Real estate trends and developments

Written by Alexander Rigante, Isabella Tamilia and Deirdra Corber


The Quebec real estate market experienced significant economic and regulatory changes in 2022, which will undoubtedly shape the 2023 landscape. The year was characterised by significant increases in interest rates, elevated construction costs, a shift in consumer trends, and the adoption of several laws and regulations affecting real estate transactions in the province.

With respect to the performance of certain asset classes, a 2022 Altus Group report of the Montreal and Quebec market indicated that the top three asset classes for investors through Q4 remained industrial, apartment, and food-anchored retail strips. A report by commercial real estate services and investment company, CBRE, on 2023 market trends predicts:

  • a continued increase in vacancy rates for office spaces;
  • that retail space will continue to face challenges despite the resurgence of in-person shopping;
  • the year-over-year stabilisation of vacancy rates coupled with an increase in costs and a decrease in new supply, will most likely see heightened activity in the multi-residential space; and
  • a continued increase in demand for industrial space, together with a continued lack of supply (which we attribute in part to insufficient developable land due to strict zoning and agricultural protection legislation).

Keeping these predictions in mind, below is an overview of some of the most impactful legal trends which have affected, and will continue to affect, the Quebec real estate market.

Prohibition on the Purchase of Residential Property by Non-Canadians

According to a 2022 report by the National Bank of Canada, the average residential mortgage payment as a percentage of income (“MPPI”) is registered at 64.6%, the second highest level since 1981, meaning that in order to purchase an average house, a household would have to devote 64.6% of its disposable income to mortgage payments. The Canada Mortgage and Housing Corporation (CMHC) has recently reported that the last time housing was affordable in Canada was in 2003 and 2004. Housing affordability remains a major issue for Canadians and has been facing considerable political and regulatory scrutiny. As a result, during the last federal election campaign in 2021, three of the main political parties made promises with regards to limiting or heavily taxing foreign investors looking to purchase residential property in Canada.

As a result of this political and economic pressure on the Canadian housing market, on 23 June 2022, parliament passed the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Prohibition Act”) which was followed by accompanying regulations entitled Prohibition on the Purchase of Residential Property by Non-Canadians Regulations (the “Regulations”), both of which came into force on 1 January 2023. The Prohibition Act essentially imposes a two-year moratorium on the direct or indirect purchase of residential property in Canada by non-Canadians, subject to certain exceptions. The intention of the Prohibition Act is to make residential homes more accessible for Canadians and in turn, to disincentivise foreign investors from making speculative investments.

The scope of the Prohibition Act and the Regulations, as well as the ambiguity of the definitions contained therein, caused uncertainty and worry with regards to their potential effects on commercial transactions, leading to an uproar in the real estate industry. One of the concerns was that the definition of “residential property” in the Prohibition Act included mixed-use land which could indirectly capture properties used purely for commercial purposes but that had mixed-use zoning. Another issue raised by the industry was that the definition of a “non-Canadian” might be based on that applied to corporations and other legal entities where a threshold of 3% ownership by non-Canadians resulted in such entities being considered “non-Canadian”. The practical effect was that widely held, publicly traded entities such as real estate investment trusts (REITs) were susceptible to being captured by this characterisation. Although initially alarming, a nuance to consider is that the Prohibition Act targets properties that are composed of three dwelling units or less, meaning that apartment buildings composed of four or more dwelling units are not affected by the Prohibition Act. In fact, CBRE reported that the top ten biggest commercial real estate transactions in Montreal in 2022 were acquisitions by REITs, three of which concerned multi-residential rental acquisitions, such as Centurion Apartment REIT’s acquisition of a portfolio of 30 apartment buildings located in the greater Montreal area for CAD950 million, CAPREIT’s acquisition of six apartment buildings for CAD281 million, and Allied Properties REIT’s acquisition of a seven-storey building for CAD121.4 million. The qualification of “residential property” within the Prohibition Act therefore shifts the issue towards one of new development as it relates to raw land, as well as one of acquiring empty units which have already been “condominiumised”.

In response to the industry’s reaction, parliament passed amendments to the Regulations that came into force on 27 March 2023 (the “Amendments”) to ease some of the restrictions imposed, and to expand on the exceptions to the ban on non-Canadians purchasing residential real estate. These exceptions are:

  • work permit holders while working in Canada;
  • vacant land zoned for residential or mixed use;
  • property for development purposes; and
  • increasing the foreign control threshold for private companies from 3% to 7%.

