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Market spotlight

Trends and prospects

What are the current trends in and future prospects for the real estate market (both commercial and residential) in your jurisdiction?

Notwithstanding the decline of oil and gas prices, rising interest rates, a low Canadian dollar and other cooling effects in Canada, domestic and foreign investment in residential and commercial real estate remains steady, with robust growth in regions with high demand and low supply such as Montreal, Toronto and Vancouver.

Pension plans, real estate investment trusts, private equity firms, developers and individuals alike continue to invest in commercial and multi-residential real estate through traditional investment vehicles. For example, there have recently been:

  • numerous strategic joint ventures between retailers, landlords and real estate investment trusts such as the one between HBC and RioCan REIT;
  • acquisitions of large real estate portfolios by foreign investors like Bluesky Hotels’ acquisition of InnVest REIT and delisting of its publicly traded units and debentures in connection with its plan of arrangement; and
  • the entry or expansion of new high-end retailers such as Saks, Nordstrom and Simons.

Continued international interest is in part due to reported double-digit annualised returns over the past few years with respect to direct real estate investment in Canada, with particular interest from the United States, China and Europe.

With new mortgage regulations, foreign taxes and supply shortages in some jurisdictions, year-on-year residential sales and price increases are expected to slow according to the Canadian Real Estate Association, which should curtail some concerns with respect to unaffordable housing in markets such as Toronto and Vancouver. Although there are regional variations in the future prospects for different types of commercial, development and investment property, surveys conducted by PricewaterhouseCoopers forecast a generally strong performance in Montreal, Toronto and Vancouver – particularly with respect to industrial properties, purpose-built multi-family rentals, urban mixed-use developments and senior housing. Except for concerns about a possible pullback in the Toronto and Vancouver housing markets, as well as the potential impact of the US election and the United Kingdom’s vote to leave the European Union, PwC has reported that Canada seems poised for a stable year, with real estate and its historic returns continuing to make it an attractive investment opportunity for both domestic and foreign investors.

Rights and registration


What types of holding right over real estate are acknowledged by law in your jurisdiction?

Real property generally falls within provincial or territorial (rather than federal) jurisdiction. Thus, the types of holding rights over real estate acknowledged by law in Canada differ across the country. Each jurisdiction has enacted statutes that govern the acquisition, ownership, use, financing and development of real estate.

In the common law provinces and territories, a freehold estate in real property is a right or interest for an indefinite duration, whereas a leasehold estate is for a duration which is fixed or capable of being fixed in time. A fee simple estate is the most common freehold estate in Canada and, for all intents and purposes, is equivalent to absolute ownership of real property. A leasehold estate is not absolute but does give the tenant an exclusive right of possession enforceable against everyone, including the owner of the freehold estate. Other rights over real estate frequently encountered in the common law jurisdictions include:

  • easements (ie, non-possessory rights to use a portion of real property for a specified purpose);
  • profits a prendre (ie, non-possessory rights to take natural resources from real property); and
  • restrictive covenants (ie, agreements not to use real property for a specified purpose).

All of these constitute rights in land. Licences to use land are purely contractual.

In Quebec – the only civil law province in Canada where real estate is generally governed by the Civil Code of Quebec – the law distinguishes between personal rights (ie, rights enforceable against a person) and real rights (ie, rights in property). Real rights include rights of ownership, rights in a thing belonging to someone else and rights in the form of a claim over another’s property. Some real rights are perpetual (eg, the right of ownership); some may be perpetual or temporary (eg, superficies and servitudes); and others are always temporary (eg, emphyteusis).

Are rights to land and buildings on the land legally separable?

In Canada, rights to land and buildings on land are legally separable; however, such separation is the exception and buildings are generally considered to be part of the land on which they are built.

In common law jurisdictions, parties under a lease can agree that the tenant owns or has an exclusive right to possess the building, notwithstanding that the landlord continues to own and may even have a contractual right to use the underlying lands. Another way in which land and buildings are legally separable is through strata title ownership, whereby, for instance in the context of a condominium, the land and buildings are separated into levels and the levels into common elements and units.

In Quebec, ownership of buildings can similarly be separated from ownership of land by creating superficies in one of three ways:

  • by the subsoil owner’s renunciation of the benefit of accession;
  • by the transfer of the right of accession; or
  • by the division of the object of ownership.

