{"id":17837,"date":"2026-03-27T15:33:24","date_gmt":"2026-03-27T15:33:24","guid":{"rendered":"https:\/\/gascon.ca\/la-cour-dappel-precise-la-portee-dune-exoneration-pour-un-preteur-en-matiere-de-mutation-immobiliere\/"},"modified":"2026-03-27T15:38:35","modified_gmt":"2026-03-27T15:38:35","slug":"la-cour-dappel-precise-la-portee-dune-exoneration-pour-un-preteur-en-matiere-de-mutation-immobiliere","status":"publish","type":"post","link":"https:\/\/gascon.ca\/en\/the-court-of-appeal-clarifies-the-scope-of-a-lender-exemption-in-real-estate-transfer-duties\/","title":{"rendered":"The Court of Appeal Clarifies the Scope of a Lender Exemption in Real Estate Transfer Duties"},"content":{"rendered":"

In its ruling in Soci\u00e9t\u00e9 en commandite Immoca immobilier c. Ville de Saint-Augustin-de-Desmaures<\/em>\u00b9, the Quebec Court of Appeal provides important clarification regarding the application of the exemption set out in section\u00a018 of the Act respecting duties on transfers of immovables<\/em> (the \u201cAct<\/strong>\u201d), particularly with respect to the interpretation of the concept of \u201crelated persons\u201d and the impact of contractual rights in that analysis.<\/p>\n

Background<\/h2>\n

In this case, the appellant, Soci\u00e9t\u00e9 en commandite Immoca Immobilier (\u201cImmoca<\/strong>\u201d), made a payment under protest of real estate transfer duties in the amount of $95,948.50 to the City of Saint-Augustin-de-Desmaures following the transfer of an immovable owned by Soci\u00e9t\u00e9 en commandite VeyLin (\u201cVeyLin<\/strong>\u201d), in the context of a hypothecary remedy by way of taking in payment.<\/p>\n

Immoca argued that it qualified for the exemption provided under section\u00a018 of the Act. This provision grants an exemption where four (4) cumulative conditions are met: (1) the transferee\u2019s business consists in the lending of money on the security of real property; (2) the transfer results from the exercise of a right to take in payment or in any other manner aiming to extinguish a debt secured by real property or ensuring the protection of such security or of any claim; (3) the transferee must not be a person related to the transferor within the meaning of section\u00a019 of the Taxation Act (Quebec)<\/em> (\u201cQTA<\/strong>\u201d); and (4) the transferee did not acquire the land pursuant to a transaction made mainly to avoiding the payment of transfer duties.<\/p>\n

The First Instance Decision: De Facto Control<\/h2>\n

At first instance\u00b2, the Court of Qu\u00e9bec concluded that Immoca met three (3) of the four (4) conditions of the exemption set out in section\u00a018 of the Act, but failed to satisfy paragraph\u00a0(b), namely the requirement that the transferee not be related to the transferor.<\/p>\n

The Court found that, at the time of the transfer, Immoca exercised de facto control over VeyLin and its general partner. The evidence showed that the same individual directed the operations of both entities, signed documents on behalf of both, granted a hypothec from one entity to the other, and managed the judicial proceedings on both sides of the dispute. The judge essentially characterized the situation as a \u201cfrom myself to myself\u201d transaction.<\/p>\n

According to the Court, this concentration of decision-making authority demonstrated that the two entities were in reality controlled by the same persons, rendering the exemption under section\u00a018 of the Act inapplicable. The claim was therefore dismissed.<\/p>\n

The Court of Appeal Decision: Refocusing on De Jure Control and Section\u00a020 QTA<\/h2>\n

On appeal, the Court reached the same conclusion, but through a different analytical framework.<\/p>\n

The Court of Appeal confirmed that the requirement under section\u00a018(b) of the Act was not met: Immoca and VeyLin were related persons at the time of the transfer. However, it refocused the analysis on the legal framework governing corporate control.<\/p>\n

While the trial court had emphasized de facto control, the Court of Appeal recalled that the Canadian standard for determining control under section\u00a019 QTA is de jure control \u2014 that is, the legal ability to elect the majority of the board of directors \u2014 in accordance with the Supreme Court\u2019s decision in Duha Printers (Western) Ltd. v. Canada<\/em>\u00b3.<\/p>\n

