Land Use Planning and Development

As we keenly usher in 2025, we thought we would have a quick recap on changes affecting real estate law in Quebec in 2024. Let’s have a look back on the past year and on news deserving some attention and follow-up in 2025. This is not a comprehensive list, but a reminder that much has happened in the real estate sector. In terms of rental housing construction, the Real Property (GST/HST) Regulations introduced an enhanced GST rebate for residential rental properties, for construction beginning between September 14, 2023 and December 31, 2030, and whose end date is set no later than December 31, 2035. The procedure for authenticating a Canadian document to be used in a foreign country has been standardized for countries that are party to the Hague Apostille Convention Abolishing the Requirement of Legalisation for Foreign Public Documents. Bylaw 20-20-20 was amended to lighten the financial burden on real estate developers for the construction of affordable social housing in Montréal until the end of 2026. In terms of housing rental, the Act to limit lessors’ right of eviction and to enhance the protection of senior lessees has imposed a moratorium on the eviction of lessees by lessors who want to subdivide, expand or change the use of a dwelling, until June 2027, in addition to providing more protection for lessees aged 65 or over against eviction or repossession of a dwelling, when they have been living at the dwelling for at least 10 years and their income is equal or less than 125% of the income that would qualify them for low-rental housing based on applicable regulations. The Competition Act was amended to further regulate property controls, including the use of exclusivity clauses and restrictive covenants in existing commercial leases. The Competition Act was also amended to fight greenwashing. In the real estate industry, developers now have the burden to prove the environmental claims in respect to their properties. The increase in the inclusion rate for capital gains was announced in the federal budget in April 2024. The inclusion rate will go from 50% to 66.66% on all capital gains realized by corporations and trusts, in addition to individuals for the portion of capital gains exceeding $250,000 in a given year. Considering the potential change in government and the fact that these measures have no force of law, stay tuned for developments on this matter. Tax authorities plan to increase applicable withholding rates for the sale of a taxable Canadian property by a non-resident of Canada starting January 1, 2025. As a result, the withholding rates for disposals made as of that date have increased significantly further to the increase in the inclusion rate for capital gains. Again, there is, however, still uncertainty on whether this measure will come into force. Bill 86 amending, among other things, the Act respecting the preservation of agricultural land and agricultural activities and the Act respecting the acquisition of farm land by non-residents was tabled and introduced to the National Assembly of Quebec by the Minister of Agriculture, Fisheries and Food, André Lamontagne. The amendments aim, in particular, to control the acquisition of farm land and fight against the acquisition of farm land by foreign investors. Stay tuned for changes in this bill. The Act to amend various legislative provisions with respect to housing has “opened the door” for municipalities to authorize housing projects before February 21, 2027, that deviate from local planning bylaws, provided that established conditions are met. Municipalities have been granted discretionary power they can use to fast-track construction projects in 2025. Following this year full of developments in the real estate sector, our real estate law team is motivated and ready to answer all your questions and requests. Do you have any other topics in mind? Share them with us and feel free to contact us for a further discussion. Have a great 2025!

Quebec has set ambitious energy transition and industrial decarbonization targets. The shift to greener practices has to be taken in a context where our energy consumption could rapidly grow under the combined effect of a number of factors, such as the reindustrialization of our economy, population growth, transport electrification and the potential for artificial intelligence to consume vast amounts of energy. Investing in the development of energy infrastructure is therefore critically important, as an abundance of energy is key to economic prosperity. The problem is that public finances are already stretched to the limit with the need to renovate our aging infrastructure, among other things. Encouraging private equity investment is thus vital, and tax incentives can be very effective in this respect. The American example In 2022, the United States passed its Inflation Reduction Act (IRA), with the goal of stimulating investment in the renewable energy sector, in particular. More specifically, the IRA altered or created a number of tax credits to encourage private investment.1 Over the past two years, US businesses have announced a total of almost US$276 billion in new investments in clean energy generation and the capturing or elimination of carbon dioxide and other forms of industrial decarbonization, an increase of 34% on the two years previous.2 The IRA is effective in that it takes the respective situations of various energy sector stakeholders into account in a creative, flexible and pragmatic way, especially where