The Prohibition on the Purchase of Residential Property by Non-Canadians Act 

Updated as of February 5, 2024

The ban on foreign ownership of Canadian housing, which is currently set to expire on January 1, 2025, will be extended to January 1, 2027. Foreign commercial enterprises and people who are not Canadian citizens or permanent residents will continue to be prohibited from purchasing residential property in Canada.

The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance stated 

“By extending the foreign buyer ban, we will ensure houses are used as homes for Canadian families to live in and do not become a speculative financial asset class. The government is intent on using all possible tools to make housing more affordable for Canadians across the country.”

Upon its initial announcement in 2022, the Canadian Real Estate Association (CREA) submitted a written consultation to CMHC highlighting several areas of the legislation that would have negative unintended consequences on the Canadian housing market and economy.

“The newly announced two-year extension is completely unnecessary, considering the fact there is no analysis, evidence or data from Statistics Canada, CMHC, or Finance Canada, to support the government’s intended impact on housing affordability in Canada,” said Janice Myers, CREA CEO. “If the government decides to move forward with this baseless extension, CREA urges them to consider recommendations including exempting pre-construction financing, defining and exempting recreational property, including CUSMA exemptions, and giving provinces input to tailor to their housing market requirements," she added. 

Since its implementation, CREA has questioned the impact of the ban and whether it truly had an impact on housing affordability in Canada.

While CREA supports the government’s desire for housing to be first and foremost used by Canadians, there are other policy measures that could better achieve the intended policy objective without frustrating supply increases. We believe the federal government should focus its efforts on policies that support the construction of more housing across the entire continuum.

Changes to the Act effective March 27, 2023

On March 27, the government announced changes to the Prohibition on the Purchase of Residential Property by Non-Canadians Act, which include increasing the corporation foreign control threshold and enabling those with work permits to purchase a home.

The changes to the regulations, which came into force on March 27, will expand exceptions to allow non-Canadians to purchase a residential property in certain circumstances, the government said.

“These amendments strike the right balance in ensuring that housing is used to house those living in Canada, rather than a speculative investment by foreign investors,” said Ahmed Hussen, Minister of Housing and Diversity and Inclusion.

In a press release by the government, they stated that “These amendments will further support individuals and families seeking to build a life in Canada by pursuing home ownership in their communities sooner and address housing supply issues”

The foreign homebuyer ban, which took effect on Jan. 1, blocks non-Canadians from buying residential property — either directly or indirectly — for two years. The ban carries the potential for $10,000 fines for violations.

Officially known as the Prohibition on the Purchase of Residential Property by Non-Canadians Act, the ban was meant to take some pressure off home prices amid an affordability crisis only made worse by the rising cost of living brought on by inflation and elevated interest rates.

Original post below

The Prohibition on the Purchase of Residential Property by Non-Canadians Act prevents non-Canadians from buying residential property in Canada for 2 years starting on January 1, 2023.

The Government of Canada has passed a new law to help make homes more affordable for people living in Canada. The Prohibition on the Purchase of Residential Property by Non-Canadians Act prevents non-Canadians and corporations controlled by non-Canadians from purchasing residential property in Canada for 2 years.

Key Highlights

The Prohibition on the Purchase of Residential Property by Non-Canadians Act prevents non-Canadians from buying residential property in Canada for 2 years starting on January 1, 2023.

The Act defines residential property as buildings with 3 homes or less, as well as parts of buildings like a semi-detached house or a condominium unit. The law does not prohibit the purchase of larger buildings with multiple units.

The Act has a $10,000 fine for any non-Canadian or anyone who knowingly assists a non-Canadian and is convicted of violating the Act. If a court finds that a non-Canadian has done this, they may order the sale of the house.

Please note: This does not apply to non-Canadians who are looking to rent.

Definitions Contained in the Regulations

Definition of “Non-Canadian”

The Prohibition on the Purchase of Residential Property by Non-Canadians Act applies to individuals who aren’t:

·        Canadian citizens

·        permanent residents of Canada

·        persons registered under the Indian Act.

·        The Act also applies to corporations based in Canada that are:

privately held

·        not listed on a stock exchange in Canada

·        controlled by someone who is a non-Canadian

Definition of “Residential Property”

The Prohibition on the Purchase of Residential Property by Non-Canadians Act defines residential property as buildings of up to 3 dwelling units and parts of buildings, like semi-detached houses or condominium units.

