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

 
 

Starting January 1, 2023, non-Canadians will be prohibited from purchasing residential real estate in Canada for a period of two years under the newly enacted Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”).

The Act prohibits the purchase of residential property in Canada by non-Canadians unless they are exempted by the Act or its regulations, or the purchase is made in certain circumstances specified in the regulations.

This new legislation will remain in force for two years and is part of the government of Canada's response to soaring housing prices across the country.

Who will be deemed “non-Canadian”

The Act will apply to:

  • Individuals who are not Canadian citizens or permanent residents of Canada;

  • Corporations that are not incorporated in Canada;

  • Corporations controlled within the meaning of the Future Regulations by foreign corporations or individuals who are not Canadian citizens or permanent residents of Canada. The threshold would be: (1) direct or indirect ownership of 3% or more of the value of equity or voting rights of a corporation, or (2) control in fact.

  • Other persons and entities set out in the Future Regulations

The prohibition applies to direct or indirect purchases of residential property, including purchases made through corporations, trusts or other legal entities.

Please note that certain key components of the Ban have yet to be determined and will be subject to additional regulations (the “Anticipated Regulations”) expected later this year.

 The Act will not apply to:

  • Canadian citizens;

  • permanent residents of Canada; or

  • companies incorporated in Canada that are not controlled by non-Canadians.

Transactions Impacted

  • Purchase of a detached house or similar building containing not more than three dwelling units.

  • Purchase of a part of a building that is a semi-detached house, rowhouse unit, residential condominium unit, or similar premises that is intended to be owned apart from any other unit in the building.

  • to be determined – no decision as of yet:

    • Purchase of vacant land zoned for residential or mixed-uses in a Census Metropolitan Area or Census Agglomeration would constitute residential property for the purpose of the Act.

    • Purchase of recreational properties outside of Census Metropolitan Areas or Census Agglomeration would not be considered residential property.

Time Period

The prohibition will be in affect for two years: January 01, 2023 to January 01, 2025

Penalties

Anyone who “knowingly…counsels, induces, aids or abets” in a contravention of the Act by a non-Canadian, or attempts to do so, is guilty of an offence and liable on summary conviction to a fine of up to CA$10,000.

  • People who have knowingly assisted in a contravention of the Act may be subject to penalties

Exemptions

  • Refugees

  • Individuals who purchase residential property with their spouse or common-law partner if the spouse or common-law partner is eligible to purchase residential property in Canada

  • Temporary residents in Canada who satisfy conditions prescribed in the Future Regulations.

  • TBD foreign workers (work permit/student permit) who meet specified criteria might be eligible.

  • Other classes TBD.

Next Steps

People participating in the residential real estate market may wish to consider whether purchase and sale contracts ought to include protective provisions, such as representations and warranties from purchasers regarding whether they are non-Canadians under the Act, restrictions on assignments to non-Canadians, and other remedies (for example, indemnities or termination rights) that apply if the purchaser is a non-Canadian. 

 

If you wish to obtain further particulars of this prohibition, we recommend seeking legal advice.

You can reach out to Wilson Rasmussen LLP’s real estate department if you would like assistance with any real estate matter.

 
 
Property DevelopmentStudio Lothair