taxation is involved. Energy project promoters often have to wait many years for their projects to generate income and profits, even though the banks and other investment funds they solicit financing from can be presumed to be operating profitable businesses. The tax losses that occur in the years during which such projects are designed and built are therefore of little interest to developers, but of immediate interest to investors. And so, a tax equity market has emerged, in which businesses subject to taxes can invest in the shares of entities set up to develop such projects so as to benefit from tax credits and faster depreciation. Typically, the entity that cashes in the investment and develops the project distributes 99% of income, losses and tax credits to investors until a predetermined return is achieved. Once that return is achieved, the investor’s share of the benefits decreases, and the developer has the option of buying out the investor’s residual share. The IRA has transformed how federal clean energy tax credits are monetized, and it is now possible to buy and sell such credits without having to make a long-term investment. For businesses, this new way of doing things is an additional and attractive way to participate in the growing tax credit market.3 In 2023, the volume of the tax equity market for American projects was around US$20 to 21 billion, up about US$18 billion from the previous year.4 It appears that the trend will continue. It is estimated that the value of the current market, which is particularly attractive to banks, is set to double to US$50 billion a year by 2025.5 The equivalent of flow-through shares The Quebec and Canadian tax deductions mechanism that most closely resembles the US tax equity market is probably flow-through shares. Through these, businesses in the mining and renewable energy sectors can transfer their mining exploration expenses and other expenses—specifically designated as eligible—to investors, who can then deduct them from their own taxable incomes.6 These businesses can thus issue shares at a higher price than they would receive for common shares to finance their exploration and development operations. Investors are willing to pay a higher price in return for the tax deductions afforded by the eligible expenses incurred by the issuing businesses, which can amount to a maximum of 120% of the equity invested in the shares.7 Investors can also claim a 15% or 30% federal tax credit. However, because tax incentives cannot be transferred, our mechanism is more rigid than the American one, and it can only be applied to mineral exploration and development expenses and certain specific expenditures related to renewable energy and energy conservation projects, such as electricity generation using renewable sources like wind, solar energy and geothermal energy.8 With ambition and innovation comes the need to take action Quebec could draw inspiration from the IRA to increase the attractiveness of flow-through shares and broaden their scope of application, thereby creating a new tool to finance the energy transition. The renewable energy sector is similar to the mining sector in many respects, not least in terms of the considerable amount of capital required to build the infrastructure needed to operate a mine or energy generation facility. The flow-through share mechanism, which is well-established and popular with investors,9 could be just as successful in our energy transition context. Making such incentives easier to transfer would also drive the emergence of a market similar to the US tax equity market. A number of Québec flagship companies, such as Hydro-Québec,10 Innergex11 and Boralex,12 are also very ambitious when it comes to developing large-scale energy projects. They face major financing challenges, as do those in the industrial decarbonization and infrastructure renewal sectors. Innovation is necessary to meet these challenges and make the transition to a more sustainable, but just as prosperous, world, and to do so in good time.13 Link Rhodium Group and MIT’s Center for Energy and Environmental Policy Research (CEEPR), Clean Investment Monitor, link Brandon Hill, How to take advantage of tax credit transferability though the Inflation Reduction Act, Thomson Reuters Institute, April 16, 2024, link Allison Good, Renewables project finance to keep pace in 2024, but tax equity rule looms, S&P Global, January 12, 2024, link Lesley Hunter and Mason Vliet, The Risk Profile of Renewable Energy Tax Equity Investments, American Council on Renewable Energy, December 2023, link Link, page in French only Link Link Prospectors & Developers Association of Canada, Flow-through shares & the mineral exploration tax credit explained, link Link Link Link The authors would like to acknowledge the participation and the work done by Sophie Poirier in this publication

