Differences Between Alberta and Ontario Law
What Investors Need to Know
Over the past two years, investor money has been pouring into Calgary real estate, where returns on investment today run three times higher than in Toronto. Alberta's legal framework differs significantly from Ontario's, and many of our clients keep asking us the same set of questions. These are entirely reasonable questions, since the process of buying and operating investment property in Calgary is quite different from Ontario, and it's certainly worth understanding these nuances before making a purchase decision. I hope this article answers most of the questions that come up, and if it doesn't, give us a call, and I'll do my best to answer whatever else you're wondering about.
So, let's start with the buying process. Calgary, unlike Toronto, and I've written about this repeatedly in my previous articles, has moved well ahead when it comes to modern technology in everyday life, and that extends to the process of buying real estate as well. In Toronto, once our client picks a floor plan, we have to reach out to the developer with a request for that specific layout, find out which floors have that unit available and what the exact price will be, then discuss it with the prospective buyer, and only then send the developer a reservation form for that unit. In Calgary, everything works differently.
Our company, as one of the leading sellers of investment real estate in Calgary, is plugged directly into the databases of the major developers, so we can see in real time which units are available, their exact price, potential rental income, exact maintenance fees, and so on. From there, all it takes is a single click to sell that unit to our client. Everything happens automatically: within an hour or so, the buyer gets an email with a link to sign the agreement electronically. Signing is typically given a 12-hour window, after which the contract goes back to the developer, the developer signs it on their end, and the buyer, the developer, and we all receive the completed copy of the agreement. From that point, a ten-day cooling-off period begins, during which the buyer has the right to withdraw from the purchase. Canadian law sets aside this window specifically so buyers can review the contract in detail and ask any questions that come up. When we work with a project, our lawyers have already reviewed the agreement and consider it fully sound, but even so, every contract gets an additional review once we receive the developer-signed copy. Our reputation matters enormously to us, and our clients' security always comes first.
Within 24 hours of signing the contract, the first payment under the agreement is due. Along with the contract, you'll receive instructions for wiring that payment to the lawyer's account, where the deposit funds are held in trust until construction is complete. Just as in Ontario, deposit funds never go directly to the developer, they're kept fully secure. The lawyer only releases the funds to the developer once construction is finished, at the moment title to the property transfers. Subsequent payments under the contract are made the same way, on the schedule set out in the agreement. The total deposit on a pre-construction contract in Calgary typically runs at 10%, rather than the 15-20% common in Toronto, which has a very meaningful impact on investment returns during the construction period.
The second major difference is that pre-construction contracts in Calgary are very straightforward and don't include any additional charges. That's because Calgary has no Land Transfer Tax, no Development Charges, no park levies, and no other add-on fees of that kind. Closing costs here amount to roughly $2,000, essentially just the legal fee. In other words, the final price of the unit differs from the contract price by about $2,000, compared to Toronto, where closing costs can run $30,000 to $50,000, or even more depending on the property's location. In Toronto, you can only ever estimate that final figure roughly in advance. In Calgary, everything is clear-cut. And in my view, that's exactly how it should be.
On top of that, investors don't need to pay an additional $24,000 in HST at closing and then file an application to get that money refunded once the unit is rented out. There's simply no HST in Calgary at all. There's also practically no gap between occupancy (when you get your keys) and closing (when title transfers) in Calgary. In Toronto, that gap typically runs 6 to 9 months; in Calgary, some projects have no gap at all, and in others it's just 2-3 weeks. This is another significant advantage, since during the gap between occupancy and closing, you're paying the developer an occupancy fee.
Now, on to rentals. There are plenty of advantages for landlords here too. First of all, with property prices running at half of Toronto's, rental rates in Calgary are only 15-20% lower than Toronto's, which naturally means investors enjoy positive cash flow from their rental income.
Every modern complex in Calgary has its own on-site management office, and they're the ones handling rentals and property management for investors. It's worth noting that Calgary's vacancy rate today is close to zero, meaning any unit that comes up for rent gets snapped up almost instantly.
Many pre-construction projects are sold with guaranteed rent and free management for 2 years. In other words, when buying a unit, the buyer signs a rental agreement alongside their purchase agreement, and is guaranteed money deposited into their bank account every month once construction is complete.
On top of all this, Alberta's laws are entirely on the landlord's side. There's no rent control here, you're free to raise the rent whenever you'd like, by whatever amount you consider appropriate. There's also no automatic lease renewal like there is in Ontario. In other words, if a lease is signed for one year and you don't want to keep renting to that tenant afterward, they're required to move out on the day the contract ends.
Unlike in Toronto, in Calgary you're allowed to collect a month's rent from the tenant as a damage deposit, which is only returned once the tenant has vacated and you're satisfied the unit is in good condition. And by the way, in Calgary you're legally allowed to include a "no pets" clause in a rental agreement. And finally, if problems ever come up with a tenant, the eviction process, which in Toronto can drag on for months, and sometimes, given how backed up the courts are, even up to a year, only takes a few weeks in Calgary.
I hope this article helps you better understand why so many people call Alberta a landlord's paradise. On our YouTube channel (New GTA Condos), in the Calgary Investments playlist, you'll find plenty of videos where I talk about investing in Alberta, walk through current statistics, and share my forecasts for what's likely to happen in Calgary over the next few years. If you're interested in investing in Calgary real estate, I'd strongly recommend giving those videos a watch. There's a lot of useful information in there!