but if there are none, having a septic installed and well drilled are added expenses that should be factored into your decision.

• Have you checked into the Coastal Hazard Assessment? 
  

This report provides important data on the rate of coastal erosion and any flood risks - both present and projected. On an island like PEI, where shorelines are actively shifting, this is a critical piece of due diligence for any waterfront or near-shore property.

• Have you completed any of the required Permits?
  

Owning land doesn’t automatically mean you can build whatever you’d like on it. Zoning, municipal bylaws, and provincial regulations all come into play. The good news: you can apply for certain permits before you take ownership, which lets you confirm the land will work for your intended use before the purchase closes.

• Are there restrictive covenants?
  

Restrictive covenants are legally binding conditions attached to a property title, typically put in place by the original developer. They can cover a wide range: fencing rules, landscaping, the size and style of structures, restrictions on rentals or home-based businesses, and even neighbourhood aesthetics. It’s important to review any covenants carefully, as they run with the land and bind future owners too.

• How long does all of this take?
  

IRAC applications, development permits, and soil assessments all take time - often weeks, sometimes months. It’s worth building that timeline into your expectations from the start. Rushing this process is one of the most common mistakes buyers make, and it can lead to costly surprises after closing.

Buying land on PEI can be a fantastic investment - but it requires a different kind of due diligence than purchasing an existing home. If you have questions about a specific property or want guidance through the process, we’re happy to help. Reach out to our team and we’ll point you in the right direction.