On January 1, 2023, the federal Prohibition on the Purchase of Residential Property by Non-Canadians Act came into force, with additional amendments occurring in late March, 2023. The Act itself prohibits non-Canadians from purchasing, either directly or indirectly, any residential property in Canada. The Federal Government imposed the ban in the hopes of cooling the housing market, particularly in British Columbia and Ontario.
Who is a “non-Canadian”?
Non-Canadians are individuals who are neither Canadian citizens, permanent residents, nor persons registered as Indians under the Indian Act.Non-Canadians also include two types of corporations. Firstly, corporations that were incorporated outside of Canada (i.e., a foreign corporation). Secondly, corporations that were (1) incorporated in Canada but are controlled by either a foreign corporation or a non-Canadian individual, and (2) the corporation’s shares are not listed on a stock exchange in Canada. “Control” for the purposes of the Act is defined direct or indirect ownership of shares or ownership interests of the corporation or entity representing 10% or more of the value of the equity in it or carrying 10% or more of its voting rights. It is interesting to note that the current 10% control threshold was amended in March from the initial control threshold of 3%.
What is “residential property”?
Under the Act, “residential property” includes:
- Detached houses with no more than three units;
- Semi-detached houses;
- A row-house unit;
- A residential condominium; and
- Land zoned for residential or mixed-use is no longer defined as residential property under the March amendments, although the initial January statute did provide land that that does not contain any habitable dwelling and is located in either a census agglomeration area or a census metropolitan area was initially included.
Are there any exceptions?
Yes, there are several exceptions under the Act. The Act does not apply to persons or corporations that entered into agreements to buy residential property before the Act came into force on January 1, 2023. Temporary residents who are students may purchase one residential property for not more than $500,000.00 if for the last five years they have both (1) filed taxes in Canada and (2) have been almost exclusively present in Canada. As well, temporary residents who are authorized to work in Canada may purchase one residential property if for three of the last four years they have both (1) worked full-time in Canada and (2) filed taxes in Canada. More recent exceptions in March of this year also provided that individuals holding foreign work permits could purchase homes, vacant land was also exempted, while land acquired by a non-Canadian for the purposes of development was also exempted.
Persons who are the spouse or common-law partner of a Canadian citizen are exempted. Persons with refugee protection status under the Immigration and Refugee Protection Act are also exempted. Persons who receive an interest in a residential property by inheritance, divorce, separation, or a gift may also be exempt.
What are the consequences of breaching the Act?
Every non-Canadian, individual or corporation, who breaches the Act may be fined up to $10,000.00. For corporations, their directors or senior officials may be liable. As well, anyone who assisted with the purchase may also be fined up to $10,000.00. While a breach of the Act will not affect the validity of an agreement to purchase a residential property, the court may order that the property be sold. If a court orders the sale of the property, the non-Canadian will not receive any profit: they will receive at most what they paid for the property.
By Jessie Bakker
Note: This article provides general commentary and is in no way intended to replace the need to consult with a legal professional concerning the specific circumstances of your situation. This article should not be construed or relied upon as legal advice.
