In June 2024, the Foreign Ownership of Land Administration (“Administration”) in Alberta released updated versions of the statutory declarations prescribed under the Foreign Ownership of Land Regulations, Alta Reg 160/1979 (“Regulations”).
These statutory declarations must be completed by any person or corporation acquiring an interest in “controlled land” in Alberta, which includes the purchase of real estate. Presently, any person or corporation purchasing real estate in Alberta that is caught by the definition of “controlled land” under the Regulations, is required to complete a statutory declaration in one of the four prescribed forms under the Regulations and submit it at the same time as the Transfer of Land for registration. Depending on the purchaser’s ownership structure, the length of the statutory declaration can vary from one page to several pages and appendices.
Along with the updated forms, the Administration in its press release titled “Form Types Information Sheet” has suggested that Canadian-controlled corporations acquiring interests in controlled lands may now rely on statutory exemptions and complete Form 3, allowing such corporations to forego the lengthy and often time-consuming process of disclosing their ownership chain to establish their Canadian control. This shift in the disclosure requirements for Canadian-controlled corporations dramatically reduces the level of disclosure needed where an existing exemption for foreign-controlled corporations under the Regulations applies to the Canadian-controlled corporation and, as the Administration notes, should improve turnaround times for processing submissions.
This article provides an overview of the current Regulations and the exemptions that a corporation can rely upon in using Form 3.
Definition of “Controlled Land”
When discussing the acquisition of “controlled land” in Alberta, terms such as ‘farm land’ or ‘agriculture land’ may be used. While this may bring to mind idyllic images of quarter sections filled with yellow-topped canola plants or pastures of grazing cattle, anyone seeking to acquire land in Alberta should be aware that the definition of “controlled land” under the Regulations captures more than crop land and pasture:
“controlled land” includes all lands in Alberta except: (i) those owned by the Crown, (ii) contained within boundaries of a city, town, new town, village or summer village, (iv) mines and minerals, and (v) lands specifically excluded from being subject to the Regulations.
With such a broad definition, it is easy to see how, for example, someone acquiring a parcel of land located in an industrial park just outside of the municipal limits of a city or town, may not anticipate that they will be subject to the restrictions on foreign ownership and mandatory disclosure requirements under the Regulations when completing this purchase.
Restrictions on Foreign Ownership and “Foreign-Controlled”
Enacted under the Citizenship Act, RSC 1985, c C-29, a federal statute, the Regulations limit ineligible persons, foreign-controlled corporations, and foreign-controlled limited partnerships from owning or beneficially owning interests in more than two parcels of “controlled land” in Alberta that cumulatively contain more than 20 acres. Otherwise, an existing exemption must apply for such ineligible persons, corporations or limited partnerships to acquire the interest or the entity needs to apply to the Provincial Cabinet for a discretionary exemption.
In using the term ‘interest,’ the Regulations contemplate more than simply acquiring fee simple ownership of controlled land. Acquisitions such as leasehold interests, rights of first refusal and options to purchase that can be evidenced by way of caveat are all interests in controlled land under the Regulations.
Under the Regulations, a corporation will be considered ‘foreign-controlled’ in three circumstances:
- If a corporation is incorporated outside of Canada, despite the fact all shareholders of the corporation may be Canadian citizens or non-foreign controlled corporations or limited partnerships.
- If a corporation is incorporated in Canada, either federally or under a provincial statute, its percentage of foreign ownership must be determined through an analysis of its ownership chain:
- If the corporation is a “private corporation” or a “public corporation” whose shares are not traded on a stock exchange in Canada, a corporation is considered ‘foreign-controlled’ if the percentage of foreign ownership as calculated under the Regulations is 50% or greater; or
- If, in the chain of ownership of the corporation, 50% or more of the outstanding shares of any of the corporations in succession are more than 50% held by ineligible persons or corporations with 50% or more foreign ownership, the corporation will be considered ‘foreign controlled’.
