The Real Estate Development Process in Canada

Bruce Strebinger

August 11, 2022

Bruce Strebinger Vancouver

The real estate investment process can be complicated, with some investors flocking to the home sales market while others dominate the rental market. Others play the tourism game, renovating existing properties or building new ones. No matter what your strategy is, there’s an entire series of steps that go into the creation or development of real estate in Canada. Listed below are some key steps to follow when developing real estate. Let’s take a closer look.

Land-use planning

In Canada, the land-use planning process is governed by provincial legislation. In Ontario, the Planning Act regulates land-use planning, and municipal councils adopt zoning by-laws and land-use plans. Developers submit applications for specific planning approvals, which vary depending on the type of development. Municipalities generally review these applications and require public meetings where stakeholders can offer comments and suggestions.

Municipalities use the Planning Act to guide land-use planning, and it sets out the roles and responsibilities of key participants. Official plans define a municipality’s development goals and policies. They are developed with input from many sources, including residents, businesses, and government agencies. By studying these documents, developers can understand the planning process better. Official plans for these plans are often made by cities and towns, and they include policies that are unique to the community.

Community planning also regulates the use of land. It is used by governments to guide growth and address important social, economic, and environmental concerns. By establishing land-use plans, communities are better able to balance property owners’ interests with the needs of the broader community. Planning decisions are made by community representatives, who take into account the needs of residents, property owners, and other stakeholders. For example, land-use planning can guide zoning decisions and the overall quality of life within a community.

Financial considerations

Purchasing or developing real estate in Canada involves various financial considerations, from leasing to land transfer taxes. Taxes on land transfer, capital gains, and foreign buyer taxes are common in real estate transactions. Hence, it is important to obtain expert advice in this regard. A letter of intent must be written that specifies critical business terms and conditions. Certain cities in Canada have established real estate boards. These boards have standardized forms for agreements between buyers and sellers.

While financing for new projects is mostly arranged through institutional lenders, there are also specialized private lenders. Financial institutions such as banks, credit unions, and caisses populaires provide loans to individuals who want to develop real estate in Canada. However, credit terms vary by lender and transaction. While the government does not certify a property to be risk-free, it is possible to verify its environmental status by looking at public and company records. Before giving money to a real estate project, some lending institutions want to see an environmental audit.

Environmental considerations

Although the Canadian regulatory landscape is far less strict than its US counterpart, it is important for commercial real estate investors to consider the environmental aspects of potential properties. The absence of certain environmental protection laws can increase investors’ exposure to contamination risks. Moreover, while liability protection requirements are generally very high, there are significant limits to public data collection. Due diligence is much more important in Canada because of this. In some transactions, Phase II Environmental Site Assessments are needed because of this.

The first step in addressing the environmental issues associated with a property is to conduct an environmental assessment. Environmental assessments are not legal requirements in Canada, but they are typically required by lenders and other financial institutions when they are buying real estate. They are particularly important for industrial properties, and the laws vary by province. In most cases, the responsibility for performing an environmental assessment falls on the person or company that used the property when it was contaminated. However, in certain circumstances, the responsibility extends to the entity that had control over the property. Before giving money to a development project, provinces that have a legal program for environmental assessment often make the project go through this kind of audit.

Social capital

Social capital is a collective attribute that has a strong positive impact on the development of a region and is considered to be beneficial. Collective attributes can be altered by various factors, including the size and interconnectedness of the social group. Smaller groups change more quickly and take less time to see change, whereas larger groups tend to change more slowly. However, social capital is often considered rooted in history and cannot be changed instantly.

The measurement of social capital is challenging. In addition to requiring data from large sample sizes, it is expensive to collect such data. Furthermore, studies typically use “best fit” indexes that do not necessarily relate to theory. And they also require a large amount of data. Despite these challenges, there is a growing body of research on the topic. In Canada, there are numerous examples of how social capital can be measured.