Understanding the Federal Prohibition on the Purchase of Residential Property by Non-Canadians in Canada
As of January 1, 2023, the Government of Canada enacted the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”), which placed a temporary two-year ban on non-Canadians from directly or indirectly purchasing residential property in Canada. The ban has been put in place for the purpose of making homes more affordable for Canadian citizens amid the housing prices skyrocketing during the Covid-19 pandemic and the rising interest rates. On March 27, 2023, the regulations of the Act were amended to increase support for individuals, families, and businesses seeking to contribute to Canada’s housing supply. These amendments will be discussed below. For the purposes of the Act, “non-Canadian” is defined to include:
a) Individuals who are not Canadian citizens, permanent residents, or registered persons under the Indian Act;
b) Corporations not incorporated under federal or provincial laws;
c) Canadian federal or provincial corporations not listed on a Canadian stock exchange for which a designation under 262 of the Income Tax Act is in effect and is controlled by a non-Canadian referred to in paragraph (a) or (b) as set out above; and
d) Prescribed persons or entities.
Following the amendments made to the regulations of the Act, the definition of a prescribed person or entity now includes:
a) Entities that are not formed under Canadian federal or provincial law; and
b) Entities that are formed under Canadian federal or provincial law that do not have shares or ownership interests listed on a Canadian stock exchange for which a designation under 262 of the Income Tax Act is in effect and which is controlled by a prescribed entity referred above in paragraph (a) or any person referred in paragraph (a), (b), or (c) of the definition of non-Canadians. Following the amendments to the regulations of the Act, the threshold of control regarding privately held corporations or privately held entities formed under provincial or federal laws which are controlled by a non-Canadian has increased from 3% to 10%.
While the federal prohibition on purchasing residential property applies to all non-Canadians, the following groups are exempt from the ban and are still permitted to purchase residential property in Canada:
a) Temporary residents as defined in the Immigration and Refugee Protection Act¸ who satisfy prescribed conditions, as set out below;
b) Refugees who have been granted protected person status under section 95(2) of the Immigration and Refugee Protection Act;
c) Non-Canadians who are either married to or in a common-law relationship where their spouse is a Canadian citizen, a registered person under the Indian Act, a permanent resident, or an individual referred to in paragraphs (a) or (b) of this section and who purchase residential property with their spouse or common-law partner;
d) Persons of a prescribed class; and
e) Non-Canadians acquiring residential property for development purposes.
PRESCRIBED CONDITIONS FOR A TEMPORARY RESIDENT
The regulations of the Act provide that a temporary resident must be a student enrolled in a program authorized at a designated learning institute, as defined in section 211.1 of the Immigration and Refugee Protection Act Regulations, who: i) has filed all required income tax returns under the Income Tax Act for the five preceding tax years leading up to the year the residential property was purchased, ii) 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, iii) the purchase price of the residential property does not exceed $500,000.00, and iv) they have not purchased more than one residential property.
Following the amendments to the regulations of the Act, the restriction on temporary residents was amended to allow individuals who hold a work permit, as defined in section 2 of the Immigration and Refugee Protection Act, or are authorized to work in Canada under section 186 of its regulations to purchase a residential property if: i) their work permit or work authorization is valid for at least another 183 days at the date of purchase, and ii) they have not purchased more than one residential property.
PERSONS OF A PRESCRIBED CLASS
In addition to temporary residents, the Act exempts persons of a prescribed class from the ban on non-Canadians purchasing residential property in Canada. The regulations of the Act state that the following individuals are persons of a prescribed class:
a) Foreign nationals whose passport contains a valid diplomatic, consular, official or special representative acceptance that has been issued by the Chief of Protocol for the Department of Foreign Affairs, Trade, and Development;
b) Foreign nationals who hold valid temporary resident status, whose temporary resident visa or temporary resident status was issued or granted in accordance with an exemption under section 25.2 of the Immigration and Refugee Protection Act, if in the opinion of the Minister, the exemption is congruent with public policy considerations to providing a safe haven to individuals fleeing conflict; and
c) Individuals who have made a section 99(3) refugee protection claim under the Immigration and Refugee Protection Act and if under section 100(1) of the Immigration and Refugee Protection Act, the individual’s claim has been found eligible and referred to the Refugee Protection Division.
The amendments to the regulations of the Act added to the list of exemptions, non-Canadians acquiring residential property for development purposes. At the time this article was written in April 2023, the Government of Canada has not defined for the purposes of the Act what is considered “development”.
OTHER AMENDMENTS TO THE REGULATIONS
In addition to the above-mentioned amendments to the regulations, section 3(2) of the Act was repealed, removing vacant land within a census agglomeration or census metropolitan area that is zoned for residential or mixed-use from the definition of “residential property” within the Act. This now permits non-Canadians to purchase vacant land that is zoned for residential and mixed-use for residential development purposes.
If you are unsure whether you fall under one of the exemptions as set out above, you can contact our law firm and we will assess based on your situation if the Act may apply to you.
If you are a non-Canadian looking to purchase property in Ontario, contact us today to set up an initial consultation where a member of our real estate law team will answer any questions you may have about purchasing a property in Ontario.
The information contained in this article is not to be construed as legal advice. The content is drafted and published only for the purpose of providing the public with general information regarding various real estate and business law topics. For legal advice, please contact us.
About the Author:
Shahriar Jahanshahi is the founder and principal lawyer at Jahanshahi Law Firm with a practice focus on representing business star-ups and investors in the province of Ontario. For further information about Shahriar Jahanshahi, click here.