Real Property

See Also

Zellstoff Celgar Limited v. British Columbia, 2014 BCCA 279

pulp mill equipment was permanently annexed and for use of land

The machinery and equipment in a pulp mill purchased by the taxpayer was fixtures and, therefore subject to land transfer tax under the Property Transfer Tax Act (B.C.). Tysoe JA stated (at para. 45):

[T]he evidence established an intention of permanent affixation despite the fact that most of the equipment could be dismantled and sold in a secondary market. The objective intention was that, barring unforeseen circumstances, the equipment was to remain for its useful lifetime. Together with her consideration of the use of the land as a pulp mill, this finding informed the judge’s conclusion that the object of annexation was for the better use of the land and that the items of machinery and equipment had therefore become fixtures. In my view, she did not err in reaching this conclusion.

Ontario Hydro v. Ontario (Ministry of Revenue), [1996] O.J. No. 333, 60 A.C.W.S. (3d) 1080, aff’d on other grounds [1999] O.J. No. 1723, 44 O.R. (3d) 1, 120 O.A.C. 184, 88 A.C.W.S. (3d) 507

microwave equipment which did not improve a building was not fixtures

Borins J found that microwave telecommunications and power line carrier equipment which for the most part was attached by screws to metal racks which, in turn, were bolted to the floor in the Pickering nuclear facility of the taxpayer, were not fixtures, and instead were tangible personal property subject to Ontario retail sales tax. He stated (at paras. 7-8):

[T]he courts are more inclined to regard an item as a chattel if it is installed as part of its owner's business, as opposed to items installed to improve the freehold. For example, equipment installed in a factory to operate a business is usually found to be a chattel because it has nothing to do with improving the freehold. ...

In this case, the microwave equipment did not improve the building in which it was installed. It was installed to enable Hydro to carry out its business of producing and distributing electricity. Therefore, it constitutes a chattel. The retail sales tax was properly paid [thereon].

Words and Phrases

Turismo Industries Ltd. v. Kovacs, (1976), 72 D.L.R. (3d) 710 (B.C.C.A.)

equipment was annexed for manufacturing rather than realty use

Equipment, which was used to produce concrete blocks, was affixed to the plant floor by removable bolts. Following the holders of mortgages taking possession following foreclosure, the purchaser successfully claimed that they had converted the equipment because it retained its chattel nature. Taggart JA stated (at 714-15):

[R]elative to its size the degree of annexation was not great. While some time and effort would be required it would be quite feasible to remove the component parts of the manufacturing equipment and install them in another building. There was, however, a sufficient degree of annexation to satisfy the second principle referred to…in Stack v. T. Eaton Co… .

As to the object of the annexation…the evidence shows that such annexation as there was was for the better use of the equipment to manufacture concrete blocks and not for the better use of the realty.

La Salle Recreations Ltd. v. Canadian Camdex Investments Ltd., (1969), 4 D.L.R. (3d) 549 (B.C.C.A.)

“permanent” is less than forever

McFarlane J found that although the degree of annexation of wall-to-wall carpeting in a hotel was slight, the object of the annexation was the better and more effective use of the building as a hotel and not the better use of the goods as goods, with the result that the carpeting and accessories constituted fixtures. In commenting (at 554-55) on the use of the word “permanent” in Haggert v. Town of Brampton, he stated:

Special attention must be given to the use of the word “permanent” in this context. I note the word is used in contradistinction to “occasional”. When used with reference to affixing or annexing chattels to realty I cannot believe that “permanent”, a relative term, means remaining in the same state and place forever or even for an indefinitely long period of time. Especially must this be so where the chattels being considered are subject to wear and tear through use … In my opinion the word “permanent”, as used by King J. should be interpreted for the purposes of this appeal as indicating the object of having the carpeting remain where it is so long as it serves its purpose.

Words and Phrases

Re City of Ottawa v. Ottawa Electric Railway Co., [1922] O.J. No. 189, 52 O.L.R. 664 (Supreme Court, App. Div’n)

equipment intended for use as machines

The taxpayer, which operated a tramway system in Ottawa, was assessed for mujnicipal taxes on its plant used for producing electricity, transformers (in sub-stations) for converting alternating current into direct electricity, and other incidental equipment. In finding inter alia that the equipment was exempted as personal property, Rose J stated (at para. 21):

If the intention is to improve your land, or your house, which is part of it, as when you install a central heating plan, that is one thing; but, if the intention is to put the machine in a place where it can conveniently be used as a machine, that is quite another thing. The latter case is what we have here; and, in the absence of some authority establishing the contrary, it is my opinion that the pieces of apparatus in question have continued to be chattels.

