Not for Sale: Closing the Door to Foreign Buyers

In an effort to make Canadian housing more affordable, the federal government introduced the Prohibition on the Purchase of Residential Property by Non-Canadians Act in its 2022 budget (“the Act”). The Act, which comes into force on January 1, 2023, prohibits non-Canadians from directly or indirectly buying residential property in Canada for a period of two years, until December 31, 2024.

With the effective date fast approaching, there’s currently some concern across the real estate and lending industries about applicability and enforceability of the Act. While there are some details available, the full scope of the Act won’t be known until specifics are introduced by regulation. These regulations are expected to be released in the coming months.

At present, the Act defines a non-Canadian as:

  1. individuals who are neither a Canadian citizen nor a person registered as an Indian under the Indian Act nor a permanent resident of Canada;
  2. corporations incorporated outside of Canada;
  3. corporations controlled by foreign corporations or individuals who are not permanent residents of Canada or Canadian citizens;
  4. a prescribed person or entity pursuant to the regulations.

The type of properties affected will be detached houses or similar buildings that contain up to three dwelling units; semi-detached houses, rowhouse units, residential condominium units, or any part of these buildings that are intended to be owned separately from other units in the building. However, detached houses that contain more than three dwelling units are not captured by the Act.

There are exceptions to the Act, for certain non-Canadians:

  1. refugees;
  2. non-Canadians who purchase residential property in Canada with their Canadian spouse or common-law partner;
  3. a non-Canadian who becomes liable or assumes liability under an agreement of purchase and sale of the residential property before the day on which this Act comes into force, January 1, 2023;
  4. foreign states that purchase residential property for diplomatic or consular purposes.

For more information on the Act and its potential impacts, please contact Hugh Claxton of our Real Estate Group.