The Regulations clarify that the prohibition applies to:

·        residential property located in a census metropolitan area or a census agglomeration as outlined in greater detail below.

·        vacant land that does not contain any habitable dwelling, that is zoned for residential use or mixed-use and that is located within a census metropolitan area or a census agglomeration

Definition of “Purchase”

The Prohibition on the Purchase of Residential Property by Non-Canadians Act applies to direct or indirect purchases of residential property. This includes purchases made through vehicles such as partnerships, trusts or other entities seeking to avoid the prohibition

There are some situations where the prohibition doesn’t apply, including:

·        when somebody acquires an interest in a residential property resulting from a divorce, separation, gift, or death

·        the rental of a dwelling unit to a tenant for the purpose of its occupation by the tenant

·        when the transfer is resulting from the exercise of a security interest or secured right by a secured creditor

Definition of “Control”

For the purposes of the prohibition vis a vis privately held corporations controlled by a non-Canadian or an entity formed under the laws of Canada or a province and controlled by a non-Canadian, the Regulations define “control” as:

·        direct or indirect ownership of shares or ownership interests of the corporation or entity representing 3% or more of the value of the equity in it, or carrying 3% or more of its voting rights, or

·        control in fact of the corporation or entity, whether directly or indirectly, through ownership, agreement or otherwise

EXEMPTIONS

The Act and Regulations provide exceptions for the following persons:

Temporary residents studying in Canada, if they:

·        are enrolled in a program of authorized study at a designated learning institution as defined in the Immigration and Refugee Protection Regulations

·        have filed income tax returns for each of the 5 taxation years preceding the year in which the purchase was made

·        have been physically present in Canada for a minimum of 244 days in each of the 5 calendar years preceding the year in which the purchase was made

·        have not previously purchased a residential property in Canada while the prohibition is in effect

·        purchase a property for a price not exceeding $500,000

Temporary residents working in Canada, if they:

·        hold a valid work permit or are authorized to work in Canada

·        have worked full-time in Canada for at least 3 years within the 4 years preceding the year in which the purchase was made

·        have filed income tax returns for 3 of the 4 taxation years preceding the year in which the purchase was made

·        have not previously purchased a residential property in Canada while the prohibition is in effect

Refugees, if they:

·        have been given refugee protection or are a protected person under the Immigration and Refugee Protection Act, 2001

Refugee claimants and individuals fleeing international crises, if they:

·        have made a claim for refugee protection in accordance with the Immigration and Refugee Protection Act, if that claim has been found eligible and referred to the Refugee Protection Division; or

·        have received temporary resident status in accordance with the Immigration and Refugee Protection Act based on humanitarian public policy considerations to provide a haven to those fleeing conflict

Accredited members of foreign missions in Canada, if they:

• hold a passport that has a valid diplomatic, consular, official, or special representative acceptance issued by the Chief of Protocol of Canada
• Non-Canadian spouses and common-law partners, if they:

purchase residential property in Canada with their spouse or common-law partner who is a Canadian citizen, a person registered under the Indian Act, a permanent resident or a non-Canadian for whom the prohibition does not apply.

Section 35 Rights – Indigenous People and Communities

The Regulations clarify that the prohibition doesn’t apply if it conflicts with the rights recognized and affirmed by Section 35 of the Constitution Act, 1982.

Section 35 recognizes and affirms the existing Indigenous and treaty rights of Indigenous peoples of Canada. These may include ownership rights to land, rights to occupy and use lands and resources, land to be set aside for First Nation use only, self-government rights and cultural and social rights.

Exceptions for certain types of property

The Regulations include an exception for any residential property found outside of a Census Metropolitan Area or Census Agglomeration as identified in Statistics Canada’s Standard Geographical Classification 2021.

Both Census Metropolitan Areas and Census Agglomerations are formed by 1 or more adjacent municipalities centered on a population centre, or the core.

A Census Metropolitan Area must have a total population of at least 100,000 of which 50,000 or more must live in the core and a Census Agglomeration must have a core population of at least 10,000.

Whether a residential property is located within a Census Metropolitan Area (CMA) or a Census Agglomeration (CA) can be determined by accessing the Standard Geographical Classification (SGC) reference maps. More detailed maps of CMAs and certain CAs are also available by accessing Statistics Canada’s Census Tract reference maps. Statistics Canada has also created an interactive mapping tool that could help determine if a specific residential property is part of a CMA or CA.

Frequently Asked Questions

Q. When will the Prohibition on the Purchase of Residential Property by Non-Canadians Act come into force?

January 1, 2023. The prohibition will be in effect for a period of 2 years.

Q. Who does the Prohibition on the Purchase of Residential Property by Non-Canadians Act apply to?

The Prohibition on the Purchase of Residential Property by Non-Canadians Act applies to:

an individual who isn’t a:

·        Canadian citizen

·        Permanent resident of Canada

·        person registered under the Indian Act

corporations based in Canada that are:

·        privately held

·        not listed on a stock exchange in Canada

·        controlled by someone who is a non-Canadian

·        entities formed under the laws of Canada or any Canadian province that are controlled by someone who is not from Canada

·        an entity formed otherwise than under the laws of Canada or a province

·        Certain exceptions for specific groups of non-Canadians are outlined in the Regulations.

Q. How is residential property defined for the purposes of the Prohibition on the Purchase of Residential Property by Non-Canadians Act?

The Prohibition on the Purchase of Residential Property by Non-Canadians Act defines residential property as buildings of up to 3 dwelling units and parts of buildings, like semi-detached houses or condominium units. The Act doesn’t prohibit the purchase of larger, multi-unit buildings.

The Regulations clarify that the prohibition applies to:

·        residential property located in a census metropolitan area or a census agglomeration

·        vacant land that does not contain any habitable dwelling, that is zoned for residential use or mixed-use and that is located within a census metropolitan area or a census agglomeration

Q. What kinds of purchases does the Prohibition on the Purchase of Residential Property by Non-Canadians Act apply to?

The Prohibition on the Purchase of Residential Property by Non-Canadians Act applies to direct or indirect purchases of residential property. This includes purchases made through vehicles such as partnerships, trusts or other entities seeking to avoid the prohibition.

There are some situations where this doesn’t apply:

·        when somebody acquires an interest in a residential property because of a divorce, separation, gift, or death

·        when a dwelling unit is rented to a tenant who will occupy the unit

·        when the transfer is resulting from the exercise of a security interest or secured right by a secured creditor

Q. How is “control” defined for the purposes of the prohibition vis a vis privately held corporations controlled by a non-Canadian or an entity formed under the laws of Canada or a province and controlled by a non-Canadian?

The Regulations define “control” as:

·        direct or indirect ownership of shares or ownership interests of the corporation or entity representing 3% or more of the value of the equity in it, or carrying 3% or more of its voting rights, or

·        control in fact of the corporation or entity, whether directly or indirectly, through ownership, agreement or otherwise

Q. What groups of people does the Prohibition on the Purchase of Residential Property by Non-Canadians Act not apply to?

The Act and Regulations provide exceptions for the following persons:

Temporary residents studying in Canada, if they:

·        are enrolled in a program of authorized study at a designated learning institution as defined in the Immigration and Refugee Protection Regulations

·        have filed income tax returns for each of the 5 taxation years preceding the year in which the purchase was made

·        have been physically present in Canada for a minimum of 244 days in each of the 5 calendar years preceding the year in which the purchase was made

·        have not previously purchased a residential property in Canada while the prohibition is in effect

·        purchase a property for a price not exceeding $500,000

Temporary residents working in Canada, if they:

·        hold a valid work permit or are authorized to work in Canada

·        have worked full-time in Canada for at least 3 years within the 4 years preceding the year in which the purchase was made

·        have filed income tax returns for 3 of the 4 taxation years preceding the year in which the purchase was made

·        have not previously purchased a residential property in Canada while the prohibition is in effect

Refugees, if they:

·        have been given refugee protection or are a protected person under the Immigration and Refugee Protection Act

·        Refugee claimants and individuals fleeing international crises, if they:

·        have made a claim for refugee protection in accordance with the Immigration and Refugee Protection Act, if that claim has been found eligible and referred to the Refugee Protection Division; or

·        have received temporary resident status in accordance with the Immigration and Refugee Protection Act based on humanitarian public policy considerations to provide a safe haven to those fleeing conflict

Accredited members of foreign missions in Canada, if they:

·        hold a passport that has a valid diplomatic, consular, official, or special representative acceptance issued by the Chief of Protocol of Canada

·        Non-Canadian spouses and common-law partners, if they:

·        purchase residential property in Canada with their spouse or common-law partner who is a Canadian citizen, a person registered under the Indian Act, a permanent resident or a non-Canadian for whom the prohibition does not apply.

Q. Does the Prohibition on the Purchase of Residential Property by Non-Canadians Act apply to Indigenous Peoples and communities?

The Regulations clarify that the prohibition doesn’t apply if it conflicts with the rights recognized and affirmed by Section 35 of the Constitution Act, 1982.

Section 35 recognizes and affirms the existing Indigenous and treaty rights of Indigenous peoples of Canada. These may include ownership rights to land, rights to occupy and use lands and resources, land to be set aside for First Nation use only, self-government rights and cultural and social rights.

Q. What types of residential property does the Prohibition on the Purchase of Residential Property by Non-Canadians Act not apply to?

The Regulations include an exception for any residential property found outside of a Census Metropolitan Area or Census Agglomeration as identified in Statistics Canada’s Standard Geographical Classification 2021.

Both Census Metropolitan Areas and Census Agglomerations are formed by 1 or more adjacent municipalities centered on a population centre, or the core.

A Census Metropolitan Areas must have a total population of at least 100,000 of which 50,000 or more must live in the core and a Census Agglomeration must have a core population of at least 10,000.

Whether a residential property is located within a Census Metropolitan Area (CMA) or a Census Agglomeration (CA) can be determined by accessing the Standard Geographical Classification (SGC) reference maps. More detailed maps of CMAs and certain CAs are also available by accessing Statistics Canada’s Census Tract reference maps. Statistics Canada has also created an interactive mapping tool that could help determine if a specific residential property is part of a CMA or CA.

Q. What documentation can be used by non-Canadians to demonstrate that they are compliant with the Prohibition on the Purchase of Residential Property by Non-Canadians Act?

The following documents can be used to demonstrate compliance with the Prohibition on the Purchase of Residential Property by Non-Canadians Act:

·        work or study permit

·        verification of status issued by Immigration, Refugees and Citizenship Canada

·        other documents that show they live in Canada (for example, rental agreements, utility bills, or records of travel in and out of the country)

Q. What happens if a non-Canadian violates the Prohibition on the Purchase of Residential Property by Non-Canadians Act?

The Prohibition on the Purchase of Residential Property by Non-Canadians Act provides that a breach of the prohibition is a criminal offence. Under this framework, enforcement of the Act relies on the expertise and discretion of justice system professionals, including investigators, independent prosecutors and ultimately, the courts.

This law imposes a fine for people who violate the prohibition. Non-Canadians that violate the prohibition, or any person or entity that knowingly helps, can be fined up to $10,000.

If a non-Canadian is convicted of breaking the law, their property can be sold. Any court-ordered sale will result in the non-Canadian receiving no more than the price paid to purchase the residential property.

The Act also establishes that, if a corporation or entity commits an offence, officers, directors, senior officials and other representatives of the corporation or entity can be a party to and liable for the offence.

Q. Do third parties, like real estate agents or lawyers, have a role in enforcing the Prohibition on the Purchase of Residential Property by Non-Canadians Act?

It is the responsibility of non-Canadian buyers themselves to ensure they are eligible to purchase a residential property while the Prohibition on the Purchase of Residential Property by Non-Canadians Act is in force.

The Act provides industry professionals with the flexibility to manage compliance within their respective circumstances and does not impose information collection, processing or reporting requirements for lawyers, notaries, real estate agents or other professionals.

It is for these professionals to determine what, if any, measures may be required for them to meet their professional responsibilities and duties to their clients.

Disclaimer

The information is for general guidance only and is not to be construed as legal or other professional advice. It should not be used as a substitute for consultation with legal or other competent advisers. Before making any decision or taking any action, you should consult your lawyer.

Assist 2 Sell is not responsible for any errors or omissions in connection with the use of this information. All information is provided as a courtesy with no guarantee of completeness or accuracy.

Assist 2 Sell won’t be liable to you or anyone else for any decision made or action taken in reliance of the information provided here.

Sources:

CMHC: https://www.cmhc-schl.gc.ca/en/media-newsroom/notices/2022/ensuring-housing-owned-canadians

Government of Canada: https://laws-lois.justice.gc.ca/eng/acts/P-25.2/page-1.html