Stack v. T. Eaton Co., [1902] O.J. No. 155 (Div. Ct.)

tests for a fixture

After reviewing the then-leading decisions (including Bain v. Brand (1876), 1 App. Cas. 762, Holland v. Hodgson (1872), L.R. 7 C.P. 328, Hobson v. Gorringe, [1897] 1 Ch. 182, and Haggert v. Town of Brampton, [1897] S.C.J. No. 73, Meredith CJ synthesized the governing principles and articulated the following five rules respecting when property was a fixture, which he characterized as "settled law":

(1) That articles not otherwise attached to the land than by their own weight are not to be considered as part of the land, unless the circumstances are such as shew that they were intended to be part of the land.

(2) That articles affixed to the land even slightly are to be considered part of the land unless the circumstances are such as to shew that they were intended to continue chattels.

(3) That the circumstances necessary to be shewn to alter the primâ facie character of the articles are circumstances which shew the degree of annexation and object of such annexation, which are patent to all to see.

(4) That the intention of the person affixing the article to the soil is material only so far as it can be presumed from the degree and object of the annexation.

(5) That, even in the case of tenants' fixtures put in for the purposes of trade, they form part of the freehold, with the right, however, to the tenant, as between him and his landlord, to bring them back to the state of chattels again by severing them from the soil, and that they pass by a conveyance of the land as part of it, subject to this right of the tenant.

Words and Phrases

Haggert v. Town of Brampton (1897), 28 S.C.R. 174, 1897 CanLII 14

objects permanently affixed to enhance the premises are fixtures

The Town of Brampton sought to recover under a mortgage held by it. The articles in question were pieces of machinery and other items located in a factory used for the manufacture of engines, threshing machines and agricultural implements. The items that were not annexed to the realty remained chattels and those that had been annexed were fixtures. King J stated (at 182):

In passing upon the object of the annexation, the purposes to which the premises are applied may be regarded; and if the object of setting up the articles is to enhance the value of the premises or improve its usefulness for the purposes for which it is used, and if they are affixed to the freehold even in a slight way, but such as is appropriate to the use of the articles, and showing an intention not of occasional but of permanent affixing, then, both as to the degree of annexation and as to the object of it, it may very well be concluded that the articles are become part of the realty, at least in questions as between mortgagor and mortgagee.

Administrative Policy

GST/HST Policy Statement P-111R, The Meaning of Sale with respect to Real Property, February 1995

Real property includes an equitable interest therein, e.g., a right to lease or an option thereto

E. Other application of sale

In the common law provinces, legal and equitable interest[s] in real property [are] specifically considered "real property" within the meaning of paragraph (b) of the definition of real property in subsection 123(1) of the Act. … The grant or transfer of the legal ownership of an equitable interest in real property may, therefore, be considered a "sale" of real property. … Where such grants or transfers are considered a "sale", the self-assessment rules of subsection 221(2) of the Act would apply.

For example, a person may grant another person an option to purchase or lease real property. The granting of such rights gives the grantee an equitable interest in the property. The consideration paid for the actual grant of the interest may be considered as being in respect of the sale of the interest where there is no consideration related to the actual use of the underlying property. …

7 April 2022 CBA Roundtable, Q.3

two annexation tests for determining whether personal property has become a fixture

CRA confirmed that since appliances and common area furniture and equipment that are acquired in connection with the construction of, say, a residential complex such as an apartment building and which do not become fixtures, will be considered to have been acquired for the purpose of the intended exempt rental of the completed units, so that no input tax credits will be available. Regarding what is a fixture, it stated:

Whether personal property has become real property is a question of fact. Generally, if property is resting on its own weight or can be easily removed with no damage, such as unplugging an appliance, it would remain personal property. When personal property is even slightly attached, one has to consider both the degree and the object of the annexation to determine if personal property has become real property:

  • The degree of annexation test generally involves the personal property being attached or connected to land or a building in a substantial manner, such as by nails or screws; the more firmly or irreversibly the personal property is affixed to the land or the building, the more likely it is to be regarded as a fixture.
  • The object of the annexation test generally involves the purpose for which the personal property is attached or connected to the land. Generally, personal property is not regarded as a fixture where it is attached or connected to land for purposes of the enjoyment of the personal property. For example, the courts have long accepted that something which is affixed merely to facilitate its display, or in order to steady it, is not to be regarded as a fixture.
Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 191 - Subsection 191(3) no ITCs for appliances acquired during the construction of a rental residential complex 201

23 March 2017 CBA Commodity Taxes Roundtable, Q.20

purchase contract was real property

In an appreciating housing market, an individual purchaser (Mr. X), whose plans have changed, assigns his purchase contract back to the builder for an amount based on the appreciation to date. CRA stated:

Generally, when a purchaser, such as Mr. X, enters into an agreement of purchase of sale for the acquisition of a newly constructed house, the purchaser, Mr. X, is acquiring an interest in real property, namely an interest in a residential complex. If Mr. X subsequently receives consideration to transfer that interest to builder (the Vendor), Mr. X would be considered to be making a sale of the interest in the residential complex.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule V - Part I - Section 2 no GST/HST should be charged on a cancellation fee paid by a new home builder to the purchaser 298
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Builder individual is a builder on assignment of new house purchase contract if original purpose was to resell house 123
Tax Topics - Excise Tax Act - Section 221 - Subsection 221(2) s. 221(2) exclusion can apply to an interest in a purchase agreement 186

GST/HST Memorandum 19.5 "Land and Associated Real Property" October 2001

Real estate options and air rights are real property, whereas supplies of density rights are not supplies of real property.

Air rights

69. Air rights are part of the bundle of rights that are owned with the land and generally relate to the access to and control of the area above the surface of a property. Rights to the control of and access to the air space above a parcel of real property constitute interests in the underlying real property and therefore, under both the common law and civil law, i.e., in all provinces of Canada, air rights constitute real property for GST/HST purposes. Accordingly, a supply by way of lease, licence or similar arrangement, of the use or right to use these rights also constitutes a supply of real property for GST/HST purposes.

Density rights

70. Density rights, on the other hand, relate to the ability to construct buildings of a particular height or "density" and are matters of municipal regulatory control. A supply of density rights does not constitute a supply of real property.

Words and Phrases
air rights density rights

GST/HST Memorandum 3.1, “Liability for Tax” (August 1999)

Distinction between real property (which includes leases thereof) and intangible personal property

Real property
ss 123(1)

56. Real property consists of land, buildings, leasehold interests in such property, and, in the Province of Quebec, immovable property and every lease thereof. The definition of real property also includes a mobile home, a floating home and any leasehold or proprietary interest therein. The term is also defined to include all other rights and interests in real property such as easements, the right under a lease or licence to use or take possession of land, and a right or option to purchase land under a contract. Therefore, the leasing of real property and the granting of a licence to use it are deemed to be supplies of real property. For purposes of Schedule IX (supply in a province) and Division IV.1 (tax on property and services brought into a participating province) only, a floating home and a mobile home that is not affixed to land are deemed to be tangible personal property and not real property. Complete information on real property is available in Chapter 19, Special Sectors: Real Property.

Intangible personal property

58. Intangible personal property includes contractual rights, options, shares in the common stock of a corporation, the right to recover a debt, intellectual property (patents, trade-marks, trade-names), and rights in relation to goods that are not in possession and other rights which may be enforced by the courts, but does not include money.

Lease, etc., of property
ss 136(1)

59. A supply by way of lease, licence or similar arrangement of the use or right to use real property or tangible personal property is deemed to be a supply of the real property or tangible personal property.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 133 s. 133 subjects advance payments to tax 108

20 February 1996 Interpretation File No. 11870-1

real property includes licences and restrictive covenants

In the course of concluding that arrangements for the use of seniors of units in a multi-unit residential complex were licences rather than leases, CRA stated:

At law, the categories of estates and other rights to real property include

  • freeholds (fee simple, fee tail, life estates),
  • leaseholds, and
  • rights that are not estates in property (easements, licences, profits à prendre, restrictive covenants and particular rights such as those pertaining to water, minerals, air space etc.).

