Understanding Canada's Foreign Buyer Ban

As of January 1, 2023, the cleverly titled, Prohibition on the Purchase of Residential Property by Non-Canadians Act has officially come into effect.

It prohibits non-Canadians from purchasing Residential Property, directly or indirectly, for a two-year period.

Definition of "non-Canadian"

A person who is not:

• A Canadian citizen
• A permanent resident
• Registered as an Indian under the Indian Act

A corporation that is:

• Incorporated outside the laws of Canada or a province
• Not Listed on a Canadian Stock Exchange and is controlled by a person who is a non-Canadian

Definition of "Residential Property"

• A detached house or building with three (3) units or less
• A semi-detached house, rowhouse unit, residential condo, or similar premise.
• Vacant land that is zoned for residential or mixed-use

Exceptions to the law

The following types of purchases are exempt from the prohibition:

• Acquiring property by death, divorce, separation, or a gift
• Renting a property for the purpose of occupation by the tenant
• Transfer under terms of a trust that was created prior to January 1, 2023
• Transfer resulting from a security interest or secured right by a secured creditor

The following types of persons are exempt from the prohibition:

• An individual who is a non-Canadian and who purchases residential property with their spouse or common-law partner, if the spouse or common law-partner is not a non-Canadian
• A temporary resident within the meaning of the Immigration and Refugee Protection Act who satisfies prescribed conditions;
• A protected person within the meaning of subsection 95(2) of the Immigration and Refugee Protection Act
• A foreign national who holds a passport that contains a valid diplomatic, consular, official, or special representative acceptance
• A foreign national with valid temporary resident status, whose temporary resident visa was issued, or temporary resident status was granted by a justified exemption under section 25.2 of the Immigration and Refugee Protection Act
• A person that has made an eligible claim for refugee protection in accordance with subsection 99(3) of the Immigration and Refugee Protection Act

The following types of properties are exempt from the prohibition:

• A property not located within a census agglomeration (“CA”) or a census metropolitan area (“CMA”).

A CA must have a core population of at least 10,000 based on data from the previous Census of Population Program (“CPP”).

A CMA must have a total population of at least 100,000, based on data from the then-current CPP, and 50,000 or more must live in the core based on adjusted data from the previous CPP.

These areas are outlined by Statistics Canada here.

Legal consequences

So what happens if a non-Canadian breaks this law?

6(1) Every non-Canadian that contravenes section 4 and every person or entity that counsels, induces, aids or abets or attempts to counsel, induce, aid or abet a non-Canadian to purchase, directly or indirectly, any residential property knowing that the non-Canadian is prohibited under this Act from purchasing the residential property is guilty of an offence and liable on summary conviction to a fine of not more than $10,000.

Some of you may be thinking, $10,000 isn't actually that much money in the context of real estate. And you're right.

But the government went ahead and included additional legislation that allows them to force the sale of any property purchased by a non-Canadian during the prohibition and stop them from receiving any profits (if any).

When was the agreement signed?

The prohibition means that non-Canadians cannot execute an agreement to purchase residential property between January 1, 2023, and December 31, 2024.

However, it does not apply to agreements (conditional or firm) that were entered into before January 1, 2023, even if the completion date is within the prohibited timeline.

These rules mean that non-Canadians will not be able to enter into pre-construction agreements during the two-year period, even if the completion date is expected to be after December 31, 2024.

Summary

• The prohibition applies to non-Canadians purchasing residential property from January 1, 2023, to December 31, 2024.
• The prohibition carries a penalty of up to $10,000 and forced sale without profit.
• Anyone that knowingly helps a non-Canadian disobey the prohibition can also be fined up to $10,000.
• The prohibition does not apply to agreements that were signed before January 1, 2023, regardless of the condition status.