By contrast, emphyteusis does not separate ownership of buildings from ownership of land in Quebec, but it does result in the emphyteutic lessee having the full enjoyment of land for a term, provided that it makes constructions, works and plantations that increase the land’s value, while the emphyteutic lessor retains ownership of the improved lands on termination. Similarly to strata title in the common law provinces, ownership of land may also be separated from ownership of a building through the regime of divided co-ownership.

Which parties may hold and exercise rights over real estate? Are there restrictions on foreign ownership of property?

Legal and natural persons may generally hold and exercise rights over real estate in Canada, provided that natural persons:

  • are of the age of majority;
  • do not lack mental capacity; and
  • are not undischarged bankrupts unless they otherwise have adequate legal representation.

Non-residents may generally hold and exercise rights over real estate in the same manner as residents of Canada. However, certain restrictions on foreign ownership of real property apply at both the federal and provincial level (see the “Investment” section below).

How are rights, encumbrances and other interests over real estate prioritised?

As a general principle, rights, encumbrances and other interests over real estate are prioritised according to their order of registration subject to, among other things:

  • unregistered rights, encumbrances and other interests of which there is actual notice at the time of registration;
  • depending on the jurisdiction, rights arising by prescription;
  • rights of creditors under bankruptcy, personal property and construction lien laws;
  • contractual rights of priority; and 
  • statutory rights and charges in favour of certain governmental and quasi-governmental entities, all of which can in some circumstances defeat the priority of a registered right, encumbrance or interest over real estate gained by reason of its registration.


Must real estate rights, interests and transactions be registered in your jurisdiction? What are the legal effects of registration?

In general, rights, interests and transactions related to real estate need not be registered in Canada; however, registration has the legal effect of:

  • recording titles in an orderly manner;
  • giving the public notice of interests claimed in land;
  • rendering rights opposable to third parties; and
  • establishing priority between claimants.

What are the procedural and documentary requirements for entry into the national real estate register(s)? Can registration be completed electronically?

Two types of land registration system are used in Canada:

  • the older registry system, which is a public record of instruments affecting land without any guarantee of title; and
  • the land titles system, which is operated by the government and effectively guarantees title, subject to certain statutory limitations.

Each province and territory uses either one or a combination of both of these systems, with most common law jurisdictions having converted or being in the process of converting to the land titles system. Jurisdictions still in the conversion process include Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario and Prince Edward Island.

The procedural and documentary requirements for registration of instruments affecting land differ across the various provinces and territories. Instruments submitted for registration must adhere to the applicable statutory and regulatory requirements regarding procedure, format and content. Electronic registration of instruments affecting land is available in certain jurisdictions across the country.

What information is recorded in the national real estate register(s) and to what extent is such information publicly available?

The register for a specific property generally records the legal owner, the legal description and civic address, and the legal interests or encumbrances registered against title. This information is available to the public to the extent that it has been registered. However, rights, interests and transactions related to real estate do not generally need to be registered in Canada. In the context of real estate transactions, off-title inquiries should be sent to various government authorities, and representations and warranties should be made by owners in order to gain comfort in respect of real property rights not requiring registration.

Is there a state guarantee of title?

There is a government guarantee of title for properties registered under the land titles system. The register or certificate of title produced for these properties may be relied on as constituting the true status of title, subject to certain prescribed statutory exceptions. Where a person is wrongfully deprived of an interest or estate in property by virtue of fraud or an error or omission on the register or certificate, he or she may apply for limited compensation or damages from a government-administered assurance fund.

There is no government guarantee of title for properties registered under the registry system. Under the registry system, quality of title is determined by the person searching the file.

Sale and purchase


How are real estate brokers regulated in your jurisdiction (eg, through caps on commission or disclosure obligations)?

Each jurisdiction in Canada has regulations governing real estate brokers which set out registration and insurance requirements aimed at protecting consumers. Although there is some uniformity in the principles and application of these regulations, there are also differences across the various jurisdictions. As a general matter, commission is not fixed by regulation and can vary by contract with the brokerage. It is customary in Canada for the seller or landlord of real property to pay its brokerage out of the purchase price or leasing proceeds pursuant to its listing agreement and, if the buyer or tenant has its own brokerage, to split the commission with that brokerage. Brokers are generally prohibited from splitting commissions with persons who are not licensed brokers.

