FOREIGN BUYERS

Foreign Buyer’s Ban – Reviewing the New Regulations and What it Means for You as a Foreign Buyer
 
On January 1, 2023, the Prohibition on the Purchase of Residential Property by Non-Canadians Regulations (the “Regulation”) came into effect and it will remain in place for a period of two years. The earlier passed Purchase of Residential Property by Non-Canadians Act (the “Act”), places a ban on non-Canadians from purchasing and or acquiring residential real estate in Canada in an attempt to curtail the challenges of housing affordability across Canada.
 
Below, we review the new Regulations and the Act to break down what this new ban really means for a foreign buyer.
 
Who is a Foreign Buyer?
 
The Act defines a non-Canadian as follows:
 
(a)    an individual who is neither a Canadian citizen nor a person registered as an Indian under the Indian Act nor a permanent resident;
 
(b)   a corporation that is incorporated otherwise than under the laws of Canada or a province;
 
(c)   a corporation incorporated under the laws of Canada or a province whose shares are not listed on a stock exchange in Canada for which a designation under section 262 of the Income Tax Act is in effect and that is controlled by a person referred to in paragraph (a) or (b); and
 
(d)  a prescribed person or entity. (non-Canadien).
 
What Property is Included?
 
The Act applies to any residential property in Canada that is a detached house or similar, containing not more than three dwelling units. Residential property for the purpose of the Act also includes any part of a building that is a semi-detached house, a rowhouse unit, a residential condominium, or any other similar premise. This also includes any vacant parcel of land that is zoned for residential purposes or mixed-use purposes.
 
What Property is Exempt from the Foreign Buyer’s Ban?
 
In keeping with their earlier promise, the federal government has committed to exempting some recreational properties. Therefore, recreational residential properties that are located in areas of Canada that are not within either a “census agglomeration” or a “census metropolitan area” will be exempt. A census agglomeration requires a core population of at least 10, 000 people based on the previous year’s Census of Population Program. A census metropolitan area

must have a population of 100,000 people with at least 50, 000 living in the core based on the Census of Population Program
 
Further section 4(2) of the Regulations provides specific exemptions as follows:
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(a)   the acquisition by an individual of an interest or a real right resulting from death, divorce, separation or a gift;
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(b)  the rental of a dwelling unit to a tenant for the purpose of its occupation by the tenant;
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(c)    the transfer under the terms of a trust that was created prior to the coming into force of the Act; or
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(d)  the transfer resulting from the exercise of a security interest or secured right by a secured creditor.

Who is Exempt from the Foreign Buyer Ban?
 
1. Canadian citizens and permanent residents;
2. International students who meet certain criteria, including but not limited to having filed income tax returns in Canada for each of the five preceding years in which the purchase of the residential unit is and or was made, as well limiting the purchase price of the residential property to a maximum of $500,000.00, and as long as the individual ha not purchased more than one residential property;

3. Work permit Holders who meet certain criteria including but not limited to having worked full-time in Canada for a minimum three year period within the preceding four years in which the purchase of the residential property is and or was made and having filed taxes for a minimum of those three out of four years;

4. Foreign nations with valid temporary resident status who meet the criteria;

5. Foreign nations who hold a passport that contains valid diplomatic, consular, official or special representative acceptance; and

6. Persons that have made a claim for refugee protection and are found eligible pursuant to the Refugee Protection Division.
  
What are the Penalties?
 
If you are found to contravene the Act, there are several consequences including the fine of up to $10, 000 per person or entity. Additionally, pursuant to section 7(1) of the Act, the court is permitted to order that a residential property purchased or acquired by a non-Canadian in contravention of the Act can be sold following an application to the court. There are further specific conditions that determine the distribution of the proceeds of the sale.

How We Can Help
 
Both corporate and individual non-Canadian buyers need to be aware of this new legislation when purchasing residential property in Canada. Further those employed and or providing services and or advising in the areas of real estate transactions will need to be informed of the prohibitions and penalties to avoid personal risk and liability.
 
If you have any questions about the Act and the Regulations, please reach out to our real estate team.

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