As of January 1, 2023, the federal government of Canada has enacted the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”), often referred to more commonly as the “foreign home buyer ban”, or similar. The ban prohibits non-Canadians from purchasing certain residential property across the country for a period of two years from January 1, 2023

Who’s affected and under what terms? What happens if you disregard the ban? This article will briefly outline the effects of the ban and its impact on the real estate market in British Columbia. 

Who does the ban affect?

Section 2 of the Act defines a non-Canadian as follows:

(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.

The Regulations enacted with respect to the Act further define the following for the purposes of (d) of the above (see the Prohibition on the Purchase of Residential Property by Non-Canadians Regulations (the “Regulations”):

2 For the purposes of paragraph (d) of the definition non-Canadian in section 2 of the Act, the following entities are prescribed:

(a)  an entity formed otherwise than under the laws of Canada or a province; and

(b)  an entity formed under the laws of Canada or a province and controlled by an entity referred to in paragraph (a) or controlled by a person referred to in paragraph (a), (b) or (c) of the definition non-Canadian in section 2 of the Act.

Have no fear, there are exemptions both in terms of persons excluded and property excluded from the overall ban.  Section 4(2) of the Act establishes several exceptions from the class of non-Canadians. This section states:

What does the ban do?

(a) a temporary resident under the Immigration and Refugee Protection Act – a non-Canadian who has a valid visa or other document required by the regulations, such as students and foreign workers under federal work permits;
(b) a protected person under the Immigration and Refugee Protection Act – a person who has been granted refugee status under the United Nations Convention Relating to the Status of Refugees;
(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, a person registered as an Indian under the Indian Act, a permanent resident of Canada or a person described in (a) and (b); or
(d) a person of a prescribed class of persons.

The Act prohibits non-Canadians from purchasing (directly or indirectly) any residential property (as that term is defined in the legislation including the Act and the Regulations).

What qualifies as residential property, you may ask? The Act defines residential property as “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.

Fortunately, the Regulations released December, 2022 provided further clarification by linking the definition of residential property above, to areas that fall within either a census agglomeration or a census metropolitan area.  This has resulted in a somewhat complex, but determinable set of exclusions, that need to be assessed by the parties involved on any given transaction.

Offences

Section 6 of the Act prescribes the offences and penalties for non-compliance with the requirements of the Act. The Act states that every non-Canadian found to have purchased residential property will be found “guilty of an offence and liable on summary conviction to a fine of not more than $10,000.” It must be noted that every person or entity found to have (or attempted to have) counseled, induced, aided or abetted in the process may also be found guilty of an offence under the Act.

Going Forward

The Act has a set repeal date of January 1, 2025, which means non-Canadians can look forward to making those future investments in just a couple of years subject to any further legislative changes. Given the consequences of violating the ban, however, real estate professionals and anyone else involved in the real estate purchase process should pay close attention to its restrictions.

Should you have any questions about the Act or the Regulations, please contact us.

This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250)448-2637 or any of our lawyers practicing in the area of real estate at the following:

Jane Otterstrom: jane@touchstone.law

Una Kuzio: una@touchstone.law