Due diligence

What due diligence should be conducted before conclusion of a real estate sale contract?

Due diligence is normally conducted after a purchase agreement has been executed by both parties. However, the transaction does not become ‘firm’ until the buyer has waived its due diligence condition, among other things. Real estate due diligence generally consists of:

  • examining title to and zoning of the subject property;
  • conducting various off-title inquiries;
  • reviewing leases, property contracts, financial statements and surveys; and
  • commissioning environmental and building condition assessments.

Preliminary agreements

Are any preliminary agreements typically entered into before conclusion of a sale contract?

A non-binding letter of intent is sometimes entered into between the parties to a purchase and sale of real estate before the conclusion of a purchase agreement, although this is unnecessary in Canada.


Must sale contracts be concluded in writing? If so, must they be notarised?

In the common law provinces and territories, purchase agreements with respect to real estate must generally be concluded in writing; however, they do not generally need to be notarised.

In Quebec, purchase agreements may be verbal, but this is highly unusual. Deeds of sale transferring title, if they are to be registered, must be written. Deeds of sale need not be notarised unless they include a hypothec (ie, a mortgage) securing a balance of sale. However, all instruments that are registered on title must include a certificate by a lawyer if not in notarial form.

Can sale contracts be concluded electronically?

Each jurisdiction has enacted e-commerce legislation governing electronic signatures. In some provinces and territories, certain documents and contracts, including those that create or transfer interests in land (eg, purchase agreements) still require original signatures. However, a number of jurisdictions have enacted legislation to allow purchase agreements in respect of real estate to be concluded electronically, including, for example, the Ontario Electronic Commerce Act.

What provisions are usually included in a sale contract?

At a minimum, a purchase agreement must include a description of the parties, the purchase price and the property. Other typical provisions in a purchase agreement include:

  • adjustments or prorations;
  • chattels and fixtures;
  • commissions and fees;
  • conditions;
  • confidentiality;
  • covenants;
  • damages;
  • deposits;
  • indemnities and releases;
  • representations and warranties;
  • requisitions and title investigations; and
  • transfer taxes.

Some jurisdictions have other prescribed provisions, such as ‘anti-shadow flipping’ clauses in contracts prepared by brokers in British Columbia.

Obligations and liabilities

What are the seller’s disclosure obligations and other liabilities, and what are the consequences of breach?

In the common law provinces and territories, there is no general duty of disclosure imposed on a seller. As a general rule, the principle of caveat emptor (‘buyer beware’) applies to buyers when purchasing real property. However, there are exceptions to this principle which oblige the seller to disclose, for example, environmental contamination or latent defects which render the property dangerous or uninhabitable. In Quebec, warranties as to title, encumbrances, compliance with law and the absence of latent defects apply to the extent not excluded or limited by contract under the deed of sale. In all jurisdictions, caveat emptor does not apply to fraud and a seller will be liable for latent defects where the failure to disclose them amounts to fraudulent misrepresentation. In the common law jurisdictions, the seller can be liable to a buyer for a misrepresentation which may be innocent, negligent or fraudulent. The liability of the seller and remedies available to the buyer vary depending on the type of misrepresentation and whether the representations merge on closing pursuant to the purchase agreement. The good faith requirement in Quebec can lead to liability for misrepresentation if it pertains to a defect which the seller knew or should have known about. Notably, the Supreme Court of Canada also recently recognised a general organising principle of good faith in the performance of contracts throughout Canada.

What contractual warranties are usually given by the seller?

The contractual warranties that a seller gives a buyer depend on market forces and the relative bargaining power of the parties. In commercial transactions, real property is commonly sold on an ‘as is’ basis, with limited warranties given by the seller. A seller will usually warrant factual matters that might be difficult for a buyer to verify independently through its own due diligence, such as the fact that the seller:

  • has been duly authorised to execute the purchase agreement;
  • has delivered copies of all contracts, leases and reports related to the real property in its possession or control; and
  • has not received notices of non-compliance, environmental contamination or expropriation.