18 January 1995 Headquarters Letter No. 11634-2

leasehold interest is real property

Before going on to find that a lease surrender by the tenant was a "sale" of real property, CRA stated:

[F]or GST purposes a leasehold interest in land is real property, unlike the position at common law, by virtue of both the definition of real property and subsection 136(1).

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Sale lease surrender is a sale 54

26 July 1994 Headquarters Letter RITS 11950-1

density rights not real property

Before indicating that a payment by a developer to a municipality in consideration for the municipality agreeing to pass a by-law allowing an increase in the height and density of the building to be located on a property represented consideration for an exempt supply under paragraph 20(c) of Part VI of Schedule V, the Directorate indicated that "Legal Services has provided their opinion that the granting of density rights does not constitute a supply of the underlying real property, but rather is a supply of a right to do something".

GST M 300-2 "Taxable Supplies" under "Supply"

The term real property includes the right under a lease or licence to use or take possession of land, and a right or option to purchase land under a contract. Definitions of tangible personal property and intangible personal property are included.


Terry G. Barnett, "The 'Dirt' on Residential Real Estate", September 2011 CICA Commodity Tax Symposium Papers

The paper includes a discussion of the assignment of a condominium purchase contract:

Equitable interest of purchaser (p.2)

Under general legal principles, once a vendor enters into an agreement for the sale of real property, the purchaser has acquired an equitable interest in the property. The purchaser is entitled to register the contract of purchase and sale against the property, and similarly, can sue the vendor for specific performance of the contract if the vendor refuses to complete the sale. ...

Disclaimer of equitable interest (p. 2)

The equitable interest that normally arises on the signing of a purchase agreement, however, is subject to the laws of contract. By contract, the vendor and purchaser may disclaim the transfer of the equitable interest that the purchaser would otherwise have in the land. Indeed, this is a common practice in many new condominium developments. An equitable interest gives a purchaser the ability to register the interest on title. In the case of a condominium building under development, financing and other commercial arrangements could be confounded by the potential registration of interests by hundreds of buyers. For this reason, in many new developments the parties contract out of the general law and disclaim any interest in real property... .If the contract contains a valid and binding disclaimer of interest in realty, what is assigned therefore is better characterized as a bundle of contractual rights, i.e. an intangible.

Paragraph (a)

Administrative Policy

ARQ Internal Interpretation 95-0110866

option on real estate is intangible personal property rather than an immovable in Quebec

A registrant (the “Vendor”) grants an assignable option with a term of 20 years on vacant land held by it to another registrant (the “Purchaser”) for consideration. The ARQ stated:

Under Quebec civil law, immovables include real rights in immovables. These real rights include usufruct, use, servitude and emphyteusis, which are dismemberments of the right of ownership (Articles 904 and 907 of the Civil Code of Québec). An option to purchase (a bilateral or unilateral promise to sell) granted on an immovable does not constitute an immovable real right but rather a personal right (being a claim of a movable nature, i.e. intangible personal property).

In this situation, subsections 221(2) and 228(4) of the federal Act cannot apply because there is a taxable supply by way of sale of intangible personal property. Consequently, it is the Vendor who must collect the GST in respect of this supply pursuant to subsection 221(1) of the federal Act.

Words and Phrases

Related Provisions

Civli Code of Quebec

Title One

Kinds of property and its appropriation

Chapter I

Kinds of property

899. Property, whether corporeal or incorporeal, is divided into immovables and movables.

900. Land, and any constructions and works of a permanent nature located thereon and anything forming an integral part thereof, are immovables.

Plants and minerals, as long as they are not separated or extracted from the land, are also immovables. Fruits and other products of the soil may be considered to be movables, however, when they are the object of an act of alienation.

901. Movables incorporated with an immovable that lose their individuality and ensure the utility of the immovable form an integral part of the immovable.

902. Integral parts of an immovable that are temporarily detached therefrom retain their immovable character if they are destined to be put back.

903. Movables which are permanently physically attached or joined to an immovable without losing their individuality and without being incorporated with the immovable are immovables for as long as they remain there and ensure the utility of the immovable.

904. Real rights in immovables, as well as actions to assert such rights or to obtain possession of immovables, are immovables.

905. Things which can be moved either by themselves or by an extrinsic force are movables.

906. Waves or energy harnessed and put to use by man, whether their source is movable or immovable, are deemed corporeal movables.

907. All other property, if not qualified by law, is movable.