The Prohibition on the Purchase of Residential Property by Non-Canadians Act prevents non-Canadians from buying residential property in Canada for 2 years starting on January 1, 2023.
The Government of Canada has passed a new law to help make homes more affordable for people living in Canada. The Prohibition on the Purchase of Residential Property by Non-Canadians Act prevents non-Canadians and corporations controlled by non-Canadians from purchasing residential property in Canada for 2 years.
Key Highlights
The Prohibition on the Purchase of Residential Property by Non-Canadians Act prevents non-Canadians from buying residential property in Canada for 2 years starting on January 1, 2023.
The Act defines residential property as buildings with 3 homes or less, as well as parts of buildings like a semi-detached house or a condominium unit. The law does not prohibit the purchase of larger buildings with multiple units.
The Act has a $10,000 fine for any non-Canadian or anyone who knowingly assists a non-Canadian and is convicted of violating the Act. If a court finds that a non-Canadian has done this, they may order the sale of the house.
Please note: This does not apply to non-Canadians who are looking to rent.
DEFINITIONS CONTAINED IN THE REGULATIONS
Definition of “Non-Canadian”
The Prohibition on the Purchase of Residential Property by Non-Canadians Act applies to individuals who aren’t:
Canadian citizens
permanent residents of Canada
persons registered under the Indian Act.
The Act also applies to corporations based in Canada that are:
privately held
not listed on a stock exchange in Canada
controlled by someone who is a non-Canadian
Definition of “Residential Property”
The Prohibition on the Purchase of Residential Property by Non-Canadians Act defines residential property as buildings of up to 3 dwelling units and parts of buildings, like semi-detached houses or condominium units.
The Regulations clarify that the prohibition applies to:
residential property located in a census metropolitan area or a census agglomeration as outlined in greater detail below.
vacant land that does not contain any habitable dwelling, that is zoned for residential use or mixed-use and that is located within a census metropolitan area or a census agglomeration
Definition of “Purchase”
The Prohibition on the Purchase of Residential Property by Non-Canadians Act applies to direct or indirect purchases of residential property. This includes purchases made through vehicles such as partnerships, trusts or other entities seeking to avoid the prohibition
There are some situations where the prohibition doesn’t apply, including:
when somebody acquires an interest in a residential property resulting from a divorce, separation, gift, or death
the rental of a dwelling unit to a tenant for the purpose of its occupation by the tenant
when the transfer is resulting from the exercise of a security interest or secured right by a secured creditor
Definition of “Control”
For the purposes of the prohibition vis a vis privately held corporations controlled by a non-Canadian or an entity formed under the laws of Canada or a province and controlled by a non-Canadian, the Regulations define “control” as:
direct or indirect ownership of shares or ownership interests of the corporation or entity representing 3% or more of the value of the equity in it, or carrying 3% or more of its voting rights, or
control in fact of the corporation or entity, whether directly or indirectly, through ownership, agreement or otherwise
EXCEPTIONS
The Act and Regulations provide exceptions for the following persons:
Temporary residents studying in Canada, if they:
are enrolled in a program of authorized study at a designated learning institution as defined in the Immigration and Refugee Protection Regulations
have filed income tax returns for each of the 5 taxation years preceding the year in which the purchase was made
have been physically present in Canada for a minimum of 244 days in each of the 5 calendar years preceding the year in which the purchase was made
have not previously purchased a residential property in Canada while the prohibition is in effect
purchase a property for a price not exceeding $500,000
Temporary residents working in Canada, if they:
hold a valid work permit or are authorized to work in Canada
have worked full-time in Canada for at least 3 years within the 4 years preceding the year in which the purchase was made
have filed income tax returns for 3 of the 4 taxation years preceding the year in which the purchase was made
have not previously purchased a residential property in Canada while the prohibition is in effect
Refugees, if they:
have been given refugee protection or are a protected person under the Immigration and Refugee Protection Act, 2001
Refugee claimants and individuals fleeing international crises, if they:
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; or
have received temporary resident status in accordance with the Immigration and Refugee Protection Act based on humanitarian public policy considerations to provide a haven to those fleeing conflict
Accredited members of foreign missions in Canada, if they:
hold a passport that has a valid diplomatic, consular, official, or special representative acceptance issued by the Chief of Protocol of Canada
Non-Canadian spouses and common-law partners, if they:
purchase residential property in Canada with their spouse or common-law partner who is a Canadian citizen, a person registered under the Indian Act, a permanent resident or a non-Canadian for whom the prohibition does not apply.
