Moratorium on Purchases of Residential Property by Non-Canadians Coming into Force on Jan 1, 2023
The new Prohibition on the Purchase of Residential Property by Non-Canadians Act (“Act”) will be in force for 2 years starting January 1, 2023. With some exceptions, this means that non-Canadians cannot directly or indirectly purchase any residential property. A non-Canadian is defined under the Act as:
a. an individual who is neither a Canadian citizen nor a person registered as an Indian under the federal Indian Act nor a permanent resident;
b. a corporation that is not incorporated under the laws of Canada or a province; or
c. a corporation incorporated under the laws of Canada or a province whose shares are not listed on a stock exchange in Canada and is controlled by an individual or a corporation that is a non-Canadian.
While non-Canadians are prohibited, there are some exceptions provided for certain non-Canadians to make residential purchase. If they fall under one of the following, the purchase will be exempt from the Act.
a. a temporary resident within the meaning of the Immigration and Refugee Protection Act (IRPA) who satisfies prescribed conditions;
b. a protected person within the meaning of Section 95(2) of IRPA;
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, temporary resident or protected person under