The federal Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”) received royal assent on June 23, 2022, and came into force on January 1, 2023. 

What is the Prohibition on the Purchase of Residential Property by Non-Canadians Act? 

The federal Prohibition on the Purchase of Residential Property by Non-Canadians Act prohibits non-Canadian residents from purchasing any residential property in Canada for two years. This legislation aims to stabilize Canada’s housing market and make housing more affordable for Canadians. It is also important to note that this Act targets purchases in population centres rather than rural areas.

Once the two-year prohibition expires on December 31, 2024, the legislation and its accompanying regulations will be automatically repealed. 

What buyers does this prohibition apply to?

The Act applies to certain individuals, corporations, and entities. 

The Act applies to individuals who do not meet one of the following criteria:

• Hold Canadian citizenship,
• Have permanent residency status in Canada, or
• Are registered under the Indian Act. 

The Act applies to corporations based in Canada that meet the following criteria:

• Are privately held;
• Not listed on a stock exchange in Canada; and
• Are controlled by a non-Canadian.

The Act applies to entities formed under Canadian law or provincial law, that are controlled by a non-Canadian, and entities formed under non-Canadian law.

The definition of control is used to determine whether a privately held corporation or entity is controlled by a non-Canadian. The Regulations define “control” as:

• The non-Canadian has direct or indirect ownership of shares or ownership interest in the corporation or entity representing 3% or more of the value of equity in it, or carrying 3% or more of its voting rights, or
• Control in fact of the corporation or entity, directly or indirectly, through ownership, agreement, or otherwise.

Are there exceptions to the prohibition? 

There are limited exceptions to the application of the Act, which include:

• International students. An individual must be enrolled in a program of authorized study at a “designed learning institution” under the Immigration and Refugee Protection Regulations; have filed income tax returns for all of the 5 taxation years before the purchase is made; have been physically present in Canada for a minimum of 244 days in each of the 5 calendar years preceding the year of the purchase; have not previously purchased residential property in Canada during the prohibition; and purchase property for a price that does not exceed $500,000;

• Temporary residents working in Canada that hold a work permit or are work permit exempt. To be exempt, a temporary resident working in Canada must hold a valid work permit or be authorized to work in Canada; have worked in Canada for at least 3 of the last 4 years before the purchase; have filed income tax returns for 3 of the last 4 taxation years before the purchase; have not previously made a purchase of residential property in Canada during the prohibition;

• Refugees. To be exempt, a refugee must have been given refugee protection or be a protected person under the Immigration and Refugee Protection Act. Refugee claimants are also exempt if they have made a claim for refugee protection and their claim has been eligible and referred to the Refugee Protection Division, or the refugee claimant has received temporary resident status based on humanitarian public policy considerations;

• Accredited members of foreign missions in Canada. To be exempt, an accredited member of a foreign mission must hold a passport that has a valid diplomatic, consular, official, or special representative acceptance issued by the Chief Protocol of Canada; and

• Non-Canadian spouses and common-law partners. To be exempt, a non-Canadian spouse or common law partner must purchase residential property in Canada with their spouse or common-law partner who is: a Canadian citizen, a person registered under the Indian Act, a permanent resident, or a non-Canadian who is exempt from the prohibition. 

What is considered a “residential property” for the purposes of the purchase prohibition? 

“Residential property” is defined in the Act as including real or immovable property in Canada of up to three dwelling units and parts of such property, such as a condominium unit or semi-detached house. 

The Regulations clarify that the purchase prohibition applies to vacant land that does not contain a habitable dwelling, however, is zoned for residential use or mixed-use and that is located within a Census Metropolitan Area or a Census Agglomeration.

What kinds of properties are not considered “residential properties” for the purposes of the purchase prohibition?

The Act does not apply to multi-unit buildings of more than three dwelling units.

Further, residential properties located outside of Census Metropolitan Areas or Census Agglomeration areas are exempt. A Census Metropolitan Area or Census Agglomeration is one or more adjacent municipalities which are centred on a population core. A Census Metropolitan Area must have a total population of at least 100,000 of which 50,000 or more must live within the core. A Census Agglomeration requires a core population of at least 10,000.

Census Metropolitan Areas and Census Agglomeration are identified in Statistic Canada’s Standard Geographical Classifications 2021, which has reference maps online. Statistics Canada also has an interactive mapping tool, also available online. 

What kinds of purchases are barred by the Prohibition on the Purchase of Residential Property by Non-Canadians Act?

The Act bars both direct and indirect purchases of residential property. Therefore, it prohibits purchases through partnerships, trusts, or other kinds of entities. There are certain exceptions to this prohibition, enumerated in the Regulations, which account for situations where:

• The person’s interest in the property is acquired because of divorce, gift, separation or death,
• The rental of a dwelling unit to a tenant for the purpose of its occupation by a tenant,
• A transfer under the terms of a trust that was created prior to the Act’s effective date (which was January 1 ,2023), or
• When the person acquires the interest as a result of a secured right by a secured creditor or the exercise of a security interest.

What are the penalties for violating the Prohibition on the Purchase of Residential Property by Non-Canadians Act?

A violation of the Act is a criminal offence. The fine associated with a violation by a non-Canadian, or any person who knowingly assists the non-Canadian in the violation, is up to $10,000. If a corporation or entity violates the Act, the officers, directions, senior officials, or other representations of the corporation or entity can be held liable. 

Additionally, the court may order that the property that was purchased illegally must be sold. If the property is sold, the non-Canadian who purchased it illegally will receive no more than the price they paid for the porperty. Proceeds of the sale can also be used to offset the costs incurred by the government in bringing the application to court. The non-Canadian who has violated the Act is not permitted to profit from the sale, so any remaining sale proceeds of the sale are given to the Receiver General of Canada. 

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