- If the corporation is a “public corporation” whose shares are traded on a stock exchange in Canada, the corporation will be considered ‘foreign-controlled’ if less than two-thirds of the directors are Canadian citizens or permanent residents, or 50% or more of the outstanding shares are held in blocks of 5% or more by non-Canadian citizens, non-permanent residents, or foreign-controlled corporations and the percentage of foreign ownership calculated under the Regulations exceeds 50%.
For a limited partnership, a different test applies. A limited partnership will be considered ‘foreign-controlled’ if one or more limited partners, contributing 50% or more of the outstanding contributions by limited partners in the partnership, are foreign controlled corporations or ineligible persons. An ‘ineligible person’ is defined broadly to include: (i) an individual that is not a Canadian citizen or permanent resident; (ii) the government of a country, a political subdivision of a country, or an agent of the government or political subdivision, other than Canada; and (iii) a corporation that is incorporated outside of Canada.
The analysis of whether a corporation is a ‘foreign-controlled corporation” looks up the entire ownership chain until the ultimate beneficial owner is reached.
Exemptions under the Regulations
Sections 6, 7 and 8 of the Regulations specify a number of circumstances where the Regulations do not apply. In summary, circumstances that are exempt include:
- Right of entry orders under The Surface Rights Act;
- Interests in controlled land to establish an industrial, processing, manufacturing or transportation facility that does not exceed 80 acres per separate facility;
- For the construction of a pipeline, processing plant, manufacturing plant, refinery, transmission line, power plant, or electric distribution system;
- Up to 160 acres per project or development for extracting sand, gravel, clay or marl;
- Up to 80 acres for establishing a residential development, or up to 20 acres to establish a single residence, if in the Minister’s opinion the proposed residence or development is in an area that such construction is likely to be permitted;
- Acquisitions or taking of interests by a foreign state for consular or diplomatic purposes;
- An acquisition or taking of an interest by an executor of the estate of a deceased person;
- A leasehold interest for a term of under 20 years, including all extensions and renewals, if registered within 60 days of execution in the Land Titles Office; and
- An interest under an option to purchase if such option is exercisable within 1 year from its effective date and the exercise is conditional on the interest holder becoming eligible under the Regulations.
Guidance from the Administration
As previewed, following the release of updated statutory declarations in June, 2024, the Administration’s guidance in its Form Types Information Sheet (“Information Sheet”) suggests a Canadian-controlled corporation can rely on an existing statutory exemption and complete Form 3, foregoing the requirement to detail its ownership chain in a lengthy statutory declaration. The Information Sheet also suggests that any Canadian-controlled corporation relying on an exemption must provide proof of a valid and substantiated use under the exemption requirements.
As this new procedure is not legislated, further guidance and direction from the Administration is required regarding the use of Form 3 by Canadian-controlled corporations.
Considerations for anyone acquiring lands in Alberta
Anyone considering acquiring real estate in Alberta must be mindful of the restrictions on ownership of “controlled land” and the disclosure requirements under the Regulations. As a breach of the Regulations may attract consequences such as divesting the offending land holdings or court-ordered sales of lands, ineligible persons, foreign-controlled corporations and foreign-controlled limited partnerships should be aware of how the Regulations impact their transaction. Advanced preparation, such as completing a thorough review of the ownership structure of the corporation or limited partnership intending to acquire lands in Alberta at the earliest possible opportunity, including before the Purchase and Sale Agreement is executed, can save great time and expense, both in legal costs and closing delays, facilitating smoother transactions.
For assistance with determining how restrictions on foreign ownership of controlled lands may impact your real estate transactions in Alberta, a member of MLT Aikins Agriculture & Food team or Real Estate team would be pleased to assist you. Listed among Chambers Canada’s top ranked firms in agribusiness in Canada, MLT Aikins provides legal advice tailored to the business and practical considerations of the agriculture and food industry.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.