We have received many questions from clients, realtors, mortgage brokers and developers in Alberta on the Prohibition on the Purchase of Residential Property by Non-Canadians Act[1]. In this blog post we will summarize this Act and inform you on how it will affect foreign buyers in Canada.
The Act is intended to limit land speculation from foreign buyers in major city centres like Toronto and Vancouver. It seeks to accomplish this goal by imposing a two-year ban on most residential real estate purchases by non-Canadians.
The ban applies a broad definition to residential property, but does not include vacant land zoned for residential and mixed use.
Additional exemptions were clarified in the Prohibition on the Purchase of Residential Property by Non-Canadians Regulations, which were revealed on December 21, 2022 and updated on March 27, 2023. This article is up to date with all relevant exemptions in the Act and accompanying regulations.
Key Points of the Act
The ban only affects non-Canadians, who are defined as:
- Individuals who are not Canadian Citizens, Permanent Residents, or registered as an Indian under the Indian Act
- Corporations not incorporated in Canada or a Canadian Province
- Corporations not listed on a stock exchange in Canada and designated under Section 262 of the Income Tax Act – and controlled (10% ownership) by an individual that is not a Canadian Citizen, Permanent Resident or registered as an Indian under the Indian Act.
- Any person or entity set out in the supporting regulations.
Currently, there are only a few exceptions to this ban:
- Refugees
- Non-Canadians with a spouse or common-law partner that is not a non-Canadian
- International Students enrolled in a program of authorized study at a designated learning institution if:
o they filed all required income tax returns under the Income Tax Act for each of the five taxation years preceding the year in which the purchase was made;
o they were physically present in Canada for a minimum of 244 days in each of the five calendar years preceding the year in which the purchase was made;
o the purchase price of the residential property does not exceed $500,000; and
o they have not purchased more than one residential property;
- Work Permit Holders or those authorized to work in Canada under section 186 of the Immigration and Refugee Protection if:
o they have 183 days or more of validity remaining on their work permit or work authorization on the date of purchase; and
o they have not purchased more than one residential property;
- Other classes of persons including:
o foreign nationals who hold a passport that contains a valid diplomatic, consular, official or special representative acceptance issued by the Chief of Protocol for the Department of Foreign Affairs, Trade and Development;
o foreign nationals, with valid temporary resident status, whose temporary resident visa was issued, or temporary resident status was granted, following an exemption provided under public policy considerations to provide safe haven to those fleeing conflict; and
o persons that have made a claim for refugee protection in accordance with the Immigration and Refugee Protection Act, if that claim has been found eligible and referred to the Refugee Protection Division;
Additionally, the following real estate transactions are also exempt from the Act:
- vacant land zoned for residential and mixed use for any purpose;
- the acquisition by an individual of an interest or a real right resulting from death, divorce, separation or a gift;
- the rental of a dwelling unit to a tenant for the purpose of its occupation by the tenant;
- the transfer under the terms of a trust that was created prior to the coming into force of the Act;
- the transfer resulting from the exercise of a security interest or secured right by a secured creditor; or
- the acquisition by a non-Canadian of residential property for the purposes of development.
Penalties
Violating the Act can result in a fine of up to $10,000 and potentially a forced sale of the property. This fine applies not only to non-Canadians that purchase residential property, but also to any person or entity that assists (directly or indirectly) with the purchase, provided they know the purchaser is a non-Canadian.
Sellers, developers, mortgage brokers, real estate agents and lawyers should not recommend or advise non-Canadians on how to avoid the Act, or else they risk exposing themselves and their clients to this fine.
Conclusion
We understand that these restrictions placed on non-Canadians are frustrating, especially the limited exceptions for temporary residents. Unfortunately, this prohibition will remain in force until 2025.
We therefore advise that real estate agents, mortgage brokers and developers do their best to confirm that their clients are not non-Canadians or that they fall under an exemption.
If you require additional clarification on the Act, please contact our office and we will be happy to assist.
[1] Prohibition on the Purchase of Residential Property by Non-Canadians Act, SC 2022, c 10, s 235 [Act].
