Securing Canada's Harvest: Regulations on Foreign Ownership of Agricultural Land

Global issues in recent years, such as strained international relations, transportation disruptions and climate unpredictability, have placed food security in the spotlight. These factors may give rise to policy and potential legislative changes in “food producing countries”, such as Canada, designed to ensure greater domestic food security. At the same time, foreign investors (especially those from countries or regions with pronounced food security issues or production gaps) may turn their attention to Canadian farmland. This bulletin discusses trends in the approach to regulating the purchase and foreign ownership of agricultural land in Canada. 

BUYING AGRICULTURAL LAND IN CANADA

All foreign investments into Canada are potentially subject to the Investment Canada Act (ICA) and its applicable review requirements, although few investments have been rejected since the enactment of the legislation.  

In addition, federal legislation authorizes each province and territory to restrict the acquisition of property (including agricultural land) by non-Canadian citizens. The provinces and territories have taken varying approaches to regulating the foreign acquisition of land:

1. British Columbia: No restrictions on foreign ownership of agricultural land. 
2. Alberta: Non-residents and foreign entities cannot own more than 20 acres of agricultural land in the aggregate. The penalties can be significant, including a judicial sale of the land. 
3. Saskatchewan: Non-residents and foreign entities cannot own more than 10 acres of agricultural land in the aggregate, with certain limited exemptions available. 
4. Manitoba: Non-residents and foreign entities cannot own more than 40 acres of agricultural land in the aggregate, with certain limited exemptions available.
5. Ontario: No restrictions on foreign ownership of agricultural land.
6. Quebec: Authorization by the agricultural regulatory authority in the province is required for any ownership of agricultural land by non-residents or foreign entities.
7. Nova Scotia: No restrictions on foreign ownership of agricultural land.
8. New Brunswick: No restrictions on foreign ownership of agricultural land.
9. Newfoundland and Labrador: No restrictions on foreign ownership of agricultural land.
10. Prince Edward Island: Individuals and corporations, including foreign entities, can own up to 1,000 and 3,000 acres of agricultural land respectively.
11. Northwest Territories, Yukon and Nunavut: Ownership of agricultural land is subject to a separate regulatory framework under the Territorial Land Act.

As a result, foreign investors are potentially subject to two tiers of regulation: (1) federal foreign investment legislation provides an initial hurdle towards foreign in-bound investment and the application of such legislation may vary in an ever-changing geopolitical climate, and (2) foreign investors must navigate provincial and territorial regulations to determine whether an investment in agricultural land is even permissible. 

U.S. PROPOSALS ON AGRICULTURAL LAND INVESTMENT

In the United States, there are fairly robust reporting requirements in respect of foreign ownership of agricultural land at the federal level, and state laws exist that prohibit or restrict foreign ownership and investments in real property, some of which include agricultural land. However, a more centralized approach has been proposed at the congressional level in recent years, which could have significant impacts on how agricultural land can be acquired in the United States.

Specifically, the proposals suggest increasing the presence of agricultural sector representatives on the Committee on Foreign Investment in the United States (CFIUS). If implemented, this may require foreign investors in agricultural land to retain specialized advisors to work through the review process. In addition, these proposals suggest adding agricultural systems and supply chains to the definition of “critical infrastructure” and “critical technologies”, lending to the possibility that CFIUS would review an investment that could result in foreign control of an indirectly related business. 

WHAT TO EXPECT IN CANADA

Given Canada’s geographic characteristics, it is worth considering how our own regulatory frameworks may evolve to address food security concerns given the momentum seen in the United States. For instance, at the federal level, a more streamlined reporting process could be proposed so that there is a coordinated land ownership database. Of note, beginning in January 2024, all federally incorporated business corporations that are required to maintain an ISC (individuals with significant control) register must now file such information annually and following any change for publication on Corporations Canada’s website. While ISC reporting requirements are not directly tied to land ownership, they illustrate the federal government’s focus on corporate transparency as an increasingly pressing public policy objective. It is therefore not inconceivable that a more tailored regulatory approach may emerge for agribusiness, much like what has been seen in the United States. 

It is also possible that more robust approaches to reviews of transactions would take place at the federal level with respect to the ICA. For example, foreign investments are facing heightened scrutiny regarding their potential impact to Canada’s national security. In addition, proposed amendments to the ICA that are expected to come into effect in 2024 will expand the scope of reviewable transactions by introducing a new mandatory pre-closing filing regime for certain investments in “prescribed business activities”. As the law continues to evolve and Canada’s trade partners adjust their approach to foreign investments in agricultural land, it remains open to the federal government to include agricultural land as a prescribed business activity for purposes of the new pre-closing filing regime, or to otherwise adjust its approach to the review of foreign investments in agricultural land under the ICA.  

These changes, while regulatory in nature, are important to consider from a transactional perspective as the viability of foreign investment in the sector would have an impact on in-bound deal flow. An increased focus on Canada in respect of economic activity of foreign investors is already occurring, and the indications appear to suggest that agricultural land will only become a more relevant concern for who gets in and who does not. 

If you have any questions on navigating the in-bound investment landscape as it applies to agricultural land in Canada, please consult with a member of our Food, Beverage & Agribusiness group and/or our Foreign Investment group.