Controlled Land: Don’t Let It Cause You to Lose Control of Your Real Estate Transaction
The Foreign Ownership of Land Regulation (FOLR), enacted in 1979, limits foreign individuals or foreign-controlled corporations/entities from acquiring interests in “controlled land.” This includes ownership, lease interests, options to purchase, rights of first refusal, and more. FOLR was introduced to address concerns about foreign interests acquiring prime agricultural and recreational land in Canada.
So, what exactly is Controlled Land?
Controlled land refers to all land outside the boundaries of a city, town, village, or summer village. It excludes land owned by the Province and mines and minerals. Certain hamlets within counties or municipal districts, such as Strathcona County (Sherwood Park) and the Regional Municipality of Wood Buffalo (Fort McMurray), are also excluded, provided they are explicitly stated in the “municipality” section of the certificate of title.
What if you want to acquire an interest in Controlled Land?
Anyone acquiring an interest in controlled land must complete a statutory declaration in one of the prescribed forms, declaring their citizenship or that the entity is Canadian-controlled. If the acquiring party is non-Canadian (incorporated in another country, has over 50% foreign ownership, or is a publicly traded corporation with less than two-thirds of directors being Canadian citizens or permanent residents), FOLR must be reviewed to determine if any exemptions apply.
Common exemptions include:
- Small Parcels: Controlled land consisting of no more than 2 parcels totalling up to 20 acres.
- Short-term Leases: Leases of controlled land for 20 years or less (including options to renew) and which are registered at the Land Titles Office within 60 days of being made.
- Short-term Options: Options to purchase exercisable within 1 year, provided the ineligible party becomes eligible.
- Industrial Use: Land for industrial, processing, manufacturing, commercial or transportation facilities, not exceeding 80 acres per facility.
- Gravel Extraction: Interests for gravel extraction, limited to 160 acres per project.
Applying for an Order in Council
If no exemptions apply, an application for an exemption by Order in Council can be made. This involves a detailed application form and specific transaction details. The review process currently takes 4-8 months.
Post-Acquisition Requirements
Even with an exemption or Order in Council, foreign entities acquiring controlled land must divest their interest within 3 years of project completion or termination. The Foreign Ownership of Lands department will periodically follow up on this requirement.
Key Takeaways
Firstly, review the title of the lands in question to determine which municipality it is located in and whether the lands in question are controlled lands. If so, for non-Canadian entities, it is crucial to determine if an exemption applies at the outset of the transaction. Alternatively, include a condition precedent to address this.
Should you be interested or have questions regarding real estate transactions involving controlled land, please contact Jill L.A. Sheward.
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Material in this article is available for informational purposes only and is a high level summary of the subject matter. It is not, and is not intended to be, legal advice. You should first obtain professional legal advice prior to taking any action on the basis of any information contained in this article. This article is copyright. For permission to reproduce this article, please email Swainson Miki Peskett LLP.
