On January 1, 2023, the Prohibition on the Purchase of Residential Property by Non-Canadians Act and its accompanying Regulations (together, "the Act") came into force. Subject to a number of exceptions, the Act prohibits foreign homebuyers from purchasing residential property in Canada for a period of two years (until December 31, 2024). Individuals and corporations who contravene the Act can be subject to fines and a court may order that the purchased property be sold.
The Act may be of particular concern for businesses who employ temporary residents (foreign workers and foreign students), as it may impact temporary residents' ability to purchase a home in Canada.
However, the Act does provide two exceptions for foreign workers and foreign students, although the parameters are narrow. There are no such exceptions to the Act for individuals who are visitors to Canada unless the residential property for purchase falls outside the ambit of the Act, as discussed below. Temporary residents who plan to purchase property in the next two years, should take care to ensure that the requirements are met.
General Rules: When the Act Applies
For a more detailed overview of the Act and its implications, generally, see Stikeman Elliott's previous Knowledge Hub post.
The Act prohibits "non-Canadians" from purchasing "residential property" located in census metropolitan areas and census agglomerations.
A "non-Canadian" includes any individual who is not a Canadian citizen, permanent resident, or status Indian. It also includes foreign corporations and certain corporations in which non-Canadian individuals own shares.
"Residential property" includes detached houses with no more than three dwelling units, as well as semi-detached houses and condominium units. It also includes land that does not contain any habitable dwelling but that is zoned as residential or mixed-use.
Census metropolitan areas and census agglomerations are defined by Statistics Canada. They cover most urban areas in Canada, though they also include many rural and recreational areas.
Exceptions for Foreign Workers and Foreign Students
The Act provides two exceptions for foreign workers and foreign students who hold temporary resident status in Canada. An exception is available for a foreign worker if:
- The foreign worker holds a work permit or is otherwise legally authorized to work in Canada;
- In the previous four years, the foreign worker has worked in Canada for a period of at least three years, and for at least 30 hours per week during that period; and
- The foreign worker has filed all required federal income tax returns for at least three of the previous four years.
An exception is available for a foreign student if:
- The foreign student is enrolled at a designated learning institution (generally, an institution for which a study permit can be issued under the Immigration and Refugee Protection Act);
- The foreign student has filed all required federal income tax returns for the previous five years;
- The foreign student was present in Canada for at least 244 days (approximately two thirds of a year) in each of the five previous years; and
- The purchase price for the property is no more than $500,000.
Both exceptions are only available to individuals who have not purchased more than one residential property.
In addition, the Act does not apply to:
- permanent residents;
- a refugee or an individual granted temporary resident status on humanitarian and compassionate grounds (a protected person);
- an individual who is a non-Canadian, but who purchases residential real estate with a spouse or common-law partner who is a Canadian, permanent resident or protected person; and
- foreign states or nationals for diplomatic or consular purposes.
Foreign workers who plan to purchase homes in Canada in the next two years, as well as businesses that employ or recruit such foreign workers, should look closely at their individual situations to see if the Act will apply and whether an exception is available.
The author would like to acknowledge the assistance of Michael Matwichuk in this preparation of this blog.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.