Furthermore, properties that are not located in a census agglomeration (CA) or census metropolitan area (CMA), such as Mont-Tremblant, would not be covered by the Prohibition Act. Mont-Tremblant has the lowest percentage of non-Canadian owners, reported to be 3.2% in 2022. The Amendments are therefore likely to drive investors towards places like Mont-Tremblant.

Finally, if a non-Canadian, or anyone (eg, lawyers, notaries or brokers) who knowingly assists a non-Canadian, is convicted of violating the Prohibition Act, they will be fined up to CAD10,000 and a court may order the sale of the property deemed to be residential under the Prohibition Act.

A Quebec Superior Court ruling confirmed that purchasers could still proceed with a purchase if they entered into a binding offer to purchase a residential property prior to 1 January 2023, even if the transaction only closed after the Prohibition Act came into effect.

The Canadian government’s willingness to relax restrictions with respect to the Prohibition Act should reassure foreign investors that the Quebec commercial real estate market remains an attractive business opportunity.

New French Language Restrictions

Since 1 September 2022, the coming into force of an Act respecting French as the official and common language of Quebec has altered the real estate regulatory environment through the introduction of certain mandatory language requirements, as they concern contracts and public registries.

In particular, all documents that are to be registered at the Quebec Land Registry and/or the Register of Personal and Movable Real Rights must be drafted exclusively in French, or, if in English, the documents must be accompanied by a certified French translation. Among the documents targeted are those essential to real estate transactions, such as deeds of sale, deeds of hypothecs (mortgages), legal hypothecs, co-ownership agreements, deeds of servitudes (easements), lease notices, etc.

Moreover, as of 1 June 2023, to the extent that a contract can be qualified as a contract of adhesion (an agreement in which the main clauses have been imposed by one party and are non-negotiable), such documents must also be drafted in French. The French version must be presented to the co-contracting party prior to such party expressing its wish to have the contract drawn up in English or in another language. Potential consequences of non-compliance may include fines, orders to comply, damages and/or nullity of the contract in whole or in part. Potential real estate-related contracts that may end up in front of the courts are insurance contracts and standard form leases that are typically imposed upon landlords by anchor tenants or upon smaller tenants by landlords. It will be interesting to see how the law will be applied and interpreted by the Quebec judiciary.

Municipalities’ Pre-emptive Right

On 9 June 2022, an Act to Amend Various Legislative Provisions Mainly with Respect to Housing (the “Act”) was adopted which granted any municipality in Quebec a pre-emptive right on immovable property in respect of which the municipality has complied with the formalities described below, in all or part of its deemed territory. The owner of a property encumbered by a pre-emptive right must present any offer to purchase it is willing to accept from a potential buyer to the municipality in question. The latter then benefits from an option to acquire the property for the same price and conditions as the offer within 60 days.

For the pre-emptive right to exist, a municipality must:

  • adopt by-laws to determine the territory in which the pre-emptive right can be enforced and the municipal purposes for which properties can be acquired;
  • notify the owner of a property that a pre-emptive right can be exercised on their property; and
  • register the notice at the Land Registry Office, which notice is valid for ten years (the registration of the notice makes the pre-emptive right opposable to third parties, such as a potential buyer).

Before the adoption of the Act, similar pre-emptive rights existed only in favour of the City of Montreal. Since its adoption, additional municipalities in Quebec have taken the above-mentioned steps to acquire a right of first refusal on properties in their territories. Such right threatens to change the scope of real estate transactions in the province as potential real estate buyers of affected properties are now faced with a new uncertainty when trying to acquire a property encumbered by such right. Buyers may be less inclined to incur fees associated with the preparation of an offer to purchase and the due diligence work that follows knowing that the municipality may opt to purchase the property within 60 days. In this respect, it is important to note that the Act provides that the municipality must compensate the buyer with respect to certain costs if it chooses to exercise its pre-emptive rights, but it is unclear at this time what amount the buyer could successfully claim.

Buyers in the province have begun to look for alternative avenues to acquire properties burdened by a pre-emptive right, such as through acquiring the shares of the company which owns the property it intends to purchase. This type of acquisition, however, opens a host of new uncertainties for potential buyers, especially for real estate investors not accustomed to acquiring entire businesses and the liabilities that accompany them. As 2023 progresses, it is expected that buyers will proceed with caution when a pre-emptive right is involved.


Despite the economic and regulatory challenges, Quebec has proved to be resilient and continues to be a sought-after market for real estate investors. Reports show continuous momentum in the industrial, retail and multi-residential spaces and these trends are expected to continue throughout 2023.

To read the article in the Chambers Guide, click here.