NEW REQUIREMENTS FOR REAL ESTATE TRANSFERS REGARDING NON-RESIDENTS
Real estate acquisitions by non-residents, both in Québec and in the rest of Canada, as well as elsewhere in the world, are not a new phenomenon. For several years, there has been an increase in transactions by non-residents of Canada, which has significantly increased the value of the real estate market. To limit this phenomenon, Ontario and British Columbia have legislated on the matter, collecting additional taxes (15% for Ontario and 20% for British Columbia) on real estate transfers by foreign purchasers in specified areas.
Although Québec has not followed its provincial counterparts, measures have been nonetheless put into place to assess the extent of real estate transactions carried out in the province of Québec. In fact, on October 1, 2020, the “Règlement sur le formulaire de présentation de la réquisition d’inscription d’un transfert immobilier” came into force, which made changes to the information requested when registering deeds of transfer at the Land Registry Office. More specifically, the applications for registration submitted from the Service en ligne de réquisition d’inscription (SLRI) must now include declarations regarding the residency status of parties to these transfers, whether they are residents or non-residents.
The adoption of the Regulation follows the amendments made to the Act Respecting Duties on Transfers of Immovables in June 2018. The new provisions of this Act notably enabled the Minister of Energy and Natural Resources (MERN) to collect information regarding the citizenship of transferors and transferees for the purposes of the development, by the Minister of Finance, of economic, fiscal, budgetary and financial policies in accordance with section 2 of the Act respecting the Ministère des Finances.
Here are some important elements of this new Regulation:
Required information
Section 2 of the Regulation sets out that in addition to the information required by section 2982 of the Civil code of Québec, the following declarations must be made, both be the transferor and the transferee:
In the case of a natural person:
- their citizenship
- their permanent resident status, if applicable, as defined in the Immigration and Refugee Protection Act
- the intention of the transferee to occupy the immovable or for it to be occupied by a member of their family as a main residence
In the case of a legal person:
- the state, province or territory in which it was constituted
- if it has completed at least one tax year, whether it is a resident or deemed resident of Canada within the meaning of the Income Tax Act for its first completed tax year before the date of the document evidencing the transfer
In the case of a trust or a partnership:
- the state, province of territory in which the contract establishing the trust or the partnership was constituted
- in the case of a general partnership, if at least half of its member are foreigners within the meaning of the Income Tax Act
- in the case of a limited partnership, if a general partner is a foreigner
- in the case of a trust, if it has completed at least one tax year, whether it is a resident or deemed resident of Canada within the meaning of the Income Tax for its first completed tax year before the date of the document evidencing the transfer
It should be noted that the notion of “sale” includes any assignment, sale with a right of redemption, sale by the creditor, sale under judicial authority and sale for non-payment of property taxes.
Some exceptions provided by law
Section 3 of the Regulation sets out four (4) exceptions to the obligation to provide the information mentioned in Section 2. These exceptions only apply to a transferor acting for an owner as part of their functions. These exceptions are:
- for the one who acts as a trustee or liquidator of a succession for the one who acts in their quality of trustee or liquidator of a succession within the context of the exercise of a hypothecary right
- within the context of the forced execution of a judgment for the non-payment of property taxes
To facilitate the preparation of applications for registrations and obtaining the necessary information, the MERN has made available to legal professionals a declaration form for the transferor and the transferee, which contains all the information that must be registered through the SLRI [1].
It goes without saying that this Regulation is not without impact for the parties to a real estate transfer and their legal advisers. The application of the new provisions of this Regulation creates an additional burden on legal professionals when registering a deed of transfer. The new requirements related to the registration is these deeds could imply an increase in legal fees for the parties to a transfer, as it involves an increase in the work of jurists and other professionals involved, no only as regards to the registration process, but in determining the residency status of a legal person, which is not always an easy task.