We have received many questions from clients, realtors, mortgage brokers and developers in Alberta on the Prohibition on the Purchase of Residential Property by Non-Canadians Act[1]. In this blog post we will summarize this Act and inform you on how it will affect foreign buyers in Canada.
The Act is intended to limit land speculation from foreign buyers in major city centres like Toronto and Vancouver. It seeks to accomplish this goal by imposing a two-year ban on most residential real estate purchases by non-Canadians.
The ban applies a broad definition to residential property, but does not include vacant land zoned for residential and mixed use.
Additional exemptions were clarified in the Prohibition on the Purchase of Residential Property by Non-Canadians Regulations, which were revealed on December 21, 2022 and updated on March 27, 2023. This article is up to date with all relevant exemptions in the Act and accompanying regulations.
Key Points of the Act
The ban only affects non-Canadians, who are defined as:
- Individuals who are not Canadian Citizens, Permanent Residents, or registered as an Indian under the Indian Act
- Corporations not incorporated in Canada or a Canadian Province
- Corporations not listed on a stock exchange in Canada and designated under Section 262 of the Income Tax Act – and controlled (10% ownership) by an individual that is not a Canadian Citizen, Permanent Resident or registered as an Indian under the Indian Act.
- Any person or entity set out in the supporting regulations.
Currently, there are only a few exceptions to this ban:
- Refugees
- Non-Canadians with a spouse or common-law partner that is not a non-Canadian
- International Students enrolled in a program of authorized study at a designated learning institution if:
o they filed all required income tax returns under the Income Tax Act for each of the five taxation years preceding the year in which the purchase was made;
o they were physically present in Canada for a minimum of 244 days in each of the five calendar years preceding the year in which the purchase was made;
o the purchase price of the residential property does not exceed $500,000; and
o they have not purchased more than one residential property;
- Work Permit Holders or those authorized to work in Canada under section 186 of the Immigration and Refugee Protection if:
o they have 183 days or more of validity remaining on their work permit or work authorization on the date of purchase; and
o they have not purchased more than one residential property;
- Other classes of persons including:
o foreign nationals who hold a passport that contains a valid diplomatic, consular, official or special representative acceptance issued by the Chief of Protocol for the Department of Foreign Affairs, Trade and Development;
o foreign nationals, with valid temporary resident status, whose temporary resident visa was issued, or temporary resident status was granted, following an exemption provided under public policy considerations to provide safe haven to those fleeing conflict; and
o persons that have made a claim for refugee protection in accordance with the Immigration and Refugee Protection Act, if that claim has been found eligible and referred to the Refugee Protection Division;
Additionally, the following real estate transactions are also exempt from the Act:
- vacant land zoned for residential and mixed use for any purpose;
- the acquisition by an individual of an interest or a real right resulting from death, divorce, separation or a gift;
- the rental of a dwelling unit to a tenant for the purpose of its occupation by the tenant;
- the transfer under the terms of a trust that was created prior to the coming into force of the Act;
- the transfer resulting from the exercise of a security interest or secured right by a secured creditor; or
- the acquisition by a non-Canadian of residential property for the purposes of development.
Penalties
Violating the Act can result in a fine of up to $10,000 and potentially a forced sale of the property. This fine applies not only to non-Canadians that purchase residential property, but also to any person or entity that assists (directly or indirectly) with the purchase, provided they know the purchaser is a non-Canadian.
Sellers, developers, mortgage brokers, real estate agents and lawyers should not recommend or advise non-Canadians on how to avoid the Act, or else they risk exposing themselves and their clients to this fine.
Conclusion
We understand that these restrictions placed on non-Canadians are frustrating, especially the limited exceptions for temporary residents. Unfortunately, this prohibition will remain in force until 2025.
We therefore advise that real estate agents, mortgage brokers and developers do their best to confirm that their clients are not non-Canadians or that they fall under an exemption.
If you require additional clarification on the Act, please contact our office and we will be happy to assist.
[1] Prohibition on the Purchase of Residential Property by Non-Canadians Act, SC 2022, c 10, s 235 [Act].