Section 35 Rights – Indigenous People and Communities The Regulations clarify that the prohibition doesn’t apply if it conflicts with the rights recognized and affirmed by Section 35 of the Constitution Act, 1982. Section 35 recognizes and affirms the existing Indigenous and treaty rights of Indigenous peoples of Canada. These may include ownership rights to land, rights to occupy and use lands and resources, land to be set aside for First Nation use only, self-government rights and cultural and social rights.
Exceptions for certain types of property
The Regulations include an exception for any residential property found outside of a Census Metropolitan Area or Census Agglomeration as identified in Statistics Canada’s Standard Geographical Classification 2021.
Both Census Metropolitan Areas and Census Agglomerations are formed by 1 or more adjacent municipalities centered on a population centre, or the core.
A Census Metropolitan Area must have a total population of at least 100,000 of which 50,000 or more must live in the core and a Census Agglomeration must have a core population of at least 10,000.
Whether a residential property is located within a Census Metropolitan Area (CMA) or a Census Agglomeration (CA) can be determined by accessing the Standard Geographical Classification (SGC) reference maps. More detailed maps of CMAs and certain CAs are also available by accessing Statistics Canada’s Census Tract reference maps. Statistics Canada has also created an interactive mapping tool that could help determine if a specific residential property is part of a CMA or CA.
FREQUENTLY ASKED QUESTIONS
Q. When will the Prohibition on the Purchase of Residential Property by Non-Canadians Act come into force?
January 1, 2023. The prohibition will be in effect for a period of 2 years.
Q. Who does the Prohibition on the Purchase of Residential Property by Non-Canadians Act apply to?
The Prohibition on the Purchase of Residential Property by Non-Canadians Act applies to:
an individual who isn’t a:
Canadian citizen
Permanent resident of Canada
person registered under the Indian Act
corporations based in Canada that are:
privately held
not listed on a stock exchange in Canada
controlled by someone who is a non-Canadian
entities formed under the laws of Canada or any Canadian province that are controlled by someone who is not from Canada
an entity formed otherwise than under the laws of Canada or a province
Certain exceptions for specific groups of non-Canadians are outlined in the Regulations.
Q. How is residential property defined for the purposes of the Prohibition on the Purchase of Residential Property by Non-Canadians Act?
The Prohibition on the Purchase of Residential Property by Non-Canadians Act defines residential property as buildings of up to 3 dwelling units and parts of buildings, like semi-detached houses or condominium units. The Act doesn’t prohibit the purchase of larger, multi-unit buildings.
The Regulations clarify that the prohibition applies to:
residential property located in a census metropolitan area or a census agglomeration
vacant land that does not contain any habitable dwelling, that is zoned for residential use or mixed-use and that is located within a census metropolitan area or a census agglomeration
Q. What kinds of purchases does the Prohibition on the Purchase of Residential Property by Non-Canadians Act apply to?
The Prohibition on the Purchase of Residential Property by Non-Canadians Act applies to direct or indirect purchases of residential property. This includes purchases made through vehicles such as partnerships, trusts or other entities seeking to avoid the prohibition.
There are some situations where this doesn’t apply:
when somebody acquires an interest in a residential property because of a divorce, separation, gift, or death
when a dwelling unit is rented to a tenant who will occupy the unit
when the transfer is resulting from the exercise of a security interest or secured right by a secured creditor
Q. How is “control” defined for the purposes of the prohibition vis a vis privately held corporations controlled by a non-Canadian or an entity formed under the laws of Canada or a province and controlled by a non-Canadian?
The Regulations define “control” as:
direct or indirect ownership of shares or ownership interests of the corporation or entity representing 3% or more of the value of the equity in it, or carrying 3% or more of its voting rights, or
control in fact of the corporation or entity, whether directly or indirectly, through ownership, agreement or otherwise
Q. What groups of people does the Prohibition on the Purchase of Residential Property by Non-Canadians Act not apply to?
The Act and Regulations provide exceptions for the following persons:
Temporary residents studying in Canada, if they:
are enrolled in a program of authorized study at a designated learning institution as defined in the Immigration and Refugee Protection Regulations
have filed income tax returns for each of the 5 taxation years preceding the year in which the purchase was made
have been physically present in Canada for a minimum of 244 days in each of the 5 calendar years preceding the year in which the purchase was made
have not previously purchased a residential property in Canada while the prohibition is in effect
purchase a property for a price not exceeding $500,000
Temporary residents working in Canada, if they:
hold a valid work permit or are authorized to work in Canada
have worked full-time in Canada for at least 3 years within the 4 years preceding the year in which the purchase was made
have filed income tax returns for 3 of the 4 taxation years preceding the year in which the purchase was made
have not previously purchased a residential property in Canada while the prohibition is in effect
Refugees, if they:
have been given refugee protection or are a protected person under the Immigration and Refugee Protection Act
Refugee claimants and individuals fleeing international crises, if they:
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; or
have received temporary resident status in accordance with the Immigration and Refugee Protection Act based on humanitarian public policy considerations to provide a safe haven to those fleeing conflict
Accredited members of foreign missions in Canada, if they:
hold a passport that has a valid diplomatic, consular, official, or special representative acceptance issued by the Chief of Protocol of Canada
Non-Canadian spouses and common-law partners, if they:
purchase residential property in Canada with their spouse or common-law partner who is a Canadian citizen, a person registered under the Indian Act, a permanent resident or a non-Canadian for whom the prohibition does not apply.
