Real Estate Investment

1. REGISTRATION SYSTEMS

There are two registration systems in Canada, one is the older registry system and the other is a land titles or “Torrens” system. Registration under the registry system provides notice to third parties and can establish priorities among competing interests, though it does not establish whether there is a valid interest in the land. 

In order to determine the interest held in the land under the registry system, it may be necessary to review all documents affecting land back to the initial Crown grant. Title searches must be undertaken and prospective buyers receive legal opinions regarding the title and interests attached to the land. 

The current land titles system provides an up-to-date statement as to the ownership and other interests in the land without having to examine all the documents dating back to the Crown grant. Most registry systems have been converted to land titles systems. 

2. TITLE INSURANCE 

Title insurance is used to provide protection against fraud or forgery in real estate transactions as well as indemnification against specified losses.  A title insurance policy will protect the insured to the extent of the policy and provides for a duty to defend in the event of a claim. This differs from a legal opinion. For example, while title insurance provides an indemnity against specified losses, a solicitor who furnishes a legal opinion can only be held responsible if there is negligence on his or her part. 

3. OWNERSHIP RESTRICTIONS FOR NON-RESIDENTS

Non-residents can generally own real property in Canada without restriction. However, as each province regulates property ownership, each province is able to restrict the acquisition of land by individuals who are not citizens or permanent residents or corporations controlled by citizens or permanent residents. For example, in Alberta, there is a limit to the types of land that can be held by non-residents. For corporations that are not incorporated in the subject province, the corporation will generally need to acquire an extra-provincial license to purchase property in the province in which the land is located. Also, both British Columbia and Ontario have introduced a “foreign buyers tax” in respect of certain acquisitions of real property by non-Canadian residents. The “foreign buyers tax” is twenty percent (20%) in British Columbia, and fifteen percent (15%) in Ontario (if applicable). Quebec has specific legislation that regulates the ability of non-residents to purchase more than four (4) hectares of agricultural land.  The Federal government has recently passed legislation entitled the Prohibition on the Purchase of Residential Property by Non-Canadians (the “Act”), which Act came into effect on January 1, 2023.  Pursuant to the Act, non-Canadians are prohibited, for a two year period commencing January 1, 2023, from purchasing certain types of residential property in various specified areas across the country. 

When a non-resident disposes of real property situated in Canada, the non-resident is subject to the withholding tax obligations discussed above, which are applicable to taxable Canadian property. 

4. LAND TRANSFER TAXES 

All provinces impose a tax on the transfer of real property. Rates vary widely and in some cases affect different portions of the purchase price of the land. Certain cities like Toronto impose an additional municipal land transfer tax. There are some differences between commercial and residential land transfer tax rates in certain provinces.