Canada: Crowdfunding For Canadian Real Estate: New Frontiers In Financing

Last Updated: July 8 2015
Article by Jennifer Hayes

Most Read Contributor in Canada, September 2018

Equity crowdfunding is a relatively new concept, and governmental regulation is struggling to keep pace with the rapidly changing crowdfunding landscape the world over. Crowdfunding for real estate is still in its early days in Canada. However, it has been making significant inroads in the US. In 2014 and 2015, there have been a number of large real estate projects in the US backed by crowdfunding campaigns (i.e. 17 John Street commercial real estate overhaul in Manhattan, $25M raised as of September 2014). In contrast to traditional investing through REITS (real estate investment trusts), crowdfunding portals provide investors the opportunity to choose exactly what building(s) or project(s) they want to invest in.

Legislative Evolution:

In the US in 2012, the JOBS Act was enacted allowing companies to solicit equity investments online, to crowdfund, up to $50M a year. However, until June 19, 2015, the type of investors were limited to accredited investors (i.e. (a) individuals making over $200,000 per year, (b) married couples making over $300,000 per year, or (c) individuals or couples with a net worth of over $1M). Now, the general American public will be able to invest in commercial real estate projects they would never have had access to before, with some limitation on the amount that can be invested (10% of the greater of their annual income or net worth) in these securities.

On December 6, 2013, Saskatchewan became the first Canadian province to implement rules that provide a prospectus exemption for equity crowdfunding for start-ups and small businesses.

On May 14, 2015, six provinces (including BC and Saskatchewan) announced the implementation of harmonized equity crowdfunding exemptions aimed at start-ups and early-stage businesses. These exemptions were discussed in detail by my colleagues in a previous blog post ( see here).

The Ontario Securities Commission expects to publish its own crowdfunding rules in the fall of 2015. As opposed to the rules introduced in BC, Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia, these rules are anticipated to apply to both smaller and larger companies, non-reporting issuers and reporting issuers, and to allow companies to raise as much as $1.5M a year (a significant increase over the other provinces' current $250,000 twice a year).

Neither Canadian, nor US, securities laws appear to differentiate between different uses of the funds raised through crowdfunding portals. The same laws appear to apply to crowdfunding for technology start-ups as to commercial real estate crowdfunding.

Equity vs. Debt:

Real estate crowdfunding falls into two sub-groups: debt and equity.

In debt crowdfunding the investors act as a lender for, rather than as, the owner of the property. Some crowdfunding portals act as arrangers (a) where the crowd acts as a direct lender to the borrower company, (b) where the commercial real estate loan is pre-funded and the crowd purchases interests in the loan, or (c) where the arranger creates a lending vehicle with funds collected from the crowd and then the vehicle lends funds to commercial borrowers and grants the crowd investors ownership interest in the lending vehicle itself. In such circumstances, the investment would be secured by the property and the investor would be entitled to monthly interest and a return of principal, but not to any benefit from property appreciation.

In equity crowdfunding, the investor becomes an indirect owner of the property by obtaining shares, limited partnership units, or other securities in the entity that owns the property/project. This form of investment carries inherently more risk, but also a potential greater return as a result of a direct interest in the property appreciation.

Risk and Disclosure:

US companies who are crowdfunding continue to have the duty to provide investors with a sufficient amount of information to allow them to make an informed decision. When dealing with real estate this duty to disclose will encompass anything that a person purchasing real estate though regular transactions would consider material, including zoning issues, leases, cost of renovations/construction, any issues with title, construction defects, etc.

Under the proposed Ontario crowdfunding exemption, reporting issuers would continue to be required to comply with their existing continuous disclosure obligations and non-reporting issuers would be required to provide disclosure of specific events, notice of how the proceeds are expended, and audited financial statements (when certain financial thresholds are met).

For BC and the other provinces who have implemented start-up crowdfunding rules, an offering document is required that includes basic information about the company, its management and the distribution, including how the business intends to use the funds, and the minimum offering amount. If, and when, these exemptions are utilized by commercial reals estate companies, the amount of information with respect to use of funds will need to be closely examined to ensure that the disclosure is sufficient for this particular type of investment. As the funding requirements of most commercial real estate companies will be significantly greater than $500,000 per year, it is unlikely that this exemption will be used to invest in/develop commercial real estate in BC. We will need to wait for a broader exemption, like that anticipated in Ontario, for commercial real estate crowdfunding to take off in BC.

Though securities regulations will provide consumers a certain level of protection by limiting each individual's allowable investment amount and disclosure obligations, the rigorous consumer protection obligations we have become accustomed to for new real estate development projects, through legislation like the Real Estate Development and Marketing Act (BC) ("REDMA"), may not apply. Based on the current drafting of REDMA, and its related regulations and policy statements, I believe that such crowdfunded investments in real estate will fall outside of its regulatory purview as investors will not be obtaining a direct interest in the property. It will be interesting to see whether or not regulations evolve to meet the market, addressing the marketing of equities/securities to the public which are directly linked to specific real estate investments/developments.

The Future:

Though crowdfunding will allow more people access to the commercial real estate market, for companies being able to solicit investments in projects from the general public online both greatly increases companies' ability to raise the capital they need, from a greatly expanded pool of potential investors, but may also greatly increase the likelihood of lawsuit, especially if the investment performs poorly.

As commercial real estate crowdfunding, and crowdfunding in general, continues to gain traction and evolve both north and south of the 49th parallel, it will be interesting to see what changes in the commercial real estate financing industry occur and how legislators, regulators and the judiciary keep pace with this ever changing landscape.

To view original article, please click here.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
McMillan LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
McMillan LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions