Essay contests that offer real estate as a prize have once again been ruled illegal in Canada, after the latest contest was shut down by Alberta Justice. It's at least the third time that such contests have been deemed in contravention of the Criminal Code of Canada.

Realty Times reported in February that a hotel in Grande Prairie, Alta. with an estimated value of $1.5 million, was being offered as the grand prize in an essay writing contest. Entrants who wrote an essay and submitted it with a non-refundable cheque for $1,000, were offered a chance to win the 44-room hotel.

But the contest was shut down in March after Alberta Justice contacted organizer Cornerstone Opportunities, and told the company that under the Criminal Code of Canada, it was running an illegal lottery.

"Basically, anyone who conducts a competition like ours and offers a sum of money or property for a smaller sum of money, may be in contravention of the Canadian Criminal Code," says Dwight Logan, treasurer of Cornerstone Opportunities. In a news release, the company says, "Although Cornerstone's leadership team had undertaken an extensive due diligence process to ensure the competition met requirements from various levels of government and community officials, they did not foresee this potential legal challenge. That due diligence included legal opinions and several interviews with offices of the Alberta Gaming and Liquor Commission and members of the Royal Canadian Mounted Police (RCMP)."

A story in the Grande Prairie Daily Herald Tribune says Alberta Justice received a request from the RCMP about the contest, and after reviewing it, decided that the challenge was valid. Cornerstone decided not to pursue a legal appeal.

Essay contests that offer real estate as the prize have been common in the United States for years. A current contest offers five different prize properties in the Washington, D.C. area, ranging from a condominium to a waterfront property on the Potomac River.

An essay contest was also featured in the 1996 movie, The Spitfire Grill, which is where Logan first got the idea to try the contest in Grande Prairie. Essay contests in Canada have been shut down before. At least two such schemes in Ontario were shut down in the 1990s by the Ontario Provincial Police, for the same reasons that the Grande Prairie contest was halted. Before the recent contest was shut down, Realty Times asked Logan about the difference between the Ontario contests and the one in Grande Prairie.

"I don't think the law has changed, but what may be the difference is that we have absolutely no element of chance in this contest," Logan said. "This is a test of skill. The parallel for us is a golf tournament or a curling bonspiel, where people pay an entry fee and the best one wins a significant prize. Those contests are all legal."

Now, Logan is disappointed that despite his legal advice, the contest has been cancelled. "We believed the business model behind (the contest) was sound and potentially a great business opportunity in that it represented a new way of selling properties in Canada and allowed us to give back to the community," he says. "It's really unfortunate that we find ourselves in this position after we've put so much energy and money into getting the project off the ground."

If there's a silver lining, Logan says, it's that the contest generated positive publicity for the Grande Prairie area and the charities that would have benefited if the plan had been successful.

Some renovations are taking place at the hotel, and then Logan and his brothers, who own the property, will attempt to sell it through more traditional methods. Logan won't say how many people entered the contest, but all the entries have been returned with a full refund and a letter of apology. Cornerstone also says that all of its suppliers will be paid in full for their services.

Published: April 8, 2004

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Jim Adair is editor of REM: Canada's Real Estate Magazine, a business publication for real estate agents and brokers. He has been writing about Canadian real estate, home building and renovation issues for more than 30 years. You can contact Jim at .