As mentioned above, certain warranties are implied to the extent they are not expressly excluded or limited in the deed of sale in Quebec.

Are there any other obligations on the buyer, aside from paying the purchase price?

Aside from paying the purchase price, the buyer is typically responsible for paying the applicable land transfer taxes, sales taxes, registration fees and other expenses relating to the purchase. In addition to any other obligations under the purchase agreement, the buyer will also generally be bound by obligations that run with the land, including leases, options to purchase, municipal agreements, mortgages and other encumbrances affecting the property.


What taxes are payable on the sale and purchase of real estate? Are any exemptions available?

The taxes that are payable on the purchase and sale of real estate depends on the type of property and the province or territory. Transfers of real estate in most jurisdictions are subject to land transfer taxes which can be imposed at both the provincial and municipal levels. The rate of land transfer taxes varies across the country – from no tax at all in Alberta (other than a registration fee based on the value of the land), Newfoundland and parts of Nova Scotia, to up to 3.5% of the purchase price or fair market value of commercial properties in Toronto, Ontario. British Columbia recently imposed a controversial additional 15% property transfer tax on taxable residential transactions in the greater Vancouver area, where the transferee is a foreign entity or a taxable trustee, as an extreme measure to cool the overheated housing market. Except in Ontario and Quebec, land transfer tax is not generally exigible on unregistered transfers of beneficial interests in real property. However, certain other jurisdictions, such as British Columbia, are considering implementing taxes on beneficial transfers. Land transfer tax exemptions are typically available for transfers between related parties provided that certain conditions are met. In most jurisdictions the buyer is liable for the payment of land transfer tax although, in Quebec, the seller may also be liable in certain circumstances.

Goods and services tax, harmonised sales tax or Quebec sales tax, depending on the jurisdiction, is also generally exigible on the transfer of commercial properties and new residential buildings. The seller is responsible for collecting the applicable taxes from the buyer, other than for buyers entitled to self-assess under the appropriate tax legislation.

If capital property is sold at a capital gain, 50% of the gain is also generally subject to income tax.

Transfer of title

When does title in the property transfer?

In common law jurisdictions, registered (or legal) title is typically transferred to the buyer on registration of a deed or transfer. In Quebec, as between the parties to the sale, title is transferred as soon as there is a ‘meeting of the minds’, but the sale may not be set up against third parties until registration of a deed.


What is the typical duration of a sale transaction?

The typical duration of a purchase and sale transaction is 60 to 90 days; however, this timeline varies depending on the property, the complexity of title and the parties. A purchase and sale transaction typically involves:

  • negotiating, drafting and signing the purchase agreement;
  • conducting due diligence; and
  • closing the transaction.



Must a lease agreement be concluded in writing?

Whether a lease must be concluded in writing depends on the jurisdiction. In several provinces and territories, leases can be verbal depending on the type of tenancy, among other things; however, written leases are always recommended to avoid evidentiary issues. 

Are there any regulations setting out mandatory or prohibited provisions in lease agreements?

Each province and territory has a residential tenancies statute or jurisdictional equivalent and, with the exception of Alberta, Newfoundland and Labrador and Nova Scotia, which are governed by common law, a commercial tenancies statute or jurisdictional equivalent. In Quebec, these are part of the Civil Code of Quebec. These statutes set out certain mandatory or prohibited provisions in leases; however, these prescribed provisions are typically not of public order and can be contracted out of by the parties.

What provisions are typically included in lease agreements?

At a minimum, a lease agreement should include:

  • the names of the parties;
  • a description of the leased premises;
  • the term of the lease; and
  • the rent payable thereunder.

Other typical lease provisions include additional rent, assignment, change of control, common area expenses, deposits and security, estoppels, events of default and remedies, expansion, governing law, indemnities and releases, inducements, insurance, maintenance and repairs, relocation, renewals, representations and warranties, subleasing, subordination and non-disturbance, use and operations and utilities.

What are the standard forms of lease agreement used in your jurisdiction?

Although not generally prescribed by law, standard form leases can be obtained from most provincial or territorial authorities responsible for housing across the country (eg, the Ontario Real Estate Association).

Length of term

Are there any regulations on minimum and maximum terms of leases?

