Are you a non-Canadian individual or a corporation planning to buy a residential property in Canada?

Are you a non-Canadian individual or a corporation planning to buy a residential property in Canada?

Are you a non-Canadian individual or a corporation planning to buy a residential property in Canada?

If yes, this blog will address all your concerns and questions about the recently enacted Prohibition on the Purchase of Residential Property by the Non-Canadians Act (hereinafter referred to as the Act). However, the Act only applies to census metropolitan areas and census agglomerations, resulting in less or no direct impact on rural and recreational properties. 

The regulations that accompany the Act also provide multiple exemptions to allow non-Canadians meeting certain conditions to purchase residential properties. We outline key requirements for some exemptions in this blog below. 

Update: Read the latest amendments to regulations on non-Canadians purchasing residential property in Canada here. 

Why has the Act been enacted?

The Act is an outcome of the federal government’s response to stabilize the Canadian housing market by preventing foreign nationals (corporations and individuals) from making significant foreign investments in Canada’s residential real estate market, which in recent years raised serious concerns regarding affordability and accessibility for Canadian citizens and permanent residents. Further, to understand the intended application of the Act, it is essential to understand the meaning of expressions such as non-Canadian, residential property, purchase and control, and exemptions, if any, under the Act. 

Who is considered a non-Canadian?

Section 2 of the Act defines “non-Canadian” as follows:

  1. An individual who is not a Canadian citizen, permanent resident, or a person registered under the Indian Act;
  2. A corporation incorporated outside of Canada or a province;
  3. A corporation incorporated in Canada or a province but not listed on a Canadian stock exchange and not eligible for a designation under section 262 of the Income Tax Act and is controlled by a person defined in (a) or (b); and
  4. A prescribed individual or entity.

What is considered a residential property as per the Act?

For the purpose of the Act, a residential property refers to real estate located in Canada can include:

  1. Single-family home or similar building with three or fewer dwelling units;
  2. Unit in a semi-detached, row house, residential condo, or similar property; and
  3. Any other property prescribed by the Act.

It further includes the appurtenances and adjoining land necessary for use as a place of residence. 

The Act only affects residential properties with three or fewer dwelling units. However, residential properties in less populated areas and recreational properties like cottages, cabins, and vacation homes are exempted from the ban. 

Does acquisition constitute a purchase under the Act? 

Section 4(1) of the regulation specifies that acquiring a legal or equitable interest or real right in a residential property, with or without conditions, constitutes a “purchase.” 

The Act does not explicitly clarify whether this refers to the agreement of purchase and sale, the completion of the conveyance, or both. However, the language implies that prohibition covers both.

Additionally, acquiring control of a corporation or entity with interest in a residential property by a non-Canadian is considered a “purchase” under the Act.

However, section 4(2) of the Act provides for certain transactions that do not constitute a purchase under the Act and are mentioned below: 

  1. When someone gets a property through death, divorce, separation, or as a gift;
  2. Renting a home to someone;
  3. Transferring property through a trust set up before the law was passed; and
  4. When a creditor takes control of a property because of a debt.

Who is exempted under the Act?

The following class of people are exempted under the provisions of the Act:

  1. International students who have lived in Canada for 244 days each year for the last five years can buy one residential property for up to $500,000. The intention to become a permanent resident is a must; 
  2. Foreign workers who have worked in Canada for three of the past four years; and 
  3. Temporary residents, refugees, diplomats, consular staff and members of international organizations can purchase residential properties without additional restrictions.

If you have temporary resident status in Canada and want to know if you’re exempted under the Act, contact our experienced real estate lawyers to assess your exemption under the Act. 

What are the penalties under the Act?

The Act, though valid for two years, has penal provisions for contravening the provisions of section 4. Section 6 of the Act provides that any contravention of section 4 shall be considered an offence that can be tried summarily with a fine of not more than $10,000. The ambit of the penal provision under the Act also extends to lawyers, realtors and other professionals.

Additionally, if a non-Canadian is convicted of having contravened section 4, the Minister of Housing and Diversity and Inclusion may make an application for an order that the residential property be sold. If such an order is granted, the sale proceeds must be distributed in the following order: 

  1. The payment of the costs of the sale, including the costs incurred by the Minister in bringing the application for the order and any unpaid fines by the non-Canadian under the Act;
  2. The payment of those, other than the non-Canadian, who are entitled to receive the proceeds of the sale in amounts and according to priorities that the superior court may determine;
  3. The repayment of the non-Canadian of an amount that is not greater than the purchase price they paid for the residential property; and
  4. The payment of any amount remaining to the Receiver General for Canada.

If your residence status in Canada is temporary and you would like to know whether you can buy a residential property in Canada. Contact our team for a detailed consultation today!

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