The Prohibition on the Purchase of Residential Property by Non-Canadians Act (the "Act") came into force on January 1, 2023, prohibiting the purchase of Residential Properties by Non-Canadians for the next two years.
Who or What is a “Non-Canadian”?
A Non-Canadian is a person who is not a Canadian citizen, permanent resident, or a person registered as an Indian under the Indian Act.
The definition of Non-Canadian also includes corporations incorporated outside of Canada, and corporations whose shares are not listed on a Canadian stock exchange and are controlled by one of the Non-Canadians listed previously, entities formed outside of Canada or a province, and entities formed in Canada that are controlled by one of the Non-Canadians listed previously.
There are exemptions for persons and entities that would otherwise be considered Non-Canadian under the Act. For example, the following classes of people may be exempt from the Act if certain conditions are satisfied:
- temporary residents;
- persons that are enrolled in a program of study at a designated learning institution;
- persons that hold a work permit, or are authorized to work in Canada;
- protected persons;
- persons who purchase Residential Property with a spouse or common-law partner that is not a Non-Canadian;
- foreign nationals; and
- persons that have made a claim for refugee protection.
The Act also does not apply to the extent that it interferes with existing aboriginal and treaty rights of the aboriginal peoples of Canada.
What is “Residential Property”?
“Residential Property” refers to any real property or immovable that is a detached house or similar building, containing 3 or less dwelling units, or part of a building that is a semi-detached house, rowhouse unit, condo or something similar. Therefore, the Act does not apply to Residential Property that contains more than 3 dwelling units, such as apartment buildings.
The Act only applies to Residential Properties that are located within designated areas, as shown in orange on the Standard Geographical Classification map below. As exemplified by the sparse snippets of orange on the map, the application of the Act is limited to certain urban areas, and excludes most rural areas of Canada.
What is a “Purchase”?
A “Purchase” includes the acquisition of both legal interests (such as that acquired through an agreement of purchase and sale) and beneficial interests (where there is no requirement for registration of an owner).
It does not include acquisitions of Residential Property by death, divorce, separation, or gift, rentals of Residential Property, transfer of Residential Property under the terms of a trust created before the coming into force of the Act, the transfer of a security interest, and the acquisition of Residential Property for the purposes of development. It also does not prohibit the Purchase of Residential Property where the agreement of purchase and sale was entered into before the coming into force of the Act.
How is the Act Enforced?
A person who contravenes the Act is guilty of an offense and is liable for a fine on summary conviction of up to $10,000. Persons who knowingly counsel, induce, aid, or abet a contravention of the Act are also guilty of an offense and are liable on summary convictions of a fine up to $10,000.
This summary is intended to provide a brief overview of the Act. We urge you to remain cognizant of the Act when transacting for the purchase of Residential Property in Canada and encourage you to contact a lawyer in our Real Estate and Land Development group for more details and assistance in determining the applicability of the Act.