In Quebec, the term of a lease may not exceed 100 years according to the Civil Code of Quebec. In the common law provinces and territories, parties to a lease can generally agree on whatever term they would like. In certain jurisdictions, leases of unsubdivided lands are restricted in terms of length of time, subject to certain exceptions. Some provinces and territories also impose land transfer taxes on long term leases.

Are long-term tenants accorded any special rights as to extension or renewal of leases?

Long-term tenants typically negotiate rights of extension or renewal in their leases; however, these rights are not implied by statute.


What regulations (if any) govern rent increases?

Rent increases in respect of residential tenancies are generally regulated by the residential tenancy acts, or their jurisdictional equivalents, of each province or territory. These acts may prescribe the timing of rent increases, the required notice and the amount by which rent may be increased without approval from the applicable landlord and tenant board. In some jurisdictions, certain tenancies or types of accommodation are exempt from some of the rent control provisions. There are no such regulations in respect to commercial leases.

What regulations (if any) govern rent security deposits?

In the common law jurisdictions, security deposits in respect of residential tenancies are regulated by the residential tenancy acts, or their jurisdictional equivalents, of each province or territory in Canada. These acts generally allow landlords to require tenants to pay a security deposit as a condition or term of their leases. In Quebec, under the Civil Code of Quebec landlords cannot exact any money, in the form of a deposit or otherwise, other than rent.

Can the tenant withhold rent payments on any legal grounds?

Tenants have a general obligation to pay rent when it is due unless otherwise mutually agreed. In certain circumstances a tenant has the statutory or common law right to withhold rent or offset it against the landlord; however, these rights vary across the country and are commonly expressly waived by tenants in commercial leases.


Under what circumstances is sub-letting typically allowed?

Sub-letting is typically allowed where the lease does not prohibit it. However, in practice almost all leases set out certain restrictions or requirements with respect to sub-letting. Most leases in Canada provide that a tenant cannot sub-let the leased premises without the prior written consent of the landlord and, if the tenant has satisfactory bargaining power, such consent is typically not to be unreasonably withheld.

Obligations and liabilities

What are the general obligations and liabilities of the landlord in respect of the property and what are the consequences of breach?

In general, a landlord is obliged, subject to the terms of the lease:

  • to deliver vacant possession of the leased premises to the tenant in a good state of repair and fit for habitation;
  • to comply with health, safety, housing and maintenance standards;
  • not to interfere with the peaceful enjoyment of the premises by the tenant and its invitees; and
  • to provide utilities, maintenance and other services.

If a landlord defaults in the performance of its obligations under a lease, a tenant may have the right to compensation, rent abatement or termination of the tenancy.

What are the general obligations and liabilities of the tenant in respect of the property and what are the consequences of breach?

A tenant is generally obliged to pay the rent reserved and to perform the other covenants in the lease at the times and in the manner specified therein, including but not limited to:

  • having insurance;
  • operating, maintaining and repairing the property; and
  • restoring the premises to the condition they were in at the beginning of the term on expiry, save for normal wear and tear.

If a tenant defaults in the performance of its obligations under a lease, a landlord generally has the right to re-enter the premises and terminate the lease or to affirm the lease and sue for rent in arrears, among other things, subject to statute, common law and the terms of the lease.


Are any taxes payable on rental income? If so, are any exemptions available?

Rent received by a landlord is generally subject to income tax. Depending on the jurisdiction, goods and services tax, harmonised sales tax or Quebec sales tax is also imposed on the rent payable by tenants under commercial leases. If the tenant is registered for goods and services tax or Quebec sales tax purposes, and is exclusively engaged in commercial activities, the relevant tax should subsequently be recoverable by the tenant, but the landlord is responsible for collecting it on behalf of the tax authorities. In some provinces, provincial sales tax may also apply.


Are the landlord and tenant bound by any insurance requirements?

The lease usually sets out the respective insurance requirements of both the landlord and tenant. The landlord is typically responsible for maintaining property insurance over the entire building as well as liability insurance for common areas. Nevertheless, commercial leases commonly provide that the tenant will pay the costs of any insurance maintained by the landlord, or its proportionate share in the case of multi-tenanted properties. The tenant is typically responsible for maintaining, among other things, its own liability insurance and property insurance on personal property and leasehold improvements.

