The Prohibition on the Purchase of Residential Property by Non-Canadians 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 . In this blog post we will summarize this Act and inform you on how it will affect foreign buyers in Canada. Please note that this blog post shall not be taken as legal advice and is intended to act as a general guideline. If you require advice, please feel free to reach to us directly by phone or email.


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 all residential real estate purchases by non-Canadians.


The ban applies a broad definition to residential property, which includes everything from detached homes and condominiums to cottages and recreational land. The government restricted these sales as of January 1, 2023.


Additional exemptions were clarified in the Prohibition on the Purchase of Residential Property by Non-Canadians Regulations, which were revealed on December 21, 2022. 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 controlled 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:
    • 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;
    • 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;
    • the purchase price of the residential property does not exceed $500,000; and
    • 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:
    • they worked in Canada for a minimum period of three years within the four years preceding the year in which the purchase was made, if the work is full-time work (at least 30 hours per week);
    • they filed all required income tax returns under the Income Tax Act for a minimum of three of the four taxation years preceding the year in which the purchase was made; and
    • they have not purchased more than one residential property;
  • Other classes of persons including:
    • 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;
    • 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
    • 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:
    • 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; or
    • the transfer resulting from the exercise of a security interest or secured right by a secured creditor.

    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.

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