To help make homes more affordable for people living in Canada, the Government of Canada passed the Prohibition on the Purchase of Residential Property by Non-Canadians Act, SC 2022, c 10 (the “Act”) which came into effect on January 1, 2023. Currently, the Act is intended to only be in effect for two years, or until January 1, 2025.
The Act prohibits the purchase of residential real estate by individuals who are not Canadian citizens or permanent residents, foreign corporations, and others deemed to be “non-Canadian”.
For the purpose of the Act, a “non-Canadian” includes:
- Individuals who are not Canadian citizens or permanent residents;
- Corporations that are not incorporated in Canada; and
- Corporations controlled by foreign corporations or individuals who are not Canadian citizens or permanent residents of Canada.
Accordingly, “Canadians” include:
- Individuals who are Canadian citizens or permanent residents;
- “Indians” as defined by the Indian Act, RSC 1985 c I-5; and
- Corporations that are incorporated in Canada, subject to the exception that they cannot be controlled by a non-Canadian.
However, the definition of “control” in respect of corporations has not yet be defined.
The types of “residential real estate” properties that are encompassed by the Act include:
- A detached house that does not contain more than three dwelling units;
- A part of a building that is a semi-detached house, rowhouse unit, residential condominium unit, or similar premises that is intended to be owned apart from any other unit in the building; and
- A prescribed piece of real property, which has not yet been defined.
For greater clarity, the types of “residential real estate” properties that are not encompassed by the Act include fourplexes and apartment complexes.
In addition to this, there are exemptions to the prohibitions contained in the Act, including that temporary residents under the Immigration and Refugee Protection Act, SC 2001, c 27, who fulfill certain conditions (that have yet to be defined) may purchase residential real estate property in Canada. Other exemptions include refugees, individuals who purchase residential property with their spouse or common law partner provided that their spouse or common law partner is eligible to purchase residential property in Canada, and another prescribed class of people that has yet to be defined.
Accordingly, anyone who “knowingly…counsels, induces, aids, or abets” in the contravention of the Act by a non-Canadian, or attempts to do so, is guilty of an offence under the Act and is liable on a summary conviction to a fine of up to $10,000.00. If a corporation or entity commits an offence, then its directors, officers, managers, supervisors, agents, or others who have directed, authorized, assented to, acquiesced in, or participated in the contravention may be personally held liable under the Act.
In addition to imposing monetary penalties, the Minister may apply to the court for an order to sell a residential property that has been purchased in contravention of the Act. The Act further confirms that, if the residential property is sold as a result of a court order, then the contravening seller cannot recover more from the sale of the property than what they originally paid for it.
If you are thinking about purchasing residential real estate in Canada and are worried about the implications of the Act and whether it applies to you, please contact Bishop & McKenzie LLP for assistance and more information.
Authors:
Megan B. Harris, Associate and Hannah A. Schmakeit, Student-At-Law