Under Canada’s federal constitution, laws relating to real estate fall within provincial jurisdiction. Each Canadian province enacts its own legislation with respect to the ownership structures, use, acquisitions and dispositions, financing and development of real property. Such laws tend to be similar across most of Canada’s provinces, as well as in the three northern territories. The exception is the civil law jurisdiction of Quebec.
In Canada’s common-law jurisdictions – ie, all provinces and territories other than Quebec – common-law jurisprudence is a key component of real estate law. In addition, some real estate-related common-law principles have been codified in legislation in Canada’s common-law jurisdictions. In Quebec, the Civil Code (similar to those in use in many continental European countries) serves as the primary source of law, although case law clarifies issues that remain after the application of the Civil Code of Quebec.
International law is not a significant source of real estate law in Canada. Nevertheless, international treaties are occasionally reflected in Canadian real estate legislation. Orders of foreign courts are enforceable in Canada under certain conditions.
The slowdown in transactional volume witnessed in Q2 and Q3 of 2020 due to uncertainty surrounding the coronavirus pandemic in Canada is now long behind us. Throughout 2021 and into 2022, we have seen what some describe as a “post-COVID boom” in real estate. While the retail and hospitality sectors have not yet fully recovered, aging or redundant real assets in prime locations are being sought for redevelopment, attracting domestic and foreign buyers. With inflation running high and an evolving pattern of interest rate hikes, this “boom” could wane in the months to come. However, as of Q1 2022, the market has yet to slow, with purchasers continuing to pay top dollar for commercial assets and avidly acquiring lands for redevelopment across most office, residential and industrial sectors.
While the downtown office sector has seen a shift, with tenants compressing operations and an active sublease market, rent payments have largely been kept current and many businesses are planning on, or actualising, hybrid or full returns to the office.
The industrial sector remained strong throughout the early days of the pandemic, and has since far exceeded its pre-pandemic buoyancy, gaining additional traction due to increased demand in the logistics sphere.
The residential sector has shifted in focus as the demand for suburban and recreational property has enjoyed a strong boost, such that this sector has generally returned to very strong levels. In particular, BC has experienced unprecedented market lifts with robust demand pushing this sector throughout the province to new heights.
On the public market front, significant activity has been trending, including a notable takeover of a publicly traded REIT.
Investors who hesitated from making major investments in 2020 have begun deploying their capital at an accelerated pace, not fully attributable to pent-up demand. Institutional and private funds dominate the market, with the new private, pooled funds demonstrating a competitive response by those seeking to take advantage of the easing of pandemic restrictions. Financings and re-financings remain very active.
The Canadian real estate market has not yet been significantly impacted by potentially disruptive developments such as blockchain and proptech. The long-term transformative effects of the coronavirus pandemic on the office (including parking), hotel and hospitality sectors will only be known when public and legislative responses to the pandemic are either at an end, or fully stabilised. Related sectors may also see transformative change, such as shifts in office, retail and residential demand from urban centres to suburban areas, potential reductions in demand for office space (with increased numbers working from home) and increased demand for vacation and recreational properties. In addition, the explosive growth of online commerce, with even greater demand due to the exponential demand for logistics and distribution centres as a result of the pandemic, have sustained and increased pressures on the industrial real estate market as major online distributors vie for scarce urban space in which to house new fulfilment centres.
While several Canadian jurisdictions already tax unregistered (or “beneficial”) transfers of land, others have either recently introduced such taxes (Quebec) or are considering doing so (British Columbia). Ontario has imposed onerous disclosure requirements, including details of shareholdings and beneficial ownership for transfers of agricultural land and certain categories of residential properties.
The continuing shortage of affordable housing has led to legislative action being taken. Both British Columbia and Ontario have already instituted foreign-buyer taxes in respect of certain residential properties in certain geographic areas. In British Columbia, an annual "speculation" tax has been introduced, which targets owners who do not pay taxes in British Columbia and who own real estate that is neither their principal residence nor made available for long-term rental. The goal is to encourage rental of underused residential properties in major urban centres, and the tax rate varies from 0.5% to 2% of the property’s assessed value. The federal government is considering Bill C-8, containing the “Underused Housing Tax Act”, with a proposed 1% tax on the value of certain residential property owned by non-permanent residents or non-citizens considered to be vacant or underused (proposed in-force date: 1 January 2022).
In British Columbia, steps have been taken to increase transparency and end hidden (beneficial) ownership of real estate. A publicly accessible registry of indirect owners of land came into effect on 30 November 2020, and became accessible to the public on April 30 2021. While certain information is publicly available on such registry, more sensitive information is only available to law enforcement/government agencies. Corporations, trusts and partnerships that acquire fee-simple property or leases with a term of over ten years must identify and provide information on all individuals who hold a significant interest in that entity. Developers of certain development properties are required to collect, report and retain information regarding assignments of purchase agreements in the new registry. Disclosure of these interest-holders will be required by the registered owner of an interest in land on a retroactive and ongoing basis.
On 9 November 2021, Toronto became the first municipality in Ontario to introduce an inclusionary zoning regime (proposed in-force date: 18 September 2022). This regulatory tool enables municipalities to require the provision of affordable housing as part of development.
In Ontario, various municipalities are preparing Community Benefits Charge by-laws, which enable municipalities to impose a charge (up to 4% of land value) to pay for the capital costs of development facilities and services, the policy goal being to lend certainty and transparency to development costs.
Property rights fall within the jurisdiction of the provinces or territories, and differ across the country. Each jurisdiction has statutes that govern the acquisition, ownership, use, financing and development of real estate. In the common-law jurisdictions, a freehold estate in real property is a right or interest that exists for an indefinite duration. Conversely, a leasehold estate exists for a fixed duration. A fee-simple estate is the most common freehold estate in Canada and is considered as absolute ownership of real property. A leasehold estate is not absolute but confers an exclusive right of possession during the lease term to the tenant.
Other non-possessory rights in land include:
Licences to use land are contractual, do not create an interest in land and generally do not grant exclusive possession.
In Quebec, real estate is generally governed by the Civil Code of Quebec, which distinguishes between personal rights and real rights.
Transfers of title are governed by provincial and territorial statute. Certain jurisdictions (Alberta, Manitoba, Prince Edward Island, Quebec and Saskatchewan) restrict the ownership of farmland or rural recreational land by non-residents. In Quebec, non-residents include residents of other Canadian provinces or countries (in the case of individuals) and those whose directors and ultimate shareholders are not domiciled in Quebec (in the case of corporate entities).
