Canada: Alberta Real Estate Issues

Non-Canadian purchasers, owners and mortgagees of interests in Alberta land need to be aware of several issues and restrictions which may apply to their transaction.

Pursuant to the Agricultural and Recreational Land Ownership Act (Alberta), no non-Canadian person or foreign controlled corporation may take or acquire an interest in ‘controlled land’ in Alberta. Generally, ‘controlled land’ includes all privately owned land outside of urban boundaries. Accordingly, the Act applies to farm land and rural recreational land. However, it will often include land occupied for commercial uses, particularly if the land is adjacent to the boundaries of an urban area or if a facility is partly located within an urban area and also partly within a rural area. Certain exemptions and exclusions are available.

In Alberta, the registration of interests to mines and minerals is, in many circumstances, similar to the registration of interests in surface rights with certain important differences. Alberta uses the Torrens System for the registration of land interests. Parcels of land have a Certificate of Title which, in most cases, is a complete reflection of all interests in that parcel of land.

There are two registration systems for the registration of mine and mineral rights in Alberta. The first, as with surface rights, is governed by the Land Titles Act of Alberta which governs the approximately 30% of mines and minerals for which freehold title has been issued. For the remaining 70%, the Mines and Minerals Act is the governing statute and parties claiming an interest in Crown-owned mines and minerals must register their interest at a Government Registry System. Unlike the Land Titles system, no Certificate of Title will be issued for the interest.

A further distinction between the Land Titles Registration system for mines and minerals and the Crown Registry System is that, under the Land Titles system, the party can register both a legal interest (i.e., a leasehold interest) and a beneficial interest (i.e,. a contractual right granting an interest in land). However, only legal interests can be registered under the Crown Registry system. Accordingly, under the Crown Registry System, certain interests such as interests earned pursuant to farmout agreements or royalty interests, are generally not registerable.

A parcel of land may have different owners of the surface and the mineral rights. Many situations arise whereby the owner of the mineral rights needs access to the lands of the surface owner to exercise these rights. Ideally, the surface owner and the mineral owner will come to an agreement that allows both parties to exercise their rights. If an agreement is obtained, the owner of the mineral rights proceeds to the Alberta Energy and Utilities Board for licensing approval.

If the surface and mineral owners do not come to an agreement, the mineral owner can apply to the Alberta Surface Rights Board for a right-of-entry order. Such an order grants to the owner of the mineral rights the use of a portion of the surface lands (for such things as road access or drilling operations) and determines the compensation payable to the surface owner.

Legislation, drilling technology and environmental concerns ensure that the owner of the surface rights of developed urban land will not be subject to right-of-entry orders.

The Law of Property Act (Alberta) restricts the recourse of a mortgagee to the lands, and no action lies on a covenant by a person for the payment contained in the mortgage. This is the case whether the mortgage was granted on commercial, farm or residential properties, with certain exceptions. However, if the person acquires land subject to a mortgage granted by a corporation, the person will be bound by the covenant for payment of the mortgage unless that person or a family member has personally used the land as a residence or farm.

In a proceeding to enforce a mortgage given by a corporation or given by a person to secure a loan under the National Housing Act (Canada), the restriction does not apply and the covenant to pay is enforceable.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.