Buyers and sellers of residential property in Canada, together with their lawyers, notaries, and real estate agents, should make themselves aware of the prohibitions contained in the Act, the penalties for contravening the Act, and consider changes that may be required to purchase and sale agreements, closing documents, and record-keeping procedures related to their real estate transactions – and whether their transactions are even permitted at all
The federal government has introduced legislation that bans the purchase of residential real estate by non-Canadians. The Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”) comes into force on January 1, 2023, and is stated to stay in force for a period of two years, a report from cwilson states.
Buyers and sellers of residential property in Canada, together with their lawyers, notaries, and real estate agents, should make themselves aware of the prohibitions contained in the Act, the penalties for contravening the Act, and consider changes that may be required to purchase and sale agreements, closing documents, and record-keeping procedures related to their real estate transactions – and whether their transactions are even permitted at all.
Section 4(1) is the key effective provision of the Act, prohibiting a “non-Canadian” from purchasing, directly or indirectly, any residential property. The Act defines “non-Canadian” as:
(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.
Importantly, “Control” of a corporation is not yet defined in the Act, but is to be defined by yet to be passed regulations.
Section 4(2) goes on to narrow the scope of the prohibition by excluding the following persons from the effect of Section 4(1):
(a) a temporary resident within the meaning of the Immigration and Refugee Protection Act who satisfies prescribed conditions;
(b) a protected person within the meaning of subsection 95(2) of the Immigration and Refugee Protection Act;
(c) an individual who is a non-Canadian and who purchases residential property in Canada with their spouse or common-law partner if the spouse or common law-partner is a Canadian citizen, person registered as an Indian under the Indian Act, permanent resident or person referred to in paragraph (a) or (b); or
(d) a person of a prescribed class of persons.
A temporary resident may include a foreign national who is permitted to enter or remain in Canada as a student, worker, or temporary resident permit holder.
Interestingly, these exceptions appear to open the door for temporary foreign workers and international students to continue purchasing residential real estate in Canada, provided they satisfy the (yet to be) prescribed conditions.
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