doing business in canada - Davies Ward Phillips & Vineberg LLP

accordance with directions from the beneficiary. In such situation, the nominee has not been conferred with anyindependent discretion and becomes the agent and mandatary of the trustee.For a variety of reasons, beneficial owners of real property may wish to use a bare trustee or nominee to holdregistered title. For example, the beneficial owner may not be a legal entity that is capable of holding title in itsown name, such as a REIT. As well, when it is more convenient to have the title recorded in the name of a singleentity, the beneficial owner may be a joint venture of individual owners and/or corporations. Other advantagesare the ability to maintain the confidentiality of the beneficial owner and to transfer beneficial ownershipwithout the necessity of registering such transfer on title.REAL ESTATE INVESTMENT TRUSTS (REITS)A REIT is a special form of business trust established to consolidate the capital of a large number of investorsfor the purpose of investment in real estate, often through the direct acquisition of income-producing real estateassets. In addition to investing in income-producing properties, REITs may also buy, develop, manage, and sell awide variety of real estate assets. Investors in the trust are usually issued units, which represent an undividedbeneficial interest in the trust, and are then allocated a pro rata share of the income and losses of the trust.The REIT structure has grown in popularity over the past decade, as REITs provide a number of advantages toboth real estate companies and REIT unitholders. These include favorable tax treatment and improved taxefficiency on distributions to unitholders, improved access to equity markets for real estate companies, and agenerally stable stream of income with the potential for high yield capital growth for real estate investors.JOINT VENTURE STRUCTURESCommercial real estate properties may also be held through a joint venture structure. A joint venture is arelationship between two or more entities who have invested their assets or carry on business together in orderto realize a profit. There are several alternative joint venture structures, with the most common being jointventure corporations, partnerships, co-ownerships and co-tenancies.Joint venture corporations are generally structured such that each party holds shares in the corporation andenters into a shareholders agreement to govern the corporate relationship. Joint venture corporations enjoymany of the same advantages as corporations in general, including limited liability, ease of administration and acertainty of legal rights and obligations.A joint venture may also hold property in either a general or a limited partnership. A partnership agreement willtypically be used to govern the relationship between the persons carrying on the business and to allocate profitsand losses between the parties. One of the primary advantages of the partnership structure is its flexibility, as itallows for varied and other non-proportionate sharing of the profits and losses.Another common structure for real estate joint ventures is the tenancy in common or undivided co-ownership: arelationship between two or more parties with a direct or indirect ownership interest in property. Each co-tenantor co-owner has an undivided interest which provides an equal right to use and possession. Co-tenants or coownerswill typically enter into a co-ownership agreement which governs this relationship and the ability of eachparty to deal with its interest. Unlike the partnership structure, the parties bear no responsibility for the debts ofother co-tenants or co-owners and have no right to act as agent for any other co-tenant or co-owner. Each cotenantor co-owner is considered its own entity, and thus each co-tenant is entitled to sell or finance its interestin the joint venture property.FOREIGN OWNERSHIPPursuant to the federal Citizenship Act, a non-resident can acquire, hold and dispose of real property in thesame manner and under the same conditions as a Canadian citizen or resident. However, the provinces have theReal Estate 7