Every private real estate Limited Partnership (LP) in Canada carries the same line: open to accredited investors only. The phrase appears on offering pages, in subscription agreements, and in every conversation between an issuer and a prospective investor. It is also one of the most-searched and least-explained terms in Canadian private markets.
This article explains what the term actually means, where it comes from, which tests most individuals qualify under, how status is verified when you subscribe, and why the entire category of single-asset real estate LPs depends on it.
The definition lives in NI 45-106
Canadian securities law starts from a simple default: a business that wants to raise money from the public must file a prospectus - a long, regulator-reviewed disclosure document - before selling securities. National Instrument 45-106 (NI 45-106), adopted by the Canadian Securities Administrators and in force in every province and territory, defines the exemptions from that default.
The most heavily used of those is the accredited investor exemption. It allows an issuer to sell securities without a prospectus, provided every purchaser meets one of the financial tests in the instrument’s definition of “accredited investor.” The logic is straightforward: investors above certain income or asset thresholds are presumed able to withstand the loss of their investment, obtain professional advice, and evaluate an offering from the disclosure the issuer provides directly.
A distribution made under this exemption is called an exempt distribution, and the market built on it - private placements, real estate LPs, private funds - is the exempt market.
The three tests most individuals qualify under
The accredited investor definition contains a long list of categories, most of which cover institutions: banks, pension funds, registered advisers, governments. For individuals, three tests do almost all of the work.
| Test | Threshold | Notes |
|---|---|---|
| Income | Over $200,000 CAD net income before taxes in each of the two most recent calendar years, or over $300,000 CAD combined with a spouse | Must reasonably expect to exceed the same threshold in the current year |
| Financial assets | Over $1,000,000 CAD in net financial assets, alone or with a spouse | Cash, securities, and deposits, net of related liabilities. Real estate is excluded |
| Net assets | At least $5,000,000 CAD in net assets | All assets minus all liabilities. A principal residence counts here |
Two details trip people up more than any others.
First, the income test is two years of history plus a current-year expectation. A single strong year does not qualify. A new partner at a firm whose income crossed $200,000 CAD this January qualifies in two years, not today.
Second, the financial asset test excludes real estate entirely. A household with a $2,000,000 CAD home and $400,000 CAD in investments does not meet the $1,000,000 CAD financial asset test. It may meet the $5,000,000 CAD net asset test if total assets minus total liabilities clear that bar, but most households in that position qualify, if at all, on income.
There is one more tier worth knowing: individuals with more than $5,000,000 CAD in financial assets sit in their own category within the definition. The practical difference is procedural - they are not required to sign the risk acknowledgement form described below.
The thresholds are not indexed to inflation. They sit where the instrument set them, which means the population of accredited households grows every year as nominal incomes and portfolios rise.
How accreditation is verified
There is no accreditation card and no central registry. Verification happens at the point of subscription, and the burden sits with the issuer.
In practice, a subscription package for a Canadian real estate LP includes three things on this point. The investor identifies which category of the definition they meet, in a representation within the subscription agreement. The issuer collects enough supporting detail to make reliance on the exemption reasonable - the regulators expect more than a checked box. And most individual accredited investors sign Form 45-106F9, a two-page risk acknowledgement that states, in plain language, that the investment is risky, that the investor could lose everything, and that no regulator has reviewed the offering.
After closing, the issuer files a report of exempt distribution with the securities regulator, listing the exemption relied on for each purchaser. The system is self-certified at the investor’s end and evidenced at the issuer’s end, and an issuer that takes verification casually is telling you something about how it treats the rest of its compliance.
Why single-asset real estate LPs require it
A single-asset LP - one named property, one closed-end partnership, a defined group of limited partners - raises between roughly $1M CAD and $10M CAD in most cases. A full prospectus, with its legal, accounting, and translation costs and its months of regulatory review, does not fit a raise of that size. The accredited investor exemption is what makes the structure economically possible at all.
That cuts both ways, and it is worth being direct about the trade. Investing under the exemption means no prospectus, no regulator review of the offering, and resale restrictions on the securities - LP units cannot simply be sold to anyone. The protections that exist are the ones the structure and the issuer’s own disclosure provide: the quality of the offering documents, the governance terms of the LP agreement, and the alignment between the general partner and the limited partners. The accreditation thresholds exist because the regulator has concluded that investors above them can evaluate exactly these things.
