On January 1, 2023, the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”) will go into effect for a period of two years. The Act prohibits “non-Canadian” persons, foreign businesses, and other parties regarded to be “non-Canadian” from directly or indirectly purchasing residential real estate. Contractual commitments made or assumed before January 1, 2023, however, will remain unaffected.
Who will be deemed “non-Canadian” under the Act?
-Individuals who are not Canadian citizens or permanent residents of Canada.
– Corporations that are not incorporated in Canada.
– Corporations “controlled” by foreign corporations or individuals who are not Canadians or permanent
residents of Canada (The Consultation Paper indicated that the threshold for "control" 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).
What types of “residential property” purchases are prohibited?
– Detached houses or similar buildings containing three dwelling units or less;
– 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;
– Other properties prescribed by future regulations (It is expected that vacant land and cottages outside of
major metropolitan areas will be exempt from the ban);
What exemptions will be available?
-Refugees;
-Permanent residents of Canada;
-Temporary residents who satisfy conditions prescribed in the future regulations (Students and foreign
workers may be eligible);
-A non-Canadian individual who buys residential property with their Canadian spouse or common law-
partner (this also applies if their spouse is a permanent resident of Canada, a person registered as an
Indian under the Indian Act, or a refugee);
How will pre-existing and future contracts be impacted?
-The prohibition does not apply where a non-Canadian becomes liable or assumes liability under a contract
of purchase and sale prior to January 1, 2023.
What are the consequences of violating the ban?
-Every person or entity who violates the prohibition, and every person or entity who knowingly helps a
non-Canadian who is subject to the prohibition buy a residential property, will be guilty of an offense and
liable to be fined up to $10,000.
-Any directors, officers, agents, senior officials, or managers of a corporation or entity that violates the
prohibition may be held personally liable if they are involved in helping a non-Canadian violate the
prohibition.
-Following a conviction for a violation of the new law, the federal government may apply to a provincial
superior court for an order requiring the property to be sold at no more than the original price.
Going forward, future regulations will most likely clarify the ambiguous elements of the prohibition.
Some legal analysts are speculating that the prohibition will be struck down and deemed unconstitutional.
Nevertheless, those in the real estate industry should brace themselves for the next two upcoming years.
Not just foreign buyers, but real estate agents, lawyers, and developers, all need to be aware of the risks
and liabilities that will be introduced to the industry with this new prohibition.
