REGULATORY AMENDMENTS TO THE PROHIBITION ON THE PURCHASE OF RESIDENTIEL PROPERTY BY NON-CANADIANS

Update: The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, announced on February 4, 2024, that the existing ban on foreign ownership of Canadian housing would be extended by an additional two years. Thus, the ban, currently set to expire on January 1, 2025, would be extended to January 1, 2027 by the Government of Canada.

 

On March 27, 2023, amendments to the Prohibition on the Purchase of Residential Property by Non-Canadians Act’s accompanying Regulations [1] (the “Regulation”), came into effect. Prohibition on the Purchase of Residential Property by Non-Canadians Act [2] (the “Act”) which has been in force since January 1st, 2023, aims to increase the affordability and availability of residential housing from coast to coast by preventing Non-Canadians from acquiring, directly or indirectly, any residential property for a period of two years [3].

It must be admitted that the Government of Canada underestimated the impact of the Immigration and Foreign Workers Act. In order to rectify the situation, the federal government has decided to make the following amendments to broaden the exceptions allowing Non-Canadians to purchase residential property, with the objective of supporting individuals and families seeking to build a life in Canada by pursuing home ownership sooner in their communities. [4].

The Honourable Ahmed Hussen, Minister of Housing and Diversity and Inclusion announced the following changes:

  1. Work Permit or Authorization Holders

Individuals who hold a work permit issued by the Government of Canada, or who are authorized to work in Canada under applicable laws, will be able to purchase residential property if (i) the permit or authorization is valid for 183 days or more from the date of purchase and (ii) upon completion of the purchase, the non-Canadian has not purchased more that one residential property.

  1. Vacant Land

The Government of Canada has decided to repeal the section of the Regulation prohibiting the purchase of land zoned for residential or mixed use. This amendment allows Non-Canadians to purchase vacant land for any permitted use, including for development purposes.

  1. Development or Redevelopment Exceptions

The Regulation now provides an exception for the purchase of residential property by Non-Canadians for development purposes. The federal government defines development as “the process of evaluating, planning alterating or improving (with or without any change in use) a residential property or the land on which the residential property is located [5]. For clarification, simple repairs, renovations and similar changes do not qualify as development or redevelopment. The work must be of such magnitude that it is equivalent to the construction of a residential building or a major change in the use of the building.

  1. Foreign Control Threshold for Corporations

The first version of the Regulation prohibited any privately held corporations or entities under the laws of Canada controlled by a Non-Canadian to acquire residential property. Such a corporation was considered to be controlled by a non-Canadian when 3% of the shares, equity or voting rights of the corporation were held by a Non-Canadian. [6]. The threshold has now been raised to 10%, which is consistent with the Underused Housing Tax Act [7].

To conclude, the amendments provided by the Government of Canada have the following objectives: 1) to allow non-Canadians to build or create residential properties by allowing the purchase of vacant land and the development and redevelopment and 2) to not penalize foreign workers and newcomers who wish to settle in Canada, by allowing them to purchase property.

By Catherine Demers

[1] SOR/ 2022-250. Regulation is current to 2023-03-20, therefore is not up-to-date.

[2] S.C. 2022, c.10.

[3] Canada Mortgage and Housing Corporation, “Prohibition on the Purchase of Residential Property by Non-Canadians Act – Frequently asked questions”, [online], on April 1, 2023.

[4] Government of Canada, “Amendments to the Prohibition on the Purchase of Residential Property by Non-Canadians Regulations”, [online], on April 1, 2023.

[5] S.C. 2002, c. 5.

[6] SOR/ 2022-250. Regulation is current to 2023-03-20, therefore is not up-to-date.

[7] S.C. 2002, c.