Termination and eviction

What rules and procedures govern termination of the lease by the landlord and the tenant’s eviction from the property?

A lease will often include provisions related to termination by the landlord and, sometimes, eviction of the tenant. For residential tenancies, the rules and procedures related to termination and eviction are generally set out in the respective residential tenancy acts, or their jurisdictional equivalents, which differ depending on the province or territory in question. In many jurisdictions, a residential landlord may apply to the applicable authority for an eviction order following:

  • default of the tenant;
  • expiry of the term; or
  • exercise of an early right of termination by the landlord.

For commercial tenancies, the rules and procedures related to termination and eviction are generally set out in the respective commercial tenancy acts, or their jurisdictional equivalents, which also differ depending on the province or territory in question. In many jurisdictions a commercial landlord must serve the tenant with notice of an alleged breach and the tenant must fail to remedy such breach within a reasonable period of time following receipt of such notice before the landlord can enforce a right of re-entry.


Finance providers

What are the typical providers of real estate financing in your jurisdiction? Are there any restrictions on who may provide financing?

Real estate financing is typically provided by financial institutions such as banks, insurers, trust companies, pension funds, credit unions and other entities that lend money in the ordinary course of business. These financial institutions are regulated under federal and provincial legislation including, for example, mortgage brokerage legislation, which in some jurisdictions sets out registration or licensing requirements for those who lend money on the security of real estate. Some jurisdictions also set out statutory registration requirements for foreign financial institutions. 

Financing structures

What are the most common structures used to secure real estate financing and how are these security interests perfected?

In Canada, real estate financing is most commonly secured by registering a mortgage and a general assignment of rents and leases, or an immovable hypothec in Quebec, against title to the real property in the applicable land registry office, as well as notice of a security interest against the borrower in the applicable personal property registry office pursuant to a general security agreement or movable hypothec in Quebec. These real and personal property security interests are generally created by execution of the underlying agreements and perfected by registration in the applicable registers. 

What covenants are typically made in financing agreements?

Financing agreements typically impose:

  • positive covenants (eg, to pay principal and interest, obtain and maintain insurance and pay taxes and utilities);
  • negative covenants (eg, not to take on new debts, sell shares or assets, or grant guarantees); and
  • financial covenants (eg, to maintain certain financial ratios and limit certain capital expenditures).

The package of covenants required by a mortgage lender is proportionate to the borrower’s risk profile.

Enforcement of security

How are security interests enforced in the event of default?

In the event of default, mortgage lenders in most jurisdictions have recourse to some or all of the following remedies for enforcing their security interests over real property:

  • taking possession of the property;
  • exercising a private power of sale;
  • instituting judicial sale proceedings; or
  • foreclosing on the property in satisfaction of the debt.

Some of these remedies may be exercised concurrently and consecutively, but are subject to certain substantive and procedural requirements prescribed by law.

What is the typical timeframe for the enforcement of security?

The timeline for enforcement of real property security can vary widely from jurisdiction to jurisdiction. However, in all jurisdictions the lender is obliged to give reasonable notice before making a demand for payment and, in most circumstances, will be required to send notices under federal bankruptcy and insolvency legislation. The borrower then has a reasonable period of time to remedy the event of default. If the borrower fails to remedy the event of default, the lender will generally have one or more of the enforcement options discussed above.


Investment climate

What is the general climate of real estate investment in your jurisdiction?

Domestic and foreign investment in Canadian real estate continues to be steady in regions with high demand and low supply, such as Montreal, Toronto and Vancouver.


Who are the most common investors in real estate?

In Canada, the most common investors in real estate include pension plans, real estate investment trusts, private equity firms, developers and individuals.

Are there any restrictions on foreign investment in real estate?

At the federal level, the Competition Act and the Investment Canada Act provide for notification to, or review by, the federal government in certain circumstances involving acquisitions by non-resident purchasers. The federal Citizenship Act also permits each province and territory to enact laws restricting ownership of real property by non-residents.