In common-law jurisdictions, registered (legal) title is typically transferred to the buyer upon registration of a deed or transfer in the relevant land registry office. In Quebec, ownership is transferred as soon as there is a “meeting of the minds”, but the sale may not be opposable against third parties until a deed is registered.
There are two types of land registration systems in Canada:
Each province and territory uses either one or a combination of these systems. However, most common-law jurisdictions have converted or are in the process of converting to the more modern land title system.
The requirements for registration of instruments affecting land differ across the various provinces and territories and may include procedural, format and content requirements. Electronic registration of instruments is available in certain jurisdictions.
Title insurance is commonly used in Canada, but less so in provinces with a Torrens system (ie, with a statutory assurance of title). Many real estate lenders require borrowers to obtain title insurance. Title insurance can also insure against matters otherwise typically covered by diligence, such as when a legal survey is not available, or when unusual title risks exist.
The coronavirus pandemic has also resulted in increased flexibility and new processes for the documentation and completion of real estate transactions in Canada, including remote witnessing through videoconference and the use of affidavits of execution for remote execution of land title documents in certain provinces. The use of electronic filing of documentation with governmental authorities has been further expanded, such as transfer tax filings and certain remaining land registry filings which previously required paper submissions.
Typically, a buyer and seller will enter into a conditional purchase agreement, following which due diligence is conducted. If the buyer is satisfied with its investigations, it will waive its due diligence condition and the transaction will become “firm”, provided any other conditions have also been satisfied.
Real estate due diligence generally consists of:
Although the bulk of due diligence investigations are already conducted through online data rooms and conference/video calls, challenges have arisen with physical site visits, property inspections and in-person meetings with key personnel. Buyers have adjusted their due diligence timelines to account for delays due to governmental restrictions on in-person gatherings and travel. Certain areas of due diligence have received increased attention, with a particular focus on force majeure clauses, pandemic response protocols and employee workplace health-and-safety procedures.
While the coronavirus pandemic originally resulted in purchasers, particularly foreign purchasers, being unable to conduct in-person property visits and rely on local consultants, travel restrictions and building closures have largely been lifted and no longer impact the diligence process.
No major market shifts have been seen in the nature of the due diligence conducted as a result of the coronavirus pandemic; however, purchasers now focus more on the covenant of existing tenants and on review of force majeure clauses in leases, and may also insert additional conditions in purchase agreements relating to tenant insolvencies or rent-relief concessions made after the transaction became “firm”.
Typical contractual representations and warranties that a seller gives a buyer depend on market conditions and the relative bargaining power of the parties. Real property is commonly sold on an “as is” basis, with limited warranties given by the seller. A seller will usually warrant factual matters that might be difficult for a buyer to verify independently through its own diligence, such as the fact that the seller:
In common-law jurisdictions, no general duty of disclosure is imposed on a seller and the principle of caveat emptor (“buyer beware”) applies to buyers when purchasing real property. However, certain exceptions oblige the seller to disclose matters such as environmental contamination or latent defects that render the property dangerous or uninhabitable.
In Quebec, warranties as to ownership and the absence of latent defects apply, unless excluded or limited by contract under the deed of sale. A professional seller may not exclude or limit these warranties in respect of undisclosed defects of which it is aware or should be aware. A non-professional seller, however, may exclude or limit these warranties on the basis of the Quebec caveat emptor equivalent. However, all sellers are bound to act in good faith under Quebec civil law, and failure to disclose a known defect would likely amount to fraud.
Across Canada, caveat emptor does not apply to fraud. A seller will be liable for latent defects where the failure to disclose them amounts to fraudulent misrepresentation. In the common-law jurisdictions, a seller may be liable to a buyer for innocent, negligent or fraudulent misrepresentation for which the remedies include rescission (the setting-aside of the contract) and/or damages, depending on the circumstances.
Typically, the purchaser has limited security for the enforcement of these remedies. In some cases, the purchaser may consider obtaining security in the form of a letter of credit, hold-back, or set-off under a vendor take-back mortgage. Representation and warranty insurance has become increasingly common in Canada in recent years.
An investor will seek comfort that the value of the property and its revenue stream is retained over time. An investor will conduct investigations to determine whether any registered or unregistered agreements affect the land, and whether the land is free from undisclosed liabilities impacting use and value. Applicable zoning/land-use legislation should be reviewed to determine the current and intended uses of the land.
Transfer-tax considerations are increasingly impacting on real estate transactions in most jurisdictions in Canada – see 2.10 Taxes Applicable to a Transaction.
Environmental contamination and remediation of real property is governed by both federal and provincial or territorial legislation; however, enforcement is primarily at the provincial or territorial level, and clean-up requirements vary across the country. Although responsibility and liability to regulators, buyers and third parties for remediation generally rests with the seller or person that caused the contamination, subsequent owners, occupiers and those exercising control over real property can be liable for that contamination. This generally occurs when the subsequent owner/occupier failed to perform diligence, knowingly accepted the environmental condition of the lands, and/or contractually assumed environmental liability.
Between buyers and sellers, environmental risk and liability are often allocated contractually by representations, warranties and indemnities and, in some cases, adjustment of the purchase price. However, parties cannot contract out of regulatory liability; their liability for environmental contamination is potentially unlimited, although certain provincial governments recognise the contractual allocation of liability.
The permitted uses of a parcel of real estate under applicable zoning or planning law can be ascertained through inquiries with local planning authorities and a review of municipal land-use by-law regulations. For larger developments, developers must enter into agreements with the applicable municipality to facilitate the development, whether to obtain construction approvals, subdivide the land, or to change the applicable land-use by-laws. These agreements commonly relate to servicing and public facilities commitments, land dedications and bonding.
The expropriation of real estate falls under both federal and provincial regulatory regimes. The federal government has the authority to expropriate land interests in land for public works or other public purposes, pursuant to the Expropriation Act (Canada). Each province and territory has similar legislation.
Expropriation legislation across the country sets out procedural requirements for expropriating authorities, such as prescribed notice periods. Compensation is generally based on the fair market value of the subject lands and may include costs and damages.
