CANADA Law and Practice Contributed by: Rachel V Hutton, Michael L Dyck, Mario Paura and Patrick Morin, Stikeman Elliott LLP
3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders 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 provi - sions applying to foreign financial institutions, and mortgage brokerage legislation applying to lending on the security of real property in sev - eral 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 for - eign ownership of land, the act of realising upon security (or the ownership of the affected land for a period of time after realising upon security) may contravene such restrictions. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Nominal registration fees apply to the registra - tion of a mortgage, an assignment of rents, a hypothec or any other registered real property security. Apart from typical legal and other enforcement costs, there are no specific registration fees pay - able in connection with the enforcement of secu - rity over real property. 3.5 Legal Requirements Before an Entity Can Give Valid Security While giving financial assistance has traditionally been legally restricted or prohibited, many Cana - dian jurisdictions have recently eased or elimi - nated the requirements. However, legislation in some provinces still contains express disclosure and reporting requirements. Even where financial
taxes and the federal under-used housing tax, see 1.3 Proposals for Reform . As mentioned in 2.10 Taxes Applicable to a Transaction , British Columbia and Ontario also impose additional taxes on foreign investors.
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
Acquisitions of commercial real estate are typi - cally 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. Some companies may also be able to utilise equity financing or (in the case of larger compa - nies) corporate level financing to fund acquisi - tions of real estate. 3.2 Typical Security Created by Commercial Investors 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 sub - ject 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 exe - cution 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 assign - ment of contracts, or third-party indemnities or guarantees.
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