At the provincial and territorial level, restrictions on the ownership of real property by non-residents vary from jurisdiction to jurisdiction. However, most jurisdictions have taken measures to preserve farm or non-urban land – for example, the following all limit the amount of farm land that can be owned by non-residents or require that the acquisition of farm land by non-residents be approved by the relevant agricultural commission, in each case subject to certain exemptions:

  • the Agricultural and Recreational Land Ownership Act in Alberta;
  • the Farm Lands Ownership Act in Manitoba;
  • the Land Protection Act in Prince Edward Island;
  • the Act Respecting the Acquisition of Farm Land by Non-residents in Quebec; and
  • the Saskatchewan Farm Security Act.

Some provinces and territories also require that corporations incorporated outside Canada obtain an extra-provincial licence or complete certain registrations in order to hold and exercise rights over real estate in those jurisdictions. 

Investment structures

What structures are typically used to invest in real estate and what are the advantages and disadvantages of each (including tax implications)?

The following structures, individually or in combination, are typically used to invest in real estate in Canada:

  • corporations;
  • partnerships;
  • trusts;
  • joint ventures; and
  • sole proprietorships.

Corporations are considered separate legal entities from their shareholders, which have limited liability but cannot flow through income, losses, gains and capital costs allowances of the corporation, which is taxed or deducted at the corporate level before shareholders are taxed on the distributions of dividends. Corporations are probably the most common real estate investment structure in Canada, but can have onerous and costly registration, operation and annual filing requirements.

Partnerships are not considered to be separate legal entities from their partners, so even though income and losses are computed at the partnership level, they are exigible at the individual partner level, which is the primary reason for investing in real estate through a partnership. In general partnerships, all of the partners have unlimited joint and several personal liability for obligations of the partnership and can participate in management. In limited partnerships, limited partners’ personal liability is limited to their individual capital contributions in the partnership, provided that they do not participate in managing the business.

Trusts are not considered separate legal entities, but unlike partnerships can be taxable under the Income Tax Act (Canada). Their assets are held in trust by trustees for the benefit of beneficiaries, both of whom can, in some circumstances, be personally liable, subject to indemnification of the trustees from the trust’s assets and beneficiaries and the fact that publicly traded real estate investment trusts have certain legislative protections. Income may be taxed at the trust or beneficiary level.

Joint ventures are not considered to create separate legal entities, so income and losses flow through to the investors, which can claim certain tax deductions independent of the other co-venturers. Joint venture and co-ownership agreements should be drafted carefully in writing in order to avoid mischaracterisation of the joint venture as a partnership and unlimited joint and several liability of its members.

Individual ownership is simple and flexible, and has the advantage of direct income, losses, gains and capital cost allowances under the Income Tax Act (Canada), but has the disadvantage of personal and unlimited liability.

Planning and environmental issues


Which government authorities regulate planning and zoning for real estate development and use in your jurisdiction and what is the extent of their powers?

The provinces and territories have generally delegated responsibility for land use planning and zoning to municipalities under enabling planning act legislation promulgated by their respective legislatures, and land use within such municipalities is primarily governed by official plans and zoning by-laws made by the municipalities.

What are the eligibility, procedural and documentary requirements to obtain planning permission?

Each province and territory, and each municipality with delegate planning and zoning authority, has different eligibility, procedural and documentary requirements for different kinds of planning permission, including development applications, building permits, bylaw amendments and subdivision consents. The planning permission process and requirements can range from simply submitting an application and paying certain fees to meeting with municipal committees, submitting plans and applications for public consultation and seeking the approval of city council.

Can planning decisions be appealed? If so, what is the appeal procedure?

Local planning decisions can generally be appealed to provincial and territorial tribunals where they exist. In jurisdictions that do not have appeal tribunals for planning and zoning matters (eg, British Columbia, the Northwest Territories and Nunavut), local counsel decisions can in some instances be judicially reviewed not on the merits but based on a lack of jurisdiction, procedural fairness or natural justice. The superior courts of each province and territory also generally retain jurisdiction to hear local planning decision appeals.

What are the consequences of failure to comply with planning decisions or regulations?

The consequences of failure to comply with planning decisions or regulations can range from the issuance of municipal violation notices and compliance orders that can be directly enforced by self-help remedies in some jurisdictions to prosecution or injunctive relief in provincial or territorial courts that can result in fines and imprisonment.