Transfers of real estate in most Canadian jurisdictions are subject to transfer tax, which is imposed at the provincial level and is typically payable upon registration of the transfer instrument in the relevant land registry. Certain municipalities (such as the City of Toronto in Ontario and various municipalities in Quebec) may levy land transfer tax in addition to the tax levied by the province. In Quebec, municipalities charge and collect transfer duties. Taxation rates vary across the country, from a high of 5% of the consideration for certain residential properties in Toronto, to no tax at all in Alberta, Newfoundland and Labrador, and parts of Nova Scotia. All provinces charge registration fees, which are generally nominal.
In Ontario and Quebec, unregistered transfers of beneficial interests in real property are also taxed, subject to some exceptions. In Ontario (but not in Quebec), the transfer of an interest in a partnership that owns land is considered to be a taxable transfer of beneficial interest in that land.
In most jurisdictions, the buyer is liable for the payment of land transfer tax and is typically responsible for paying the applicable sales taxes, registration fees and other expenses relating to the purchase.
British Columbia and Ontario impose taxes of 20% and 15%, respectively, on the transfer of certain residential properties in certain urban areas to foreign nationals, foreign corporations or trustees for a beneficial owner that is a foreign national or foreign corporation.
At the federal level, the Competition Act and the Investment Canada Act provide for notification to, or review by, the federal government in certain circumstances involving acquisitions by non-resident purchasers. The federal Citizenship Act also permits each province and territory to enact laws restricting ownership of real property by non-residents.
At the provincial and territorial level, most jurisdictions have taken measures to preserve farm or non-urban land, and certain jurisdictions limit the amount of farmland that can be owned by non-residents. Some provinces and territories also require that non-Canadian corporations obtain an extra-provincial licence or complete certain registrations to own real estate.
For discussion of the British Columbia “speculation tax” and the proposed federal speculation tax, see 1.4 Proposals for Reform.
As mentioned in 2.10 Taxes Applicable to a Transaction, British Columbia and Ontario also impose additional taxes on foreign investors.
Acquisitions of commercial real estate are typically financed through mortgage debt provided by financial institutions such as banks, insurers, trust companies, pension funds, credit unions and other entities that lend money in the ordinary course of business.
Real estate financing is commonly secured by granting a mortgage and a general assignment of rents and leases (an immovable hypothec in Quebec), of the borrower’s interest in the subject real estate, along with a general security agreement (a movable hypothec in Quebec), with respect to the borrower’s personal property. These security interests are created by the execution of security documents and are perfected by registration in the applicable land title and personal property registries. Lenders may also require additional security, such as an assignment of contracts, or third-party indemnities or guarantees.
Although any person may lend money and take a mortgage (hypothec in Quebec) to secure real-estate loans, certain financial institutions are regulated by statute, with special provisions applying to foreign financial institutions, and mortgage brokerage legislation applying to lending on the security of real property in several provinces. For the registration of security, certain land title registries require foreign lenders to provide evidence of their existence and good standing. Others require foreign lenders to be extra-provincially registered with the provincial corporate registry in order to take security over real property in the province. Although mortgage interests may be exempt from restrictions on foreign ownership of land, the act of realising upon security may contravene such restrictions.
Nominal registration fees apply to the registration of a mortgage, a general assignment of rents, a hypothec or any other registered real property security.
While giving financial assistance has traditionally been legally restricted or prohibited, many Canadian jurisdictions have recently eased or eliminated the requirements. However, legislation in some provinces still contains express disclosure and reporting requirements. Even where financial assistance is not directly prohibited or restricted by statute, directors must observe their fiduciary duty to act in the best interest of the corporation when approving such arrangements.
In the common-law provinces, the remedies for mortgage lenders generally include foreclosure, action on the covenant, appointment of a receiver, judicial sale, power of sale and possession. Power of sale is a sale of the mortgaged property by the mortgage lender without court proceedings or supervision, pursuant to either the provisions of the mortgage which expressly grant the lender the power to sell the mortgaged property upon default, or the applicable provincial mortgage legislation (a power of sale is not available as a remedy in all common-law provinces). In Quebec, analogous remedies include a personal right of action against the debtor, as well as the hypothecary rights of taking in payment, sale by a secured creditor, sale by judicial authority and taking possession for the purposes of administration.
A lender is obliged to give “reasonable notice” before making a demand for payment and will generally be required to send notices under federal bankruptcy legislation before seeking to enforce its security over the interest in land. In Ontario, New Brunswick, Prince Edward Island and Quebec, the lender is free to sell the property privately by following a prescribed process, while reserving the right to sue the borrower for any deficiency in the sale proceeds. In British Columbia, Alberta, Ontario and Quebec, the lender can sue for foreclosure (resulting in title to the property passing to the lender in full satisfaction of the debt). More commonly, most provinces also permit a lender to apply to court for a judicial sale of the property, with the borrower remaining liable for any resulting deficiency.
While court closures and access restrictions resulting from the pandemic may have resulted in enforcement delays, legislation restricting a lender’s ability to foreclose or realise on collateral has not been implemented.
Certain statutory liens for property taxes, pension deficits, construction liens or other statutory remittance obligations may have priority over secured debt, even if the secured debt was registered/perfected prior to the creation of the lien. Otherwise, debt secured by registration may generally only be subordinated to new debt by agreement of the existing secured party.
Holding security will not generally expose a lender to environmental liability, although the value of the secured asset could be reduced if that liability arises during the term of the loan. Upon realising on the security and taking possession or control of the subject lands, a lender (or its receiver) could be exposed to environmental liability.
If security interests were granted by a borrower on a legitimate bona fide basis, for good consideration, the subsequent insolvency of the borrower generally does not affect the enforceability of the security interest. However, the secured party’s enforcement proceedings may then be subject to court oversight and associated delays. If security was granted for little or no consideration, or on any basis where the intent of the grant of security was to prefer certain debts over others, federal legislation imposes “claw-back” rules that could impair or invalidate the security.
The impact of the expiry of the London Inter-bank Offered Rate (LIBOR) on borrowers has mainly been limited to amending credit agreements with LIBOR-based loans to include language to establish replacement benchmark rates.
Provincial governments are responsible for land-use planning (other than on federal lands), but delegate most planning and zoning functions to municipalities. Much of the regulation of real property is in the form of zoning by-laws and building by-laws (informed by provincial policies and plans, municipal official plans and “plans d’urbanisme”).
