On December 23, 2022, the federal government released Regulations under the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”), which will come into effect on January 1, 2023. This advisory is meant to provide a summary of these Regulations for real estate licensees, the real estate development industry, mortgage brokers, credit unions, and other interested parties.
The Regulations clarify several aspects of the Act, including the definition of “non-Canadian” (which now includes partnerships, trusts, and other entities that are not individuals or corporations), “residential property” (which now includes vacant land zoned for residential or mixed-use in certain areas), and “purchase” (which includes the acquisition of legal or equitable interests in residential property). The Regulations also outline exceptions to the prohibition, such as when the acquisition is due to death, divorce, separation, or as a gift, or when the dwelling is rented to a tenant who will occupy the unit.
Additionally, the Regulations define “control” as a three percent direct or indirect ownership interest in a privately held corporation by a non-Canadian or an entity controlled by a non-Canadian. They also outline the conditions under which temporary residents can be exempt from the prohibition, as well as the criteria for foreign nationals and refugee claimants to be exempt. The Regulations also clarify that the Act does not apply if it is incompatible with the Indigenous and treaty rights recognized by the Constitution Act, 1982.
If an order is made under the Act for a non-Canadian to sell a wrongly purchased property, the Regulations specify that the proceeds from the sale should be distributed in a specific order. Regulated entities should be aware that it is an offense to assist a non-Canadian in purchasing the residential property directly or indirectly, and that fines of up to $10,000 may be imposed for such violations. Regulated entities should also be aware that the Act does not apply to non-Canadians who enter into an agreement to purchase residential property before the Act comes into force.
It is the responsibility of regulated entities to ensure that they are in compliance with the Act and Regulations. They should review both the Act and the Regulations to fully understand their scope and application, and ensure that they are not assisting non-Canadians in purchasing residential property in violation of the Act.
In recent years, there has been a growing trend of non-Canadians purchasing residential property in Canada. This trend has raised concerns among some members of the public and policymakers, leading to calls for stricter regulations on foreign property ownership. As a result, several Canadian governments have implemented new regulations that prohibit non-Canadians from purchasing residential property in certain areas.
One key reason for these new regulations is to address concerns about affordability. As foreign buyers have increasingly entered the Canadian housing market, prices for residential properties have risen, making it more difficult for Canadian residents to afford to purchase a home. By restricting foreign ownership of residential property, governments hope to reduce demand and help bring prices back down to a more affordable level.
Another reason for these regulations is to ensure that foreign investors are not taking advantage of Canada’s housing market for speculative purposes. Some have argued that foreign investors are purchasing residential properties as a way to park their money, rather than as a place to live. By prohibiting foreign purchases, governments hope to discourage this type of speculation and ensure that the housing market is primarily used for its intended purpose – providing homes for Canadians.
There are also concerns about the impact of foreign ownership on the housing supply. As more foreign buyers enter the market, there is a risk that the supply of available homes could be reduced, leading to further price increases and making it even more difficult for Canadians to afford to purchase a home. By restricting foreign ownership, governments hope to ensure that there is a sufficient supply of homes available to meet the needs of Canadian residents.
It is important to note that these new regulations do not completely prohibit non-Canadians from purchasing residential property in Canada. In some cases, foreign buyers may still be able to purchase property in certain areas if they meet certain requirements, such as obtaining a permit or demonstrating that they will be using the property as their primary residence.
Overall, the new regulations prohibiting the purchase of residential property by non-Canadians are an important step in addressing concerns about affordability, speculation, and the housing supply in Canada. While they may not solve all of the challenges facing the housing market, they represent a significant effort to ensure that the market is working in the best interests of Canadian residents.