Starting on January 1st, 2023, the federal government will enforce the Prohibition on the Purchase of Residential Property by Non-Canadians Act. The objective is to help make homes more affordable for people living in Canada. This new law will prevent non-Canadians from buying residential property in Canada for two years. In addition, this law deters non-Canadians from using business structures such as partnerships, trusts, or other entities to avoid the prohibition. Foreign-controlled Canadian entities will also be banned from buying residential properties. 

It is important to note that the federal government has made several exemptions, including for many foreign workers and international students who plan on living in Canada long term. 

Exemptions from the ban are as follows:

1. Canadian citizens and permanent residents
2. International students 
   1. They filed their tax returns in Canada for the past five years before the year the property was bought. 
   2. They were physically present in Canada for at least 244 days for the past five calendar years. 
   3. Finally, they have bought only one residential property, and the purchase price is at most $500,000. 
3. Foreign workers 
   1. That worked in Canada full-time (at least 30 hrs per week as defined in subsection 73(1) of the Immigration and Refugee Protection Regulations) for a minimum period of three out of four years before the year the property was bought.
   2. They filed tax returns in Canada for at least three out of the four years before the year of purchase. 
   3. Finally, they have bought only one residential property. 
4. Foreign nationals
   1. Who holds a passport that contains a valid diplomatic, consular, official or special representative acceptance issued by the Chief of Protocol for the Department of Foreign Affairs, Trade and Development.
   2. With a valid temporary resident status, whose temporary resident visa was issued, or temporary resident status was granted. 
5. Refugees, refugee claimants and those fleeing from international crises. 
6. Indigenous Individual
   1. A person registered as an indigenous individual under the Indian Act. 

Other exemptions from the ban include:

1. An individual who is a non-Canadian that purchases a residential property in Canada with their spouse or common-law partner if the spouse or common-law partner is a Canadian citizen.
2. Buildings containing more than three dwelling units.
3. Buying commercial properties.
4. Recreational properties (cottages, cabins and other vacation homes).
5. Properties acquired through foreclosure.
6. Individuals that acquired residential properties as the result of death, divorce, separation or as a gift.
7. The dwelling unit is rented out to a tenant who will occupy the unit. In other words, a tenant affected by the ban can still rent a home in Canada. Purchasing a rental property of three dwelling units or under is NOT OKAY. 
8. The transfer is under the terms of a trust created before January 1st, 2023.
9. The transfer results from exercising a security interest or secured right by a secured creditor. 

TORRES MORTGAGES NOTES 

This Act does not apply to non-Canadians that entered into or assume liability under the agreements of purchase and sale before January 1st, 2023. While the sale of residential property to a non-Canadian after January 1st, 2023, will remain valid, a court may order a sale of any residential property that a non-Canadian has purchased in violation of the Act. In that case, the non-Canadian cannot recover more than what was paid for the property.

Penalties

Once the Act is in force, any person or entity assisting a non-Canadian in purchasing directly or indirectly any residential property is guilty of an offence. As a result, they could be liable to a fine of not more than $10,000.  

Seek Legal Counsel 

Suppose you have a client, property, or transaction that the Act captures. In that case, you should advise your client to seek legal advice before continuing to provide your services.

Sources: 

Government Of Canada (2022, December 21st). PROHIBITION ON THE PURCHASE OF RESIDENTIAL PROPERTY BY NON-CANADIANS ACT. Canada Gazette, Part II, Volume 156, Number 26. Retrieved December 27th, 2022, from https://canadagazette.gc.ca/rp-pr/p2/2022/2022-12-21/html/sor-dors250-eng.html

Government Of Canada (2022, November 28th). Prohibition on the Purchase of Residential Property by Non-Canadians Act S.C. 2022, c. 10, s. 235. Justice Laws Website. Retrieved December 27th, 2022, from https://laws-lois.justice.gc.ca/eng/acts/P-25.2/page-1.html