On December 20, 2022, the federal government's Single-Use Plastics Prohibition Regulations1 (the “Regulations”) gradually came into force, with the effect, as the name suggests, of prohibiting (or restricting, in certain cases) the manufacture, import and sale of certain single-use plastics that pose a threat to the environment. In principle, it is now prohibited to manufacture, import and sell certain single-use plastic products made entirely or partially of plastic, such as foodservice ware, checkout bags and straws. On June 20, 2024, beverage ring carriers and flexible straws packaged with beverage containers have been added to this list.2 However, there are cases currently pending before the courts that have the potential to change the situation. Currently contested: the Regulations and the Order A contestation to the Regulations has been before the Federal Court since July 15, 2022, in an application for judicial review brought by Petro Plastics Corporation Ltd et al3 (the “Petro Plastics Case”).  However, the parties to this case have asked for it to be suspended pending a final judgment in another case4 brought by the Responsible Plastics Use Coalition (the “Coalition Case”).5 In the Coalition case, the validity of the order by which plastic products were added to the list of toxic substances in Schedule 1 of the Canadian Environmental Protection Act (“CEPA”)6 is called into question. The Federal Court of Appeal will soon hear this case and render a judgment that will affect the Petro Plastics case. On November 16, 2023, in the Coalition Case, the Federal Court ruled in favour of the Coalition, retroactively quashing the Order Adding a Toxic Substance to Schedule 1 to the Canadian Environmental Protection Act (the “Order”) and declaring it invalid and unlawful as of April 23, 2021.7 Essentially, the Federal Court had two main reasons for concluding that the registration was illegal. Findings of the Federal Court Order found unreasonable The Federal Court concluded that the Order was unreasonable because the evidence that the federal government had in hand did not support the conclusion that all plastic manufactured articles were toxic within the meaning of CEPA. On the contrary, the evidence showed that certain plastic manufactured articles included in the scope of the Schedule 1 list were not toxic. According to the Federal Court, the government acted outside its authority by listing the broad category of plastic manufactured articles on Schedule 1 in an unqualified manner. Order found unconstitutional The Federal Court also concluded that the Order was unconstitutional because it did not fall within the federal government’s criminal law power. Only substances that are toxic in “the real sense” can be included on the list of toxic substances. They must be substances that are harmful, dangerous to the environment or human life, and truly have the potential to cause harm. In other words, according to the Federal Court, the power to regulate the broad and exhaustive category of “single-use plastics” lies with the provinces. The Attorney General of Canada appealed this decision with the Federal Court of Appeal on December 8, 2023. The Federal Court of Appeal granted a stay of the judgment rendered on November 16, 2023, until disposition of the appeal,8 such that the Order and the Regulations remain in force, at least for the time being. If the Federal Court of Appeal upholds the decision that the Federal Court rendered on November 16, 2023, this will affect the validity of the Regulations. Under section 90 of CEPA, a substance can only be added to Schedule 1 by order if the federal government determines that it is toxic within the meaning of CEPA, and, under section 93 of CEPA, the government only has the power to regulate such a substance after it has been added to the list. The plastic items in question Subject to the outcome of the court cases discussed above, here is the exhaustive list of items that the Regulations prohibit: Single-use plastic ring carriers designed to surround beverage containers in order to carry them together.9 Single-use plastic stir sticks designed to stir or mix beverages or to prevent a beverage from spilling from the lid of its container.10 Single-use plastic foodservice ware that (a) is formed in the shape of a clamshell container, lidded container, box, cup, plate or bowl, (b) is designed to serve or transport ready-to-eat food or beverages and (c) contains certain materials.11 Single-use plastic checkout bags designed to carry purchased goods from a business and : (a) whose plastic is not a fabric,12 or (b) whose plastic is a fabric that will break or tear, as the case may be, (i) if it is used to carry 10 kg over a distance of 53 m 100 times; (ii) if it is washed in accordance with the washing procedures specified for a single domestic wash in the International Organization for Standardization standard ISO 6330, as amended from time to time.13 Single-use plastic cutlery that is formed in the shape of a fork, knife, spoon, spork or chopstick and that (a) contains polystyrene or polyethylene; or (b) changes its physical properties after being run through an electrically operated household dishwasher 100 times.14 Single-use plastic straws that either (a) contain polystyrene or polyethylene, or (b) change their physical properties after being run through an electrically operated household dishwasher 100 times. Exceptions Single-use flexible plastic straws Single-use flexible plastic straws, i.e., those with a corrugated section that allows the straw to bend and maintain its position at various angles,15 may be manufactured and imported.16 These flexible straws may also be sold in any of the following circumstances:17  The sale does not take place in a commercial, industrial, or institutional setting. This exception means that individuals can sell such flexible straws. The sale is between businesses in packages of at least 20 straws. The sale of a package of 20 or more straws is between a retail store and a customer if the customer requests straws and the package is not displayed in a manner that permits the customer to view the package without the help of a store employee.18 The sale of straws is