If you are the owner of a residential property with three housing units or less and intend to put it up for sale soon, know that a new measure has come into effect to prohibit the purchase of this type of property by non-Canadians for a specified period.
In keeping with its goal of making housing more affordable for people living in Canada, the federal government announced in its 2022 budget that a new measure would be implemented in early 2023 and would be applied for a period of two years. An Act to prohibit the purchase of residential property by non-Canadians[1] and its Regulations[2] thus came into force on January 1, 2023 and will be repealed on January 1, 2025.
The spirit of the Act
Essentially, this new Act stipulates that it is prohibited for a non-Canadian to purchase a residential property during this two-year period, whether they do so directly or indirectly. Section 2 of the Act states that the prohibition applies both to an individual who is neither a Canadian citizen nor a permanent resident and a non-Canadian corporation (this includes corporations as well as entities not listed on a stock exchange in Canada and controlled by non-Canadians), making it even more difficult to circumvent the Act by using a corporation to purchase a residential property. This also means that Canadians, permanent residents and certain temporary residents who benefit from an exception to the regulations[3] will not be affected by this measure.
Scope of the Act
The regulations define the scope of what constitutes a “purchase,”, i.e. the acquisition of a residential property, with or without conditions, with a legal interest or a balance of sale, or the acquisition of a real right in a residential property (right of ownership, usufruct, servitude, etc.).[4] The regulation also provides exceptions for certain types of properties and special circumstances.
Categories of properties concerned
The properties governed by this Act are buildings that have a maximum of three housing units, including:
- triplexes
- semi-detached houses
- condominium units
Bigger properties with four housing units or more are not subject to the Act..
Penalties for non-compliance
A purchase made in contravention of the Act will not affect the validity of the sale of the residential property, but the purchaser will be liable to a fine of not more than $10,000.00[5] and a court may order the purchaser to sell the property.[6]
The purchaser will not be the only one liable to this fine, since every person who counsels, induces, aids or abets or attempts to counsel, induce, aid or abet a non-Canadian to purchase a residential property in contravention of the Act is also liable.[7]
Caution is in order
If you intend to sell a property, be aware and proceed with caution. Get informed and make sure you comply with the requirements of the new Act.
To learn more:
https://laws-lois.justice.gc.ca/eng/acts/p-25.2/page-1.html and https://canadagazette.gc.ca/rp-pr/p2/2022/2022-12-21/html/sor-dors250-eng.html
[1] An Act to prohibit the purchase of residential property by non-Canadians S.C. 2022, c. 10, s. 235
[2] Prohibition on the Purchase of Residential Property by Non-Canadians Regulations SOR/2022-250
[3] An Act to prohibit the purchase of residential property by non-Canadians, subsection 4(2)
[4] Prohibition on the Purchase of Residential Property by Non-Canadians Regulations, s. 4
[5] An Act to prohibit the purchase of residential property by non-Canadians, subsection 6(1)
[6] An Act to prohibit the purchase of residential property by non-Canadians, subsection 7(1)
[7] An Act to prohibit the purchase of residential property by non-Canadians, subsection 6(2)
Anik Bellemare, LL.B., D.D.N.
Notary, Wealth Management
