Restrictions on Foreign Ownership of Rural Land – Alberta’s Regulations and BC’s Bill M-202
Posted in Property Law

In a previous blog post, Nicholas Shon wrote about proposed amendments to the Property Law Act (British Columbia), aimed at restricting ownership of land located within the British Columbia Agricultural Land Reserve (the “ALR”) by “foreign nationals” or “foreign corporations” to a maximum of five acres. 

Alberta has comparable restrictions on foreign ownership under the Foreign Ownership of Land Regulations (the “Alberta Regulations”). In force since 1979, the Alberta Regulations seek to strike a balance between encouraging economic investment from foreign sources while ensuring that prime rural lands remain available for Canadians. 

Application of the Alberta Regulations

The Alberta Regulations impose a general prohibition on the acquisition of an interest in “controlled land” consisting of more than two parcels containing more than 20 acres in total, by individuals who are neither citizens nor a permanent residents of Canada (“Ineligible Persons”) or foreign controlled corporations, except as permitted by certain exceptions (discussed below). 

Under the Alberta Regulations:

  • the property interests captured by the general prohibition include any possessory right in real property, spanning from an option to lease to full fee simple ownership;
  • “controlled land” is defined as any real property in Alberta other than (a) land within the boundary of a municipality, (b) crown land, and (c) mines and minerals; and
  • a “foreign controlled corporation” is any corporation incorporated outside of Canada, or incorporated within Canada and (i) if not publicly traded, having 50% or more of its shares controlled by Ineligible Persons or foreign controlled corporations, or (ii) if publicly traded, having 50% or more of its shares held in blocks of 5% or more by Ineligible Persons or foreign controlled corporations, or where less than two thirds of the directors are Canadian citizens or permanent residents. 

Permitted Ownership Exceptions

The general restriction on foreign ownership under the Alberta Regulations is subject to a number of exceptions under which an Ineligible Person or foreign controlled corporation may acquire an interest in controlled land for certain business purposes. These purposes include, the construction of a pipeline, processing plant or transmission line, and under certain conditions, industrial processing, manufacturing, commercial or transportation facilities and the development of residential subdivisions, among others. Where no specified exception applies, an Ineligible Person or foreign controlled corporation may apply to the Lieutenant Governor in Council for an order in council allowing a particular transaction or class of transaction to proceed despite being prohibited under the Alberta Regulations.

Regulatory Requirements and Compliance

Every transfer or registration filed in the Alberta Land Titles Office (the “LTO”) in respect of controlled land is reviewed by the Foreign Ownership of Land Administration (“FOLA”) office. The Alberta Regulations contain certain filing requirements that are triggered when documents transferring an interest in controlled land are submitted for registration to the LTO. The transfer or registration of an interest in controlled land must be supported by a declaration setting out the citizenship / permanent residence of the prospective interest holder (and in the case of a corporation, details of its shareholders). Compliance with this requirement can be onerous for a Canadian corporation with a complex organizational structure or a broad base of shareholders. Where an Ineligible Person or foreign controlled corporation proposes to acquire an interest in controlled land in reliance on a specified exception, the Alberta Regulations require it to provide details of its proposed use of the controlled land. 

Review by FOLA is not expressly triggered unless there is a direct transfer or registration of legal title to an interest in controlled land. Accordingly, it is important to consider how the Alberta Regulations apply to any transaction involving Alberta real property, even where the deal does not appear outwardly to be a ‘real estate deal’. For instance, the sale of shares may result in a corporation becoming “foreign controlled” (as defined in the Alberta Regulations). If that corporation holds an interest in controlled land, even without a formal transfer event at the LTO, an appropriate declaration needs to be filed with FOLA to re‑characterize the corporation as foreign controlled and ensure its use of the controlled property fits within an exemption from the Alberta Regulations. If no exception to the Alberta Regulations applies and an order in council is not obtained, an Ineligible Person or foreign controlled corporation holding an interest in controlled land must divest itself of the interest within three years. 

Notable Differences Between the Proposed BC Legislation and the Alberta Regulations

Both the Alberta Regulations and the proposed BC legislation share the stated goal of reserving certain rural lands for Canadians. However, there are a number of key differences between these regimes:

  • While the Alberta Regulations use the % ownership test discussed above to define a “foreign controlled corporation”, the proposed BC legislation uses the “de facto control” test from Section 256 of the Income Tax Act (Canada) - the same test used to apply BC’s Foreign Entity Tax on residential real estate. For a succinct discussion of the “de facto control” test, see this post by Peter Tolensky and Ed Wilson.  
  • Unlike the Alberta Regulations, the proposed BC legislation does not contain any ‘business purpose’ exceptions for foreign investment within the ALR (except for the ability of the Lieutenant Governor in Council to grant discretionary exemptions).

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