What regime governs the protection and development of historic and cultural buildings?

Federal, provincial and municipal regulations govern the protection and development of historic and cultural buildings in Canada. At the federal level, for example, the Heritage Railway Stations Protection Act and Act to Protect Heritage Lighthouses protect railway stations and lighthouses, respectively. Each province and territory also has legislation for the conservation, protection and preservation of heritage properties. Some municipalities include heritage protection measures in their land use planning policies; some pass bylaws to designate heritage properties as such and prevent their demolition or alteration; and some require heritage property owners to enter into easements and covenants registrable on title for the protection of same.

Government expropriation

What regime applies to government expropriation of real estate?

The expropriation of real estate falls under both federal and provincial regulatory regimes. The federal government has the statutory authority to expropriate land or immovable real rights for public works or other public purposes pursuant to the Expropriation Act (Canada). Similarly, each province and territory has expropriation legislation which grants expropriation powers to authorities such as the provincial government, municipalities and utility companies.

What is the required notice period for expropriation and how is compensation calculated?

Expropriation legislation across the country sets out specific procedural requirements for expropriating authorities, such as prescribed notice periods. Compensation is generally based on the fair market value of the lands being expropriated and in some instances may include reasonable costs and damages for injurious affection.

Environmental issues

What environmental certifications are required for the development of real estate and how are they obtained?

Municipalities generally require developers to obtain building permits and planning approvals, among other things, before constructing new developments or redeveloping brownfields. At the time of submission of applications and fees for these regulatory permits and approvals, municipalities may require studies and records such as environmental site assessments, environmental impact assessments and records of site condition to be commissioned. A record of site condition, which is essentially a summary of the environmental condition of a property based on assessments completed by qualified persons, can be filed with some provincial governments following the satisfactory clean-up of contaminated property in order to limit potential future liability of developers, property owners and others.

What environmental disclosure obligations apply to real estate sales?

Sellers generally have a legal obligation to disclose environmental contamination with respect to real estate on sale in Canada. Nevertheless, in certain jurisdictions such as British Columbia, prescribed environmental disclosure obligations can be waived by a purchaser.

What rules and procedures govern environmental clean-up of property? Which parties are responsible for clean-up and what is the extent of their liability?

Environmental contamination and remediation of real property is governed by both federal and provincial or territorial legislation; however, enforcement is primarily at the provincial or territorial level, and clean-up requirements vary across the country. Although responsibility and potential liability to regulators, buyers and third parties for environmental clean-up generally rests with the seller or person that caused the contamination, subsequent owners, occupiers and those exercising control over real property can attract liability for such contamination. As between buyers and sellers, landlords and tenants or owners and managers, environmental liability is often addressed and allocated by representations, warranties and indemnities in the underlying agreement. Notably, however, parties cannot contract out of regulatory liability and their liability for environmental contamination is potentially unlimited, subject to certain provincial governments recognising and accounting for the contractual allocation of liability by the parties.

Are there any regulations or incentive schemes in place to promote energy efficiency and emissions reductions in buildings?

The federal government uses a variety of regulations, incentives and other policy instruments to promote energy efficiency and reduced emissions in both newly constructed and existing buildings.

In terms of regulation, the National Energy Code of Canada for Buildings 2011 (Canada) sets a national standard of energy performance by establishing minimum energy efficiency requirements for the design and construction of new buildings. These standards enter into force of law only if adopted by a province or territory, and jurisdictions such as British Columbia are beginning to adopt and adapt the national code. The Energy Efficiency Act (Canada) also gives the federal government authority to prescribe standards for products that affect energy use in both new and existing buildings, such as household appliances, heating and cooling systems and light bulbs.

In terms of incentives, there are a number of provincial, municipal and private sector incentives available for buildings certified to the Leadership in Energy and Environmental Design (LEED) standards or that use ENERGY STAR qualified products. Every newly constructed federal office building must meet the LEED gold standard of environmental performance. ENERGY STAR Portfolio Manager is a voluntary national energy benchmarking initiative that allows users to track, compare and rate their building’s energy performance online with a view to reducing their carbon footprint and receiving recognition.

These are just a few examples of the regulations and incentives in place to promote energy efficiency and reduced emissions in buildings across Canada.