Municipal by-laws regulate nearly all aspects of land use, the nature of buildings thereon, and the size and intensity of development of land. Building permits are required for construction and for additions/alterations to buildings. Building-permit fees are typically calculated based on the floor area of the proposed building or the value of proposed construction, and the type and use of the building. Building by-laws, building-permit requirements and building-code standards govern the building materials, heating and ventilation systems, electrical systems, sewage and water systems, fire safety, access and inspection. The National Building Code of Canada has largely been adopted by the municipalities of most provinces, resulting in a trend towards building regulation uniformity. Regulations may restrict redevelopment of a building having heritage value. For developments in specialised urban areas, additional approvals pertaining to design may be required.
Most provincial planning and zoning functions have been delegated to municipalities. Zoning and building by-laws designate geographic zones within the municipality and prescribe the uses allowed in each zone, limit density, dictate height and parcel size, and impose minimum building setbacks and parking requirements.
Development projects typically require applications for subdivision, re-zoning and development permits. Each municipality has differing eligibility, procedural and documentary requirements for each category of development permissions, which range from submitting an application and paying fees to meeting with municipal committees or the public, submitting plans and seeking the approval of municipal councils. Third parties (particularly neighbours) may have the right to be given notice of the application and to participate at a public hearing.
The availability of a right of appeal in these matters varies. In some provinces, such as Alberta and Ontario, the decision of a municipality may be appealed to a specialised tribunal. In others, such as British Columbia, there is no such tribunal and municipal council decisions are not subject to judicial review on their merits (although they may be reviewable on formal grounds such as lack of jurisdiction, procedural fairness or natural justice).
Large-scale developments by private real estate developers will typically require agreements with the municipality, setting out the terms and conditions for the development to proceed, relating to the construction of public facilities, land dedications, servicing commitments and financial obligations.
Provincial legislation generally provides for fines and penalties for contravention of applicable zoning and building by-laws. Municipalities may also take direct enforcement action against an offender to bring about compliance, and may pursue injunctions and court orders.
Legal persons (corporations and natural persons) may hold real property in Canada by way of direct ownership by an individual or through ownership of shares in a corporation that owns real estate. Relationships may also be established for the ownership of land, such as co-ownerships, partnerships and trusts, largely based on tax consequences, liability concerns and business considerations. Corporations, partnerships, co-ownerships and trusts are the most popular real estate investment vehicles.
Corporations are legal entities distinct from their shareholders. While corporations provide the benefit of limited liability for shareholders, the income, losses, gains and capital cost allowances of the corporation are taxed or deducted at the corporate level, followed by the taxation of dividends in the hands of the shareholders.
By contrast, a partnership is not a distinct legal entity, and constitutes a legal relationship among its partners and is governed by common law and/or statute. Under Canadian law, there are two principal types of partnership – “general” and “limited”:
A significant advantage of investment via a partnership is the tax treatment: although income and losses are calculated at the partnership level, they are taxed and deducted at the partner level.
Co-ownerships, like partnerships, are not separate legal entities but constitute a contractual relationship between land-owners. Income and losses pass through to the co-owners, who may claim tax deductions separately from the other co-owners. Accordingly, co-ownership agreements must be drafted to avoid the possibility of the relationship being construed as one of partnership (where, for example, each partner can bind all the other partners) rather than co-ownership.
Trusts are also not separate legal entities and constitute a relationship whereby a person holds property as trustee for the benefit of others. Both trustees and beneficiaries can be personally liable in connection with the trust property, subject to indemnification. Additionally, publicly traded real estate investment trusts have certain legislative protections in this regard. Income may be taxed at the trust or beneficiary level.
There is no minimum capital requirement for any of the aforementioned entities.
Corporations can be incorporated either federally or provincially, and are required to file articles of incorporation. A corporation’s governance framework can be shaped by its shareholders through its articles, shareholder agreements and corporate by-laws. The articles provide basic details such as the corporation’s business name, registered office, first director(s), share capital and share provisions. By-laws are used to add to, or supplant, default provisions set out in the corporation’s governing statute. Shareholder agreements may regulate how shares will be sold, specify procedures by which important decisions are made and provide protection for minority shareholders. Federal or provincial statutes stipulate corporate requirements such as the number and residency of the directors and fiduciary duties. Public corporations are also subject to applicable securities law requirements.
While partnership legislation may impose basic governance rules, most sophisticated parties enter into partnership agreements setting out matters of governance in detail. The agreement typically addresses capital contributions, the business operations, profit/loss distributions and the addition or removal of partners.
Based on the contractual nature of a co-ownership, governance requirements vary depending on the agreement between the parties, which may establish rights and restrictions relating to the underlying land, determine profit-sharing and delegate management responsibilities.
Trusts are typically governed by the trust deed, under which the trustees’ powers may be limited to merely holding title at the behest of the beneficial owner, or may extend to allowing the trustee to exercise full discretion over dealings with the subject lands. In all cases, the trustee holds all benefits derived from the land for the beneficial owner/beneficiary.
Annual legal costs for entity maintenance are typically less than CAD1,000.
Leases and licences are contracts that permit the occupancy and use of real estate for a period of time, without buying it outright. While leases provide for exclusive possession over a specific area for a limited period of time, licences may not grant exclusive possession, and do not constitute an interest in land.
The most common categories of commercial lease include commercial/office leases, retail leases, and industrial/warehouse leases.
Commercial leases may be further categorised into “net leases” and, rarely, “gross leases”. Under a net lease, all operating costs and expenses relating to the property are passed on to the tenant in addition to the payment of base rent, although responsibility for capital expenses may remain with the landlord. Under a gross lease, tenants are charged an “all-in” fixed gross rent to cover the landlord’s operating and capital costs and expenses, while providing the tenant certainty as to its financial obligations.
Ground leases are generally long-term, with few landlord obligations and the tenant’s right or obligation to construct and control the improvements on the land. In Quebec, "emphyteutic leases" (a conveyance of a dismemberment of ownership for a term) is analogous to a ground lease. Ground leases allow the tenant to invest in, and enjoy the depreciation of, the buildings on the land. Accordingly, the landlord will enjoy a low threshold of oversight and control, while the tenant will have greater contractual certainty to protect and finance its investment.
Rents and lease terms are freely negotiable, with the exception that the Quebec Civil Code caps the term at 100 years. In response to the coronavirus pandemic, a number of temporary measures were introduced.