Q. Does the Prohibition on the Purchase of Residential Property by Non-Canadians Act apply to Indigenous Peoples and communities? The Regulations clarify that the prohibition doesn’t apply if it conflicts with the rights recognized and affirmed by Section 35 of the Constitution Act, 1982. Section 35 recognizes and affirms the existing Indigenous and treaty rights of Indigenous peoples of Canada. These may include ownership rights to land, rights to occupy and use lands and resources, land to be set aside for First Nation use only, self-government rights and cultural and social rights.
Q. What types of residential property does the Prohibition on the Purchase of Residential Property by Non-Canadians Act not apply to? The Regulations include an exception for any residential property found outside of a Census Metropolitan Area or Census Agglomeration as identified in Statistics Canada’s Standard Geographical Classification 2021. Both Census Metropolitan Areas and Census Agglomerations are formed by 1 or more adjacent municipalities centered on a population centre, or the core. A Census Metropolitan Areas must have a total population of at least 100,000 of which 50,000 or more must live in the core and a Census Agglomeration must have a core population of at least 10,000. Whether a residential property is located within a Census Metropolitan Area (CMA) or a Census Agglomeration (CA) can be determined by accessing the Standard Geographical Classification (SGC) reference maps. More detailed maps of CMAs and certain CAs are also available by accessing Statistics Canada’s Census Tract reference maps. Statistics Canada has also created an interactive mapping tool that could help determine if a specific residential property is part of a CMA or CA.
Q. What documentation can be used by non-Canadians to demonstrate that they are compliant with the Prohibition on the Purchase of Residential Property by Non-Canadians Act?
The following documents can be used to demonstrate compliance with the Prohibition on the Purchase of Residential Property by Non-Canadians Act:
work or study permit
verification of status issued by Immigration, Refugees and Citizenship Canada
other documents that show they live in Canada (for example, rental agreements, utility bills, or records of travel in and out of the country)
Q. What happens if a non-Canadian violates the Prohibition on the Purchase of Residential Property by Non-Canadians Act? The Prohibition on the Purchase of Residential Property by Non-Canadians Act provides that a breach of the prohibition is a criminal offence. Under this framework, enforcement of the Act relies on the expertise and discretion of justice system professionals, including investigators, independent prosecutors and ultimately, the courts. This law imposes a fine for people who violate the prohibition. Non-Canadians that violate the prohibition, or any person or entity that knowingly helps, can be fined up to $10,000. If a non-Canadian is convicted of breaking the law, their property can be sold. Any court-ordered sale will result in the non-Canadian receiving no more than the price paid to purchase the residential property. The Act also establishes that, if a corporation or entity commits an offence, officers, directors, senior officials and other representatives of the corporation or entity can be a party to and liable for the offence.
Q. Do third parties, like real estate agents or lawyers, have a role in enforcing the Prohibition on the Purchase of Residential Property by Non-Canadians Act? It is the responsibility of non-Canadian buyers themselves to ensure they are eligible to purchase a residential property while the Prohibition on the Purchase of Residential Property by Non-Canadians Act is in force. The Act provides industry professionals with the flexibility to manage compliance within their respective circumstances and does not impose information collection, processing or reporting requirements for lawyers, notaries, real estate agents or other professionals. It is for these professionals to determine what, if any, measures may be required for them to meet their professional responsibilities and duties to their clients.
Q. Who was consulted during the development of the Prohibition on the Purchase of Residential Property by Non-Canadians Act and the accompanying regulations? The Government committed to bring forward a prohibition in Budget 2022 and the legislation was deliberated on in Parliament as part of the Budget Implementation Act, 2022 No. 1. Although the Regulations were exempted from pre-publication in the Canada Gazette, the federal government consulted with government and non-government stakeholders. This included publishing a detailed consultation document outlining the specific policy proposals intended for the regulations on the CMHC website for 4 weeks in August-September 2022. CMHC invited provinces and territories, Indigenous governments and organizations, industry and other partners in the housing system to comment directly on the consultation document.
Content credit to CMHC SCHL