The key contribution of the decision lies in its interpretation of sections\u00a019 and 20 QTA together. The Court clarified that section\u00a020 forms an integral part of the mechanism for applying section\u00a019. It is not an independent or indirect reference; rather, section\u00a020 expressly serves to determine who controls a corporation.<\/p>\n

Section\u00a020 provides that a person who has, under a contract or otherwise, an immediate or future right \u2014 conditional or not \u2014 to acquire shares or control voting rights is deemed to occupy the same position with respect to control as if that person were the actual owner of the shares at that time.<\/p>\n

Accordingly, the legislature has broadened the de jure control analysis to include not only corporate documentation, but also existing legal and contractual rights.<\/p>\n

The Determining Factor: The Conversion Clause<\/h2>\n

In this case, the loan agreement between Immoca and VeyLin provided that, in the event of default, Immoca could convert its debt into partnership units of VeyLin and simultaneously acquire shares of its general partner.<\/p>\n

Although this right was never exercised, it granted Immoca a legal potential to obtain control. Under section\u00a020 QTA, such a future right is sufficient to establish deemed de jure control.<\/p>\n

The Court of Appeal therefore concluded that, at the time of the transfer, Immoca held a contractual right sufficient to be deemed to control VeyLin. The entities were related persons within the meaning of section\u00a019 QTA, which precluded the application of the exemption under section\u00a018 of the Act.<\/p>\n

Conclusion: A Structural Reminder for Lenders<\/h2>\n

This decision does not amend the legislation, but it significantly clarifies its scope. It confirms that the relevant control for the purposes of section\u00a019 QTA remains de jure control. However, such control includes contractual rights captured by section\u00a020 QTA \u2014 a simple future or conditional right to acquire shares may suffice to create a legal relationship of control. For lenders, the decision serves as a reminder that certain clauses \u2014 particularly conversion mechanisms or rights of acquisition in the event of default \u2014 may carry unintended consequences.<\/p>\n

February 12, 2025
\nBy: Audrey Robitaille<\/a>, Partner, and Louisa Kouretas<\/a>, Student<\/p>\n

 <\/p>\n

\n

\u00b9 2025 QCCA 1117.
\n\u00b2 Soci\u00e9t\u00e9 en commandite Immoca immobilier c. Ville de Saint-Augustin-de-Desmaures, 2024 QCCQ 637.
\n\u00b3 [1998] 1 R.C.S. 795, par. 36.<\/p>\n","protected":false},"excerpt":{"rendered":"

In its ruling in Soci\u00e9t\u00e9 en commandite Immoca immobilier c. Ville de Saint-Augustin-de-Desmaures\u00b9, the Quebec Court of Appeal provides important clarification regarding the application of the exemption set out in section\u00a018 of the Act respecting duties on transfers of immovables (the \u201cAct\u201d), particularly with respect to the interpretation of the concept of \u201crelated persons\u201d and […]<\/p>\n","protected":false},"author":4,"featured_media":17838,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[159],"tags":[],"class_list":["post-17837","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-law"],"acf":[],"_links":{"self":[{"href":"https:\/\/gascon.ca\/en\/wp-json\/wp\/v2\/posts\/17837","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gascon.ca\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gascon.ca\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gascon.ca\/en\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/gascon.ca\/en\/wp-json\/wp\/v2\/comments?post=17837"}],"version-history":[{"count":3,"href":"https:\/\/gascon.ca\/en\/wp-json\/wp\/v2\/posts\/17837\/revisions"}],"predecessor-version":[{"id":17841,"href":"https:\/\/gascon.ca\/en\/wp-json\/wp\/v2\/posts\/17837\/revisions\/17841"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/gascon.ca\/en\/wp-json\/wp\/v2\/media\/17838"}],"wp:attachment":[{"href":"https:\/\/gascon.ca\/en\/wp-json\/wp\/v2\/media?parent=17837"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gascon.ca\/en\/wp-json\/wp\/v2\/categories?post=17837"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gascon.ca\/en\/wp-json\/wp\/v2\/tags?post=17837"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}