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

The recent passing of the Prohibition on the Purchase of Residential Property by Non-Canadians Act has been met with both praise and criticism.

This new legislation bans non-Canadians from purchasing residential property in Canada, except for in certain areas.

The main goal of this act is to protect the Canadian housing market from foreign speculation, which has been blamed for the rapid rise in home prices in the country. The act also aims to ensure that Canadians are able to access affordable housing and that foreign investors are not taking advantage of the Canadian housing market.

Proponents of the act argue that it will help to stabilize the housing market and prevent foreign investors from driving up prices. They also argue that it will help to protect the rights of Canadian citizens and ensure that they are not priced out of the housing market.

On the other hand, opponents of the act argue that it could have a negative impact on the economy, as foreign investors may be discouraged from investing in Canada. They also argue that it could lead to a decrease in the number of available properties, as foreign investors may choose to invest in other countries.

Overall, it remains to be seen how the Prohibition on the Purchase of Residential Property by Non-Canadians Act will affect the Canadian housing market. It is clear, however, that this act could have a significant impact on the housing market, and it is important for Canadians to be aware of the potential implications.

The main takeaway from this new law is that non–Canadians are now prohibited from purchasing residential property in Canada.

The main takeaway from this new law is that non–Canadians are now prohibited from purchasing residential property in Canada. This means that foreign investors will no longer be able to purchase real estate in Canada, including condominiums, single–family homes, and other types of residential dwellings. This law applies to all non–Canadians, including permanent residents, foreign nationals, and those with temporary status.

In addition, the law also prohibits non–Canadians from entering into a lease or rental agreement for residential property in Canada. This means that foreign investors will no longer be able to rent out properties in Canada, which could have a significant impact on the rental market.

Finally, the law also prohibits non–Canadians from acquiring an interest in residential property in Canada, either directly or indirectly. This means that foreign investors will no longer be able to purchase shares or other interests in companies that own residential property in Canada.

Overall, the Prohibition on the Purchase of Residential Property by Non–Canadians Act is a significant piece of legislation that will have a major impact on foreign investors in Canada. It is intended to protect the Canadian housing market and ensure that Canadians are able to purchase homes without competition from foreign buyers. It is a law that should be taken seriously by all foreign investors looking to purchase residential property in Canada.

DEFINING THE PARAMETERS OF THE ACT

A “non-Canadian” is defined in the Act and Regulations as:

a) an individual who is not a Canadian citizen, not a person registered as an Indian under the Indian Act, and not a person identified as a permanent resident;
b) a corporation that is incorporated otherwise than under the laws of Canada or a province;
c) a corporation incorporated under the laws of Canada or a province whose shares are not listed on a stock exchange in Canada for which a designation under section 262 of the Income Tax Act is in effect and that is controlled by a person referred to in paragraph (a) or (b);
d) an entity formed otherwise than under the laws of Canada or a province; and
e) an entity formed under the laws of Canada or a province and controlled by an entity referred to in paragraph (d) of this definition or controlled by a person referred to in paragraph (a), (b) or (c) of this definition.

A “residential property” is defined in the Act and Regulations as any real property or immovable located within a census agglomeration or census metropolitan area and that is:

a) a detached house or similar building containing not more than three dwelling units;
b) a part of a building that is a semi-detached house, rowhouse unit, residential condominium or other similar premises that is intended to be a separate parcel or other division of real property; and
c) land that does not contain any habitable dwelling and is zoned for residential use or mixed use.

A “purchase” is defined in the Regulations as the acquisition, with or without conditions, of a legal or equitable interest or a real right in a residential property but does not include:

a) the acquisition by an individual of an interest or a real right resulting from death, divorce, separation or a gift;
b) the rental of a dwelling unit to a tenant for the purpose of its occupation by the tenant;
c) the transfer under the terms of a trust that was created prior to the coming into force of the Act; or
d) the transfer resulting from the exercise of a security interest or secured right by a secured creditor.

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EXCEPTIONS

Subject to conditions set out in the Act and Regulations, the prohibition on the purchase of residential property will not apply to refugees, temporary residents, protected persons under the Immigration and Refugee Protection Act, foreign diplomats, and other groups as stated in the Act and Regulations.

The prohibition on the purchase of a residential property will also not apply if the non-Canadian assumed liability for the residential property under an agreement of purchase and sale prior to January 1, 2023.

PENALTIES

A non-Canadian that contravenes the prohibition against purchasing residential property within the Act, and any person that knowingly counsels, induces, aids, or abets them to do so, or attempts to, is liable on summary conviction to a fine of not more than $10,000.00.

Professionals who assist in the purchase and sale of property in Canada, such as lawyers, brokers, developers, realtors, and others, should make appropriate inquiries as to whether any purchasers are non-Canadian so as to avoid being liable under the Act.

If a corporation or entity commits an offense, any of the following persons that directed, authorized, assented to, acquiesced in, or participated in the commission of the offense is liable for the offense:

a) an officer, director or agent or mandatary of the corporation or entity;
b) a senior official of the corporation or entity;
c) any individual authorized to exercise managerial or supervisory functions on behalf of the corporation or entity.¹³

While the Act punishes contravention, it does not void or invalidate the sale of the residential property to which the contravention relates.¹⁴ Therefore, enforcement of the Act will not relieve a party of its contractual obligations relating to the sale of the contravening residential property. However, if a non-Canadian contravenes the Act, the residential property in question may be sold by the superior court of the province in which the residential property is located, in the manner prescribed by the Act and Regulations.¹⁵

LOOKING AHEAD

In addition to the federal ban, provincial and/or municipal taxes on vacant homes or land speculation are also in effect as of January 1, 2022, and federal tax changes for residential property flipping are in effect as of January 1, 2023. Furthermore, the Non-Resident Speculation Tax, which applies throughout the entire province of Ontario and includes a 25% tax on non-resident purchases of residential homes, is implemented under the Land Transfer Tax Act, R.S.O. 1990, c. L.6. While these efforts may have the desired effect, it is yet to be seen.

Sources: Cassels, Goverment of Canada