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Disclaimer: This article on the foreign buyer ban in Canada is intended for the purposes of providing information only and is to be used only for the purposes of guidance. Please note this article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.
Update: March 2023
The regulations to this Act were amended as of March 27, 2023. The following amendments were made:
- Those who hold a work permit or are authorized to work in Canada under the Immigration and Refugee Protection Regulations can purchase a residential property if:
- they have 183 days or more of validity remaining on their work permit or work authorization at the time of purchase; and
- do not purchase more than one residential property.
- This no longer applies to mixed-use or vacant land.
- Private corporations can buy residential property so long as they are controlled by less than 10% by a non-Canadian.
On January 1, 2023, a new law will come into effect stating that non-Canadians cannot buy residential property for two years. This law aims to prevent foreign investors from unduly impacting the Canadian real estate market. You likely have already seen something to this effect on the news. However, it’s important to understand the more nuanced detail of this law.
This article outlines who this law does and does not apply to and what it means for real estate professionals. Of course, we welcome you to contact our office if you need any clarification.
Coming into effect – what does that mean?
Simply put, non-Canadians cannot enter into or assume purchase and sale agreements as of January 1, 2023. An agreement entered into or assumed before January 1 is valid even if the transaction closes after January 1, 2023.
What is a Non-Canadian?
The Prohibition on the Purchase of Residential Property by Non-Canadians Act identifies a non-Canadian as someone who is:
- not a Canadian citizen
- not a person registered as an Indian under the Indian Act
- not a permanent resident
- a corporation incorporated in a jurisdiction outside of Canada
- a Canadian corporation that is not publicly traded and whose shares are owned by someone who falls under 1-3 above.
Let’s explain that last point a bit further. To illustrate, imagine a holding corporation that wants to buy an investment property. Four shareholders own shares in the corporation. Three of the shareholders are Canadian citizens; however, the fourth is not a Canadian citizen, registered under the Indian Act, or a permanent resident.
As of January 1, 2023, that corporation would be prohibited from purchasing residential property in Canada. This would remain true as long as the non-Canadian shareholder directly or indirectly owns shares in the corporation.
Who does this law not apply to?
However, the Act sets out some instances where non-Canadians may purchase residential property, namely where the purchaser is:
a. a temporary resident (as defined by the Immigration and Refugee Protection Act);
b. a protected person within the meaning of subsection 95(2) of that Act;
c. an individual who is a non-Canadian, but purchases residential property in Canada with their spouse or common-law partner. That spouse or common-law partner must be a Canadian citizen, permanent resident, person registered under the Indian Act or someone who falls under point a) or b) above.
Simply put, this allows people with strong ties to Canada to purchase a home, even if they are a non-Canadian.
Purchases by Non-Canadians
It’s worth noting that while a purchase made by a non-Canadian would be legally binding, the court can order the purchaser to sell the property at a price no higher than the purchase price.
What does this mean for real estate professionals?
Subsequently, real estate professionals, including realtors, mortgage brokers, notaries, and lawyers, must be vigilant to ensure that their transactions do not contravene the Prohibition on the Purchase of Residential Property by Non-Canadians Act. If you are a real estate professional, you may need to add some new processes, including:
- verifying that your clients are not non-Canadians;
- completing all necessary due diligence to ensure that a corporation’s shareholders comply with the requirements of the law; and
- understanding how the law applies to temporary residents and protected persons.
The Act outlines severe consequences for professionals involved in a non-compliant transaction, such as fines of up to $10,000. Real estate professionals should take the time to familiarize themselves with their legal obligations and ensure they are meeting them.
Beeksma Law and Understanding Real Estate Law
At Beeksma Law, we want to help you understand and comply with the foreign buyer ban in Canada. We provide comprehensive legal services to assist clients with all aspects of real estate transactions, including buyer representation, purchase and sale agreements, documentation review, and more.
As well we enjoy working with other professionals to make sure that everyone involved in a transaction understands their legal obligations. We provide free consultations so that you can learn more about our services and how we can help you comply with the foreign buyer ban in Canada. Contact us today to book an appointment!