between a retail store and a customer, if the straw is packaged together with a beverage container and the packaging was done at a location other than the retail store. The sale is between a care facility, such as a hospital or long-term care facility, and its patients or residents. Export of single-use plastic items All the manufactured single-use plastic items listed above may be manufactured, imported or sold for export until December 20, 2025.19 That said, any person who manufactures or imports such items for export will be required to keep a record of certain information and documents as appropriate for each type of plastic manufactured item.20 Records of the information and documents will have to be kept for at least five years in Canada.21 Conclusion: an opportunity to rethink the use of plastics In the short term, businesses will need to start thinking about how they will replace the plastic manufactured items they use. To help businesses select alternatives to single-use plastic items, the federal government has released its Guidance for selecting alternatives to the single-use plastics in the proposed Single-Use Plastics Prohibition Regulations.m22 According to this document, the aim should be to reduce plastics. Businesses may begin by considering whether a single-use plastic product should be replaced or no longer provided. Only products that perform essential functions should be replaced with non-plastic equivalents. Stir sticks and straws can be eliminated most of the time. Another way to reduce waste is to opt for reusable products and packaging. Businesses are invited to rethink their products and services to provide reusable options. Reusable container programs (i.e., offering customers the option of bringing their own reusable containers) are a reuse option that businesses may want to consider, in particular to reduce the amount of plastic foodservice ware. Only where reusable products are not feasible should businesses substitute a single-use plastic product with a recyclable single-use alternative. In such cases, businesses are encouraged to contact local recycling facilities to ensure that they can successfully recycle the products at their end of life. Ultimately, charging consumers for certain single-use alternatives (e.g., single-use wooden or moulded fibre cutlery) may also discourage their use. SOR/2022-138 Regulations, ss. 3 (2), s. 11 and ss. 13 (4) Petro Plastics Corporation Ltd et al v Canada (Attorney General), Court File No. T-1468-22. Order registered on April 23, 2021 and published in the Canada Gazette on May 12, 2021 Court File No. T-824-21 S.C. 1999, c. 33 Responsible Plastic Use Coalition v. Canada (Environment and Climate Change) 2023 FC 1511 2024 FCA 18 Regulations, s. 1 and 3 Regulations, s. 1 and 6 Regulations, s. 1 and 6 “Any material woven, knitted, crocheted, knotted, braided, felted, bonded, laminated or otherwise produced from, or in combination with, a textile fibre” as defined in section 2 of the Textile Labelling Act, RSC 1985, c. T-10 Regulations, s. 1 and 6 Regulations, s. 1 and 4 and ss. 5 (1) Regulations, s. 1 Ibid, s. 4 Regulations, ss. 5 (2)–(6) According to Guidance for selecting alternatives to the single-use plastics in the proposed Single-Use Plastics Prohibition Regulations, the goal is to ensure that people with disabilities who need flexible single-use plastic straws continue to have access to them at home and can carry them to restaurants and other premises. Regulations, ss. 2 (2), s. 10 and ss. 13 (5). Ibid., s. 8 Ibid, ss. 9 (1). https://www.canada.ca/en/environment-climate-change/services/managing-reducing-waste/consultations/proposed-single-use-plastics-prohibition-regulations-consultation-document.html

On December 6, 2023, an amendment to the Act to amend the Act respecting municipal taxation and other legislative provisions1(“Bill 39”)was adopted during a clause-by-clause consideration of Bill 39 in parliamentary committee. Two days later, the Bill received assent. This amendment introduced new provisions to circumscribe the circumstances in which a municipality’s use of one of its powers may be considered disguised expropriation,2 particularly when the power exercised is provided for in the Act respecting land use planning and development3 (the “Act”). Legislative framework for disguised expropriation Certain provisions have been codified in the new section 245 of the Act, in line with case law on disguised expropriation.4 The Act now expressly states that a planning by-law may restrict the exercise of a right of ownership, without giving rise to an indemnity, unless the restrictions are so severe as to prevent any reasonable use of an immovable.5 It has now been established by law that a municipality’s act affecting the use of an immovable creates no obligation to indemnify under article 952 of the Civil Code of Québec6  (“C.C.Q.”). To enable municipalities to exercise their role in protecting the environment, as well as the health and safety of people and property, a presumption is now applied in their favour to the effect that the infringement of a right of ownership is justified solely insofar as it results from an act that meets one of the conditions listed in paragraph 3 of section 245 of the Act. The presumption thus applies when the expropriator demonstrates that the purpose of the act is to: protect wetlands and bodies of water; protect another environment of high ecological value; or that the act is necessary to ensure human health or safety or the safety of property.7 Declaratory effect A