If you’ve been following the recent headlines in Canadian real estate news, you may have heard about Canada’s two year ban on foreign buyers. The “Prohibition on the Purchase of Residential Property by Non-Canadians Act” will take effect January 1, 2023 and is to be in place for a minimum of at least two years.
As you may already be aware, major Canadian cities such as Toronto, Vancouver, Montreal and Calgary have seen an influx of real estate being purchased by foreign buyers over the past decade or so.With Toronto, and Canada as a whole, being a desirable place to invest due to our relatively stable economy, growing job opportunities, consistent population growth, low crime rates (when compared to other major international cities) and a lack of supply to keep up with the demand, there is no surprise that many investors choose to invest in Canadian real estate.
Below are some highlights from the new Act in order to help you understand how it will apply to the way real estate is traded here in Toronto.
What Is Considered A “Non-Canadian”?
(a) an individual who is neither a Canadian citizen nor a person registered as an Indian under the Indian Act nor a permanent resident;
(b) a corporation that is incorporated otherwise than under the laws of Canada or a province;
(c) a corporation incorporated under the laws of Canada or a province whose shares are not listed on a stock exchange in Canada for which a designation under section 262 of the Income Tax Act is in effect and that is controlled by a person referred to in paragraph (a) or (b); and
(d) a prescribed person or entity. (non-Canadien)
permanent resident has the same meaning as in subsection 2(1) of the Immigration and Refugee Protection Act. (résident permanent)
What Is Considered A Residential Property Based On The Act?
residential property means any real property or immovable, other than a prescribed real property or immovable, that is situated in Canada and that is
(a) a detached house or similar building, containing not more than three dwelling units, together with that proportion of the appurtenances to the building and the land subjacent or immediately contiguous to the building that is reasonably necessary for its use and enjoyment as a place of residence for individuals;
(b) a part of a building that is a semi-detached house, rowhouse unit, residential condominium unit or other similar premises that is, or is intended to be, a separate parcel or other division of real property or immovable owned, or intended to be owned, apart from any other unit in the building, together with that proportion of any common areas and other appurtenances to the building and the land subjacent or immediately contiguous to the building that is attributable to the house, unit or premises and that is reasonably necessary for its use and enjoyment as a place of residence for individuals; or
(c) any prescribed real property or immovable. (immeuble résidentiel)
Who Is Prohibited From Buying Canadian Real Estate Under The Act?
4 (1) Despite section 34 of the Citizenship Act, it is prohibited for a non-Canadian to purchase, directly or indirectly, any residential property.
Exception — persons
(2) Subsection (1) does not apply to
(a) a temporary resident within the meaning of the Immigration and Refugee Protection Act who satisfies prescribed conditions;
(b) a protected person within the meaning of subsection 95(2) of that Act;
(c) an individual who is a non-Canadian and who purchases residential property in Canada with their spouse or common-law partner if the spouse or common law-partner is a Canadian citizen, person registered as an Indian under the Indian Act, permanent resident or person referred to in paragraph (a) or (b); or
(d) a person of a prescribed class of persons.
Foreign state
(4) For greater certainty, nothing in subsection (1) is to be construed as hindering a foreign state from purchasing residential property for diplomatic or consular purposes.
Non-application
5) Subsection (1) does not apply if the non-Canadian becomes liable or assumes liability under an agreement of purchase and sale of the residential property before the day on which this Act comes into force.
What Are The Penalties For Offences?
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.
Party to offence
(2) If a corporation or entity commits an offence, any of the following persons that directed, authorized, assented to, acquiesced in or participated in the commission of the offence is a party to and liable for the offence whether or not the corporation or entity has been prosecuted or convicted:
(a) an officer, director or agent or mandatary of the corporation or entity;
(b) a senior official of the corporation or entity;
(c) any individual authorized to exercise managerial or supervisory functions on behalf of the corporation or entity.
Although this new two year ban on foreign buyers appears to have good intentions for Canadians, this Act would have been more beneficial to Canadians back in 2016 when we were seeing an influx of foreign investment and offer amounts substantially higher than the list prices due to lower interest rates.
If you are a foreign investor considering buying a property here in Toronto, it is important to review the full Act and discuss your options with a local Canadian real estate lawyer before moving forward with submitting an offer on a property.
Are you thinking about making a move or have questions about the current real estate market? Contact me any time with your questions. I’m always happy to help.
