Amendments to the Prohibition on the Purchase of Residential Property by Non-Canadians Act
Amendments to the Prohibition on the Purchase of
Residential Property by Non-Canadians Act
On January 1, 2023, the federal government implemented the Prohibition on the Purchase of Residential Property by Non-Canadians Act and regulations (together, the “Act”) barring non-Canadians from purchasing residential property in Canada, subject to certain exceptions.
As of March 27, 2023, the Act was amended to allow non-Canadians to purchase residential properties in additional, very limited, circumstances. In this post, you will find an overview of the Act and the new changes that have taken effect.
Under the Act, non-Canadians are prohibited from purchasing residential property in Canada.
“Non-Canadians” refers to non-Canadian citizens, individuals who are not “Indians” within the meaning of the Indian Act, individuals who do not have the status of a Canadian Permanent Resident, non-Canadian corporations, and private Canadian corporations owned or controlled by non-Canadians.
“Residential Property” refers to detached homes, residential buildings with up to three dwelling units, semi-detached houses, row-home units, residential condominium units, other properties intended for residential use, and vacant land zoned for residential or mixed use and located within a census agglomeration or metropolitan area.
“Purchase” refers to any acquisition of an interest in residential property. However, this Act does not stop non-Canadians from acquiring property as a result of a death, divorce, separation, or a gift. Non-Canadians are also permitted to acquire property should they be entitled to do so by way of a trust that was created prior to January 1, 2023, or by exercising security as a creditor (for example, acquiring a property that was held as collateral to a mortgage or other security interest). Nothing in the Act prohibits non-Canadians from renting residential properties to tenants.
There are certain exceptions to this overarching prohibition. In particular, residential properties can still be purchased by temporary residents to Canada who meet specific conditions, temporary residents who hold a work permit, some refugees, and non-Canadians whose spouse or common-law partner is Canadian.
Four main changes have been made to the Act, effective March 27, 2023:
- Vacant land Purchases: The definition of “Residential Property” for the purposes of this Act no longer includes vacant land zoned for residential or mixed use and located within a census agglomeration or metropolitan area, meaning that non-Canadians can now purchase this type of property.
- Housing Development: Residential property intended for the purposes of housing development can now be acquired by non-Canadians.
- Temporary Residents and Work Permits: Current restrictions with respect to purchases by temporary residents working in Canada have been altered. Under the Act, in order to purchase residential properties, temporary residents were required to have worked in Canada for a minimum of three years within the four years preceding the purchase. Under the new amendment, this requirement is removed and temporary residents must only show that they have 183 days (approximately six months) or more remaining on their work permit on the date of purchase. This must also be the purchaser’s only home – temporary residents remain limited to purchasing and owning only one residential property in Canada.
- Foreign Ownership of Corporations Increased: Originally, the Act considered a corporation as “non-Canadian” if up to 3% of its ownership and control was held by non-Canadians. This threshold has now been raised to 10%. This amendment will allow further flexibility for corporations with minority foreign share ownership to purchase and develop residential land.
Although the full impact of the recent amendments have yet to be seen, they have the potential to introduce a new pool of potential buyers to an otherwise downturned real estate market – especially so in the areas of land development for residential purposes.
If you have questions about the way the Act or its amendments impact you or your business, reach out to the real estate lawyers at Merovitz Potechin LLP.
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