noteworthy change is that the new section 245 of the Act is declaratory, meaning that it has a retroactive effect. Generally, the principle of interpretation is that new laws have no retroactive effect, as set out in the Interpretation Act.8 The intention behind making section 245 of the Act declaratory was to give the provision retroactive effect from the date that it came into force. It is important to note that this declaratory effect is absolute, such that the courts are bound to comply with it, as if the section had always existed and had such effect. It cannot therefore be associated with the general rule that legislation is prospective, meaning that it only has an effect in the future.9 In enacting declaratory legislation, the legislature assumes the role of a court and dictates the interpretation of its own law, such that it becomes akin to binding precedents10. As a result, such legislation may overrule a court decision in the same way that a Supreme Court decision would take precedence over a previous line of lower court judgments on a given question of law.11 That being said, the declaratory effect of the Act’s new section 245 will only apply to disputes instituted since its coming into force and before December 8, 2023, as well as to cases taken under advisement by a trial judge, and cases that are pending and under advisement before the Court of Appeal of Quebec. It will therefore not be possible to apply to have a judgment that has acquired the effect of res judicata amended by invoking this declaratory effect. Incidentally, as recently as January 2024, the Court of Appeal had decided to allow a municipality appealing a decision raising issues related to the content of Bill 39, to add further arguments to the existing appeal brief.12 According to the appellant municipality, the “new law” would have the effect of sealing the fate of the case in question.13 On June 18, 2024, following its hearing of this same case on the merits, the Court of Appeal found that “[TRANSLATION] it was not able, on the basis of the case on appeal as constituted, to render an abstract decision on an issue that was not truly debated at trial.”14 Consequently, the Court of Appeal overturned the findings at trial for the sole purpose of allowing the trial judge to decide the case in light of the parameters set by new section 245.15 It would therefore seem that the referral of appeal cases back to the trial stage is the route preferred by the Court of Appeal in accordance with the declaratory effect of the new legislative provisions. Various other amendments Other provisions also include amendments related to the conditions described above. Technically speaking, the provisions of Bill 39 relating to expropriation came into force as soon as it received assent. However, the transitional provisions created certain exceptions. Firstly, as of June 8, 2024,16 municipalities will be required to send a notice to the owner of an immovable concerned by an act referred to in one of the three presumptions. Such notice must be sent within three months of the date of entry into force of the act.17 Secondly, the owner of an immovable who has suffered an infringement of their right of ownership that prevents all reasonable use of the immovable may now bring a proceeding before the Superior Court for the payment of an indemnity under article 952 of the C.C.Q. Such a proceeding is prescribed three years after the date of coming into force of the act. This period began to run on December 8, 2023, for regulations in force on that date, without extending periods that had already begun to run. Finally, it is important to note that it is now possible for a municipality that has been found guilty of disguised expropriation to acquire the immovable concerned. The municipality can therefore decide to acquire the immovable or put a stop to the infringement of the right of ownership.18 Under the transitional provisions, in any dispute where the judge has not taken the matter under advisement by December 7, 2023, the Court must consider these rules concerning the possibility for a municipality to put an stop to an infringement of the right of ownership.19 Conclusion The sections added to the Act under Bill 39 provide a framework for interpreting and applying the principle of disguised expropriation. The declaratory effect was clearly intended to accommodate municipal authorities wishing to benefit from the principles of this new legislation in pending cases. B. 39, 1st Sess., 43rd Legis., Quebec, 2023. The Ministère des Affaires municipales et de l’Habitation opted instead for the term “expropriation de fait” (de facto expropriation) in the Muni-Express on the adoption of Bill 39 (see the Act to amend the Act respecting municipal taxation and other legislative provisions – Muni-Express (gouv.qc.ca)) CQLR, c. A-19.1. Municipalité de Saint-Colomban c. Boutique de golf Gilles Gareau inc., 2019 QCCA 1402; Dupras c. Ville de Mascouche, 2022 QCCA 350. Minister’s comments in support of the amendments to section 245 of the Act. CCQ-1991. New section 245, para. 3 of the Act. CQLR, c. I-16, s. 50  Régie des rentes du Québec v. Canada Bread Company Ltd., 2013 SCC 46. Id., para. 27. Id. Ville de Saint-Bruno-de-Montarville c. Sommet Prestige Canada inc., 2024 QCCA 25, para. 5. Id., para. 1. Ville de Saint-Bruno-de-Montarville c. Sommet Prestige Canada inc., 2024 QCCA 804, para. 30. Id., paras. 30 and 31. Bill 39, section 87, para. 1. New section 245.1 of the Act. New section 245.3 of the Act. Bill 39, section 87, para. 2.