On 24 April 2020, the federal government announced the Canada Emergency Commercial Rent Assistance Program (CECRA), under which the federal and provincial (or territorial) governments partnered to pay 50% of the gross rent of participating tenants in the form of a forgivable loan to their landlords in certain prescribed circumstances. After the expiry of the CECRA on 30 September 2020, the federal government introduced the Canada Emergency Rent Subsidy (CERS). From 27 September 2020 to 3 July 2021, the CERS provided subsidies via the federal income tax system to a maximum of 65% of qualifying rent expenses.
On 23 October 2021, CERS was replaced by the Tourism and Hospitality Recovery Program (THRP) and the Hardest-Hit Business Recovery Program (HHBRP), which are set to remain in place until 7 May 2022. For the first five 28-day qualifying periods (24 October 2021 to 12 March 2022), the THRP and HHBRP provides subsidies for qualifying rent expenses up to a maximum of 75% and 50%, respectively (up to CAD56,250 (THRP) and CAD37,500 (HHBRP) per property). Multi-location entities are eligible for a maximum of CAD750,000 under the THRP and CAD500,000 under the HHBRP per qualifying period. For the remaining two 28-day qualifying periods (13 March 2022 to 7 May 2022), the maximum subsidy rate for THRP and HHBRP declines to 37.5% and 25%, respectively.
An initial lease term typically ranges between five and ten years, subject to a tenant’s option to extend for one or more additional periods. A ground lease, in which the tenant will have financed and constructed the buildings on the land, will have a longer initial term and options to extend. The coronavirus pandemic has not resulted in material changes to commercial lease provisions. While force majeure clauses may be updated to cover future pandemics, their application will continue to exclude breaches of payment obligations.
As a result of the coronavirus pandemic, both landlords and tenants have revisited limited lease provisions, including the definition and effect of force majeure provisions and quiet enjoyment covenants. However, landlords have typically not entertained rent abatements in the event of future pandemics, nor have landlords accommodated potential delays in construction build-out or supply chain issues.
For commercial leases, rent is based on market conditions and negotiated prior to settling the lease agreement. Market conditions will determine whether there will be a fixed rental rate for the term, or whether the rental rate will increase throughout the term.
Rent is commonly increased during renewal terms. The rent payable for an extension or renewal can be:
Goods and Services Tax (GST), Harmonized Sales Tax (HST) or Quebec Sales Tax (QST) is payable on rent and must be collected by landlords. If the commercial tenant is registered for GST/HST/QST purposes and is engaged in commercial activities, up to 100% of those taxes should be recoverable by the tenant. GST/HST/QST paid by commercial landlords on their expenses is generally recoverable, whereas GST/HST/QST paid by residential landlords is not.
A security deposit may be due at the commencement of a lease. In some jurisdictions, transfer tax may be triggered if the lease term exceeds certain thresholds.
Tenants occupying leased premises in a multi-tenanted development will typically pay a pro rata share of the expenses for maintaining and repairing common areas, as additional rent. In more landlord-friendly markets, responsibility for maintenance, repair and replacement costs will be allocated to the tenants, including for structural matters. However, major capital costs are often allocated to the tenant on an annual amortised/depreciated basis, so that the tenant's proportionate share of such major costs is not charged to the tenant all at once.
Tenants are typically responsible for the cost of their own utilities and telecommunications services, plus a proportionate share of such costs for common areas.
Landlords typically insure the buildings of a leased development, whereas tenants are responsible for insuring its fixtures, trade fixtures and personal property. Insurance premiums paid by the landlord are typically recovered from tenants as additional rent. Tenants must typically carry “all-risks” physical damage insurance and general liability insurance.
The interpretation of business-interruption insurance provisions has generally not resulted in tenants being covered as a result of office closures during the coronavirus pandemic.
Landlords may impose restrictions on how a tenant uses the real estate, subject to land use, zoning and planning laws. The use of real estate can also be affected by restrictive covenants.
The terms and conditions of a lease will determine whether a tenant is permitted to alter or improve leased premises or install tenant trade fixtures. Landlords often restrict such work that affects the structure of the leased premises or affects or disturbs other tenants. Tenants will usually be responsible for the repair and maintenance of such work and, upon termination, the lease will dictate whether the work must be removed and the leased premises restored to their original state by the tenant, whether reasonable wear and tear is excepted, and whether improvements will become the property of the landlord.
All Canadian provinces and territories have residential tenancy legislation; in Quebec, it is included in the Civil Code. Some provinces and territories also have legislation governing commercial tenancies generally, without specific provisions in respect of any particular category of commercial property. Where legislation does not exist or does not address an issue, common-law principles apply. During the pandemic, rent-subsidy programmes and eviction moratoriums have applied to commercial and residential tenancies, respectively. For a discussion of commercially focused programmes, see 6.3 Regulation of Rents or Lease Terms.
Subject to the specific terms and conditions of a lease, a tenant’s insolvency would likely trigger the occurrence of an event of default under the lease and permit a landlord to terminate the lease; however, bankruptcy legislation would apply to the tenancy relationship.
A landlord may require a tenant to pay a security deposit and may require the tenant to grant the landlord security over the tenant’s personal property. Landlords may also require a third-party guarantee from a parent company or subsidiary.
Commercial tenants generally do not have the right to continue to occupy the relevant real estate after the expiry or termination of the lease term. However, leases often contain an “overholding” clause whereby a tenant may remain in possession on a monthly basis, usually at increased rent (up to 200% of the monthly rent payable during the term).
Most leases provide that the landlord must first consent to any assignment of a lease, any subletting of the leased premises or any change of corporate control of the tenant. The lease will dictate whether or not that consent may or may not be unreasonably withheld and will state the conditions for that consent. Most common-law jurisdictions will dictate certain circumstances for which the landlord may withhold consent. Commercial leases may also give the landlord the right to terminate the lease upon a request for assignment, sublet or change of control.
A landlord will typically have the right to terminate a lease upon the tenant’s failure to pay rent, upon another material breach that is not cured within a specified time, upon the tenant’s insolvency and upon substantial damage or destruction of the leased premises/building. Tenants typically either have no right to terminate a lease or may only do so in limited circumstances, such as upon damage or destruction of the leased premises. Where a tenant negotiates an early termination right, fees will be payable based on the unamortised value of leasehold improvements paid for by the landlord.