This is why how an issuer publishes its terms matters more in the exempt market than anywhere else. There is no prospectus to fall back on. The offering documents are the disclosure.
Foreign accredited investors
The accredited investor concept is not uniquely Canadian. The United States has its accredited investor definition under Regulation D; the UK has certified high-net-worth and sophisticated investor regimes; the EU has professional client categories under MiFID II. Investors in the US, UK, EU, Switzerland, Singapore, Hong Kong, and Australia can typically subscribe to a Canadian LP through their home-jurisdiction private placement frameworks, with counsel review on both the issuer and investor side.
For real estate specifically, foreign investors should understand one structural distinction: subscribing for LP units in a Canadian Limited Partnership is a securities transaction under NI 45-106, not a direct purchase of residential property. That distinction is what keeps the pathway open under the Prohibition on the Purchase of Residential Property by Non-Canadians Act, which restricts direct foreign purchases of residential property through January 1, 2027. The full structural analysis covers how the Act and the LP structure interact, and what the cross-border subscription process looks like in practice.
How Luxara applies this
Every LUXARA/Capital and LUXARA/Estates offering is distributed under the accredited investor exemption in NI 45-106. The terms of each offering - minimum subscription, fee structure, distribution waterfall, and exit mechanics - are published before any conversation, because in the exempt market the offering documents are the disclosure. Subscription packages include the accreditation representation and, where required, Form 45-106F9. Foreign subscriptions add cross-border counsel review through Gowling WLG, with 14 to 21 days for legal package preparation against 7 to 14 days for a standard Canadian subscription.
The structure and governance behind those terms are documented on the Capital and governance pages, and the questions investors ask most often - including accreditation, subscription mechanics, and exits - are answered in the FAQ.
Common questions
What is an accredited investor in Canada? A person or entity meeting one of the financial tests in NI 45-106. For individuals: net income before taxes over $200,000 CAD in each of the two most recent years ($300,000 CAD with a spouse), net financial assets over $1,000,000 CAD, or net assets of at least $5,000,000 CAD.
What income do you need? Over $200,000 CAD net income before taxes in each of the two most recent calendar years - or over $300,000 CAD combined with a spouse - with a reasonable expectation of the same in the current year.
Does a house count toward the $1,000,000 CAD test? No. Financial assets are cash, securities, and deposits, net of related liabilities. Real estate is excluded. A home does count toward the separate $5,000,000 CAD net asset test.
Who verifies status? The issuer, at subscription: a representation of which test the investor meets, supporting detail, and for most individuals a signed Form 45-106F9 risk acknowledgement, followed by a report of exempt distribution filed with the regulator.
Can non-Canadians qualify? Often, yes - through their home-jurisdiction private placement frameworks with cross-border counsel review. See the foreign investor analysis for the full pathway.
This article describes the accredited investor definition and the prospectus-exemption framework under National Instrument 45-106 in general terms. It is not legal, tax, or financial advice, and it does not determine whether any specific person qualifies as an accredited investor; that determination is made at subscription, on the facts, with the investor’s own advisors. Luxara offerings are limited to accredited investors as defined under National Instrument 45-106. This article is for informational purposes only and does not constitute an offer to sell securities. Any offer or sale will be made only through formal subscription documents to verified accredited investors.
Sources
- National Instrument 45-106 Prospectus Exemptions (consolidated). Ontario Securities Commission. https://www.osc.ca/en/securities-law/instruments-rules-policies/4/45-106
- Companion Policy 45-106CP Prospectus Exemptions. Canadian Securities Administrators.
- Form 45-106F9 Risk Acknowledgement for Individual Accredited Investors. Canadian Securities Administrators.
- Prohibition on the Purchase of Residential Property by Non-Canadians Act. Justice Laws Canada. https://laws-lois.justice.gc.ca/eng/acts/P-25.2/page-1.html
Related on Luxara
- LUXARA/Capital - Single-asset Limited Partnership offerings distributed under the accredited investor exemption, with published terms.
- Foreign investors and Canadian real estate - How non-Canadian accredited investors subscribe to a Canadian LP.
- The third path - Why the closed-end single-asset LP cannot gate redemptions, and how the exit works.
- FAQ - eligibility and subscription - Accreditation, documentation, and timelines.