MORE DETAILS RELEASED ON THE FOREIGN BUYERS BAN:
On Wednesday, December 21, 2022 the federal government released the supporting regulations on the Prohibition on the Purchase of Residential Property by Non-Canadians Act (Foreign Buyers Ban) which includes definitions, exceptions, and enforcement elements to help individuals understand and comply with the law.
What is the Prohibition on the Purchase of Residential Property by Non-Canadians Act?
On June 23, 2022, Parliament passed the Prohibition on the Purchase of Residential Property by Non-Canadians Act. Coming into force Sunday, January 1, 2023, this Act is designed to prohibit foreign buyers from purchasing residential real estate in Canada for a period of two years (until January 1, 2025), in an attempt to help curb the rapid escalation of Canadian real estate values due to foreign investment.
Although the Act sounds like a very broad-ranging ban on foreign investment in Canada, this is actually not the case. There are quite a few exceptions and points of clarity outlined in the Act.
What are some of the key elements of the new Act?
- Only applies to non-Canadians. It does not apply to Canadian citizens or permanent residents.
- Only applies to residential properties like detached or semi-detached homes, townhomes and condos, or residential investment properties containing up to 3 units. It does not apply to commercial properties or multi-unit dwellings with 4 or more units.
- Only applies to residential properties located inside major centres (defined as Census Agglomeration (CA) or Census Metropolitan Areas (CMA).). It does not apply to residential properties located in smaller towns or in rural settings.
- Applies to both direct or indirect purchases of residential property, including purchases made through corporations, trusts or other legal entities.
- At this point is only valid for a period of 2 years (until January 1, 2025).
What are some of the other exclusions or exceptions in the Act?
- The regulations specifically exclude, among other things, acquisitions of interests resulting from transitional or life events such as death, divorce, separation, or a gift.
- Exceptions to the prohibition are also permitted for international students, temporary residents, foreign nationals, and refugee claimants, subject to varying conditions, such as tax filing and residency obligations.
If you believe that you may be affected by this new legislation, you should consult your lawyer for further information prior to moving ahead with the purchase of residential property in Canada. The Act does include penalties for non-compliance, including for any parties who assist.