In common-law jurisdictions, tenants are typically permitted to register evidence of their lease against title to the subject lands in the relevant land registry, although, other than in Quebec, the lease may allow the landlord to prohibit registration. Depending on the jurisdiction, the actual lease agreement, a caveat/notice of lease or a short form of lease can be recorded on title to the subject lands. Upon the registration of a lease, transfer tax may be payable in British Columbia and Ontario. Generally, the tenant is responsible to pay such transfer taxes. In Quebec, a lease with a term that exceeds 40 years, inclusive of renewals, triggers transfer duties.
A tenant may be forced to vacate leased premises in the event of default. Leases often provide that a breach must be material and go uncured beyond a specified grace period before the tenant can be dispossessed. In addition, in most jurisdictions a landlord is required to serve notice, specifying the breach and allowing a reasonable period to remedy the breach before they may re-enter the premises.
Eviction moratoriums were also instituted by most provinces in the spring and summer of 2020. Most of these moratoriums were predicated on CECRA eligibility and concluded at or around the date on which the CECRA programme ended (1 October 2020). Ontario subsequently instituted a new moratorium programme for CERS recipients that provides for non-enforcement of certain commercial lease remedies, including eviction for arrears of rent, until 22 April 2022.
A lease may be terminated by governmental or municipal authorities pursuant to legislative authority relating to expropriation (ie, public taking) or condemnation of land. In such cases, compensation will depend on the relevant legislation and both the landlord and tenant may be compensated.
In some jurisdictions, a lease for a term longer than three years may become invalid, and therefore terminated, if a bona fide third party acquires a landlord’s interest for value without notice of the lease. In such instances, however, equitable considerations may prevent an outright termination.
Canadian construction contracts generally adopt one or more of the following structures:
The allocation of responsibility for the design and construction of Canadian construction projects is determined by the project delivery model, and the form of construction contract used by the owner.
Generally, construction risks are managed through the construction contract, by way of indemnities, warranties, retentions, liquidated damages, termination rights, exclusions, limitations and waivers of liability, force majeure and insurance requirements. Risk may also be managed through the use of bonds, letters of credit or guarantees.
Schedule-related risks are generally managed through the contract, which will stipulate which party bears responsibility for different types of schedule impacts and delays. The parties may incorporate liquidated damage provisions such that an owner is entitled to compensation or set-off rights if certain milestone and completion dates are not achieved, subject generally to force majeure and owner-caused delays. The amount of the compensation must represent a genuine pre-estimate of the actual cost or loss to the owner attributable to such a delay and not a penalty to the contractor, as Canadian law limits the enforcement of penalty clauses. Payment incentives and early-completion bonuses are also common features of construction contracts.
While ultimately dependent on the nature and scope of the applicable construction project, as well as the parties involved, it is common for owners to seek additional types of security from a contractor. That security is most commonly in the form of labour, material and performance bonds, and letters of credit, although in some cases an owner may insist on some form of corporate guarantee.
Each of the Canadian provinces gives statutory construction, builders’ or mechanics’ lien rights to those providing work, materials and/or services supplied to a construction project. The applicable legislation must be reviewed to confirm the applicable rights and procedures. Generally, construction liens are registered against the project lands, with owners having the ability to remove the lien in two ways:
Most provincial construction lien statutes protect owners who abide by the hold-back provisions of the statute and retain the specified percentage (usually 10%) from each progress payment under the construction contract. These hold-back funds can be paid into court if a lien is registered against an owner’s lands to have the lien discharged from title to the lands. In so doing, the owner’s liability is capped, provided the owner had no direct contractual obligations to the lien claimant.
In Quebec, construction liens (legal hypothecs) are governed by the Civil Code and subsist without registration for 30 days after the end of the work, after which they must be registered. There are no hold-back provisions in the Civil Code, and such legal hypothecs secure the value added by the work, services or supplied materials. Material modifications to lien legislation in Alberta are expected to come into force in 2022.
In most cases, an occupancy permit or final approval, based on compliance with building codes and other applicable regulations/standards, must be issued by the local municipality before a project can be inhabited or used for its intended purpose.
Goods and Services Tax (GST), Harmonized Sales Tax (HST) and Quebec sales tax (QST) constitute all applicable VAT in Canada; rates range from 5% to 15%, depending on the jurisdiction within Canada in which the transfer takes place.
GST/HST/QST generally apply to the transfer of commercial real property, as well as new residential real property. The seller is responsible for collecting the applicable VAT from the buyer, except where the buyer is entitled to self-assess VAT (ie, buyers that are registered for VAT purposes and acquire real estate in the course of their commercial activities). Used residential real estate is generally exempt from VAT. Additionally, transfers of real property in the context of the sale of a business may be exempt from GST/HST/QST.
Where land transfer tax is imposed, it typically applies to the transfer of real estate and not to transfers of shares of a corporation or (with exceptions, such as in Ontario) interests in a partnership that owns real estate. In some jurisdictions, land transfer tax is payable on the conveyance of a leasehold interest in land if the lease term exceeds specified thresholds.
In British Columbia, property transfer tax is currently only payable on registered transfers of real property; transfers of a beneficial interest in real estate do not trigger payment of property transfer tax. As a result, owners of commercial real estate often structure their ownership as a bare trust, with a nominee company holding the legal or registered title to the real estate in trust for the “real” or beneficial owner of the real estate. On closing, the seller transfers the shares of the nominee company and the beneficial interest in the property to the buyer, avoiding registration of a legal transfer of title in the Land Title Office. However, such transactions are anticipated to incur tax in the near future.
Municipal property taxes are payable by the owner of the property and are generally passed on to tenants. These taxes are typically calculated based on the use and assessed value of the property. Some municipalities provide exemptions for public and/or non-profit organisations, or for geographical areas in which the municipality wishes to provide an incentive for development.
The taxation of Canadian rental income for a non-resident of Canada depends partly on whether such income is characterised as income from property or income from carrying on a business. Generally, the more effort expended in respect of the property, the higher the likelihood it would constitute a business.
If the rental income constitutes carrying on business in Canada, the non-resident will generally be subject to tax on their net income attributable to that rental business. The rate of tax paid is generally the same as that which is paid by Canadian resident corporations (approximately 26.5%). In addition to the mainstream Canadian tax on Canadian-source income, the non-resident will also be liable to pay a branch tax of 25% on its after-tax Canadian profits that are not reinvested in its Canadian business. The branch tax can be limited to 5% if its members are corporations that are entitled to the benefits of the Canada-US Tax Treaty (with the first CAD500,000 of earnings being exempt from the branch tax).
Passive payments such as dividends, interest, royalties and rent made by a Canadian resident to a non-resident are subject to a Canadian withholding tax of 25%, which may be reduced by virtue of a tax treaty between Canada and the state of residence of the non-resident.
If the rental income is passive, the non-resident will generally be subject to Canadian withholding tax under Part XIII of the Canadian Income Tax (ITA). The ITA provides for a withholding tax of 25% on gross rental income.
As an alternative to the 25% gross withholding tax regime, a non-resident can make an election in respect of its passive rental income (a "Section 216 election") that will allow it to file a Canadian income tax return and be taxed on a net basis (ie, after deducting its expenses associated with property). The rate of tax payable is the same as that paid by Canadian resident corporations.
Non-residents are subject to Canadian income tax under the ITA if, amongst other things, they dispose of taxable Canadian property (TCP). For these purposes, TCP includes a direct interest in real property or an interest in a private corporation, partnership or trust where, at any time in the last 60 months prior to the date of disposition, more than 50% of the value of the interest is derived primarily from real property situated in Canada. Relief may be available under an applicable income tax treaty if the sale of an interest in a corporation, partnership or trust does not, at the time of sale, derive more than 50% of its value primarily from real property situated in Canada.
Where a non-resident of Canada proposes to sell TCP, the purchaser may be required to withhold 25% (for non-depreciable capital property) or 50% (for depreciable property) from the purchase price, unless a clearance certificate is applied for and granted in advance. In addition, a non-resident must notify the Canadian taxing authorities about a disposition of TCP either before they dispose of the property or within ten days following the disposition.
For a discussion of VAT on rent, see 6.7 Payment of VAT.
In computing net rental income (ie, where income is earned by a resident entity, where rental income earned by a non-resident constitutes business income, or where a Section 216 election has been made by a non-resident earning property income), expenses incurred in earning such income may generally be deducted, including operating expenses, reasonable financing costs and tax depreciation.
Tax depreciation may be claimed on buildings and other depreciable property used to earn rental income. Tax depreciation is allowed generally at rates varying from a 4% to 10% declining-balance rate on buildings and other structures. The amount claimed is discretionary, and claims may be made in whole or in part, although tax depreciation generally cannot be used to create or increase a rental loss. The rate in the year of acquisition is generally one half of the rate otherwise available; however, this rule has been effectively suspended for most types of property acquired prior to 2024, with a phased resumption of the half-year rule between 2024 and 2028.
Quebec's commercial real-estate industry will remember 2021 as both a year of COVID-19 clampdowns and a year of considerable growth in several asset classes.
The Quebec government imposed many restrictions to combat the Delta variant and then the Omicron variant, including evening curfews, restrictions upon both public and private gatherings, the prohibition of team sports and the closure of gyms. In an effort to entice the unvaccinated to reconsider their decision, vaccine passports were mandatory to enter government-controlled liquor and cannabis stores, and retail establishments of at least 16,000 square feet.
These measures had a significant impact on many businesses. Notably, the hospitality sector struggled, as restaurants faced ongoing operational challenges, exacerbated by the need to adapt to repeated government-imposed closures and reopenings due to fluctuations in the number of COVID-19 cases across the province. Staffing instability, constant uncertainty and sudden requirements, such as the obligation to authenticate vaccine passports, were just some of the challenges faced by business owners and staff.
Yet 2021 was fruitful for the real-estate industry, as demonstrated by the announcement of the acquisition of the units of Cominar Real Estate Investment Trust for approximately CAD5.7 billion. Located in Montreal, Quebec City and Ottawa, Cominar's 37.5-million-square-foot office, retail and industrial portfolio was acquired by a consortium led by Montreal-based Canderel, a major Canadian real-estate company, with participation from both Canadian and US investors. Once regulatory approvals were obtained, the transaction closed on March 1 2022. The industrial properties were subsequently sold to Blackstone, and selected office and retail assets were then sold to the Mach Group, Montreal-based investors and managers.
As the discussion of the various asset classes will show, Cominar is a graphic example of both private and institutional investor confidence in the future of the Quebec commercial real-estate market.
The industrial class is the current gem of Quebec commercial real estate. With widespread demand, a lack of available land that is not zoned "green" by agricultural land protection legislation, and the large fulfilment-space requirements of Amazon and other businesses, industrial rents have skyrocketed.
Agricultural zoning protection
A word on the protection of agricultural land is warranted, as agricultural protection is an important barrier to development. Over 15 million acres of Quebec land is zoned as agricultural, and may not be developed for non-agricultural purposes without the approval of the Commission de protection du territoire agricole du Québec (CPTAQ). CPTAQ approvals are extremely difficult to obtain, as a recently decided Amazon case illustrates. Amazon, which currently has three distribution centres in proximity to Montreal, has been searching for a suitable site south of Montreal. A site in Varennes, Quebec that was formerly used for industrial purposes was selected. As the zoning is now agricultural, permission was sought from the CPTAQ to allow the project to proceed. In January 2022, the permission was refused, despite the obvious economic benefits this type of investment would bring to the region. This is far from an isolated case, and many locally supported developments are stymied by the agricultural zoning restrictions.
The significant increase of rents and land values
A recent CBRE study pegs average net rental rates for industrial space at CAD10.47 per square foot. For tenants paying in the range of CAD5.50 per square foot, lease renewals are daunting, and relocating to another suitable space, if available, will still have them paying market rents.
Land values have also skyrocketed. CBRE is now reporting pricing at CAD200 per square foot, while just a year ago, average pricing was at the level of CAD175 per square foot. Nevertheless, not only are several industrial projects currently under construction, but at least one private REIT has publicly announced the sale of smaller industrial portfolios to redeploy the capital into a new high-ceiling product for large users, in partnership with industrial developers, some of which are based in Quebec.
Certain developers are adding industrial uses to their retail properties where the synergies are evident. As an example, Cadillac Fairview added a 130,000-square-foot gastronomical centre to the enclosed Promenades Saint Bruno mall, a regional shopping centre on the south shore of Montreal. The facility will feature restaurants, boutiques, a culinary demonstration facility and entertainment areas, all within a warehouse-type construction.
Quebec's housing shortage, coupled with an explosion of single-family housing prices throughout the pandemic, has fuelled much multi-residential activity, both for the rental market and for the condominium/sale market.
In its 2021 market recap, the Urban Development Institute of Quebec (UDI) lists 13 rental projects and 14 condominium projects within the Greater Montreal area currently under construction. UDI also reports robust multi-residential activity in the Greater Quebec City area of rental and condominium projects being delivered in 2022 and 2023.
Centurion Apartment REIT recently acquired a two-thirds interest in a portfolio of 30 Greater Montreal-area apartment buildings, comprising a total of 3,678 apartments. This is the largest single multi-family transaction ever in the province of Quebec. It exemplifies investors' confidence in the stability and growth potential of the multi-residential market.
The Office Industrial Market
The office market is in a state of flux. Throughout the pandemic, the Quebec government mandated working from home. The mandate ended March 7 2022 and businesses are now starting to reintegrate into their once-vacant offices.
Office tenants are reassessing their needs as they reintegrate, partially on-site and off-site. UDI reports that upon lease renewal, tenants are reducing space requirements by approximately 8% and that approximately 15% of the space available for leasing is on the sublease market.
High tech to the rescue
A bright spot is high tech. A recent Price Waterhouse Coopers survey of 19 North American cities ranked Montreal sixth in leasing of office space by high-tech tenants.
Among these are data centre operators. The pandemic has dramatically accelerated the expansion of the digital environment and cloud services needed for the operation of businesses, institutions and governments. Data centres require energy-intensive buildings equipped with specialised building, mechanical and electrical infrastructure. Multi-tenant data centres (for colocation) remain in demand. Increasingly though, single-tenant data centres are sought-after by large tech companies and cloud providers looking to consolidate operations and for the installation of specialised sophisticated equipment in a secure facility.
The Greater Montreal area is a leader in life sciences/biotech. Biotech City, the hub for this activity, is located in the city of Laval, just north of Montreal limits. Biotech City includes world-renowned biopharmaceutical firms and research institutes employing over 5,000 employees within approximately 13 million square feet of technologically advanced space. A recent CBRE communiqué on life-sciences leasing reports that many landlords are seeking advice on building or converting space to labs. Either operation will be upfront-capital-intensive in creating the highly specialised space required for this sector. The success of Biotech City as a hub for this industry coupled with strong financial covenants from tenants should help balance out the risk/reward metrics.
A Cushman and Wakefield study reports that Quebec retail sales reached record highs in 2021. Amazon, in particular, capitalised on the "stay-at-home" culture. Large retailers such as Walmart, Costco and the major supermarkets contributed to this growth, introducing hybrid shopping, online and in stores, and delivery options to consumers.
What about the shopping centres? Grocery and pharmacy-anchored projects performed well, as did well-anchored power centres. Downtown Montreal was bleak, largely due to the absence of office workers, university and foreign students, and government restrictions. Even the Montreal Canadiens, playing in the Stanley Cup final for the first time in many years, were only allowed 3,500 fans in the Bell Centre, a facility that seats 21,032.
Property management saw a major change in 2021. Ivanhoe Cambridge, the real-estate subsidiary of the Caisse de dépôt et placement du Québec (CDPQ), the Quebec government pension fund, transitioned the operation of its Canadian shopping centre portfolio to Jones Lang LaSalle (JLL), in order to focus upon its core business as an investor. Together, JLL and Ivanhoe Cambridge will develop a "Centre of Excellence for Sustainability (COES) in Quebec, and an accompanying team, to accelerate the transition to sustainable development and implantation of current and near-future technologies" (joint press release of August 24 2021). This is consistent with the ESG goals of the real-estate industry and the requirements of lenders and institutional investors.
Repositioning and densification
The government-imposed Covid-19 restrictions posed a number of challenges to enclosed malls. Class B and C malls suffered greatly, although this issue predates the pandemic.
Many developers of older properties are repositioning into mixed-use projects, often with residential towers and ground floor retail spaces suited to the needs of the residents. Zoning, urban planning, traffic circulation and lease obligations to existing tenants are among the myriad of issues to address when redeveloping an existing property. In instances where the retail space and the residential space are owned by different groups, a useful structure that can be implemented is to horizontally "condominiumise" the land, and then create vertical condominiums to separate the residential from the retail spaces.
We can draw a further example of such repositioning and densification from Prevel’s Esplanade Cartier development project, located directly below the historic Jacques Cartier Bridge and facing the St. Lawrence River. What was once the site of industrial-zoned land, which had essentially been used for parking purposes for the past 20 years, is being developed into a multi-phase mixed-use project that will incorporate residential units (both condominium and rental) as well as social housing, commercial and office spaces, and community components. The adoption of Montreal’s bylaw to improve the supply of social, affordable and family housing has also made its way into practice, as residential development projects of 4,843 square feet or more, such as the Esplanade Cartier development, are required to incorporate a fixed ratio of social, affordable and family housing.
Much of the repositioning is TOD-supported (Transit-Oriented Development), and CDPQ Infra, a division of the CDPQ, is building and funding the Réseau express métropolitain, otherwise known as the REM. The REM is a light-rail rapid transit system currently under construction. Through the REM's 26 stations, the system will link downtown Montreal, the airport and the Greater Montreal area.
Construction is currently in progress with a 2024-targeted completion date. Many of the repositioning projects are situated at or near REM stations, providing quick and easy access. The REM is also planned to integrate with the existing metro (underground subway system), with a view towards increasing the use of energy-efficient and climate-control-friendly public transit.
Expropriation legislative reform
Ever since work on the project began, many property owners and tenants were, and still are, expropriated for its construction – all the more so since procedures for phase two of this project, the REM de l'Est, located in the eastern part of the city, are in motion and set to commence within the coming months. Quebec’s Expropriation Act is the framework law on expropriation in the province. However, to facilitate the construction and operation of the REM, the government of Quebec sought to balance the limits to owner's rights imposed by the Act with the needs of the REM.
The need to adopt such a special law for the realisation of this major project has highlighted the necessity to reform the Expropriation Act, which will celebrate its 50th anniversary this year. This imminent reform will have to allow for a modernisation of the expropriation procedure in order to adapt it to the new realities of the Quebec real-estate market, while simultaneously taking into account the difficulties encountered by both public bodies and private parties in the course of this process.
Quebec is and continues to be an attractive target for real-estate investment in both existing and new projects. At least once a week, the press reports a new project being announced, or a significant trade being completed, as the right metrics are in place for this: low levels of unemployment, a skilled workforce, a diverse economy and less competition for products than is found in Toronto or Vancouver. As we emerge from the pandemic and its government-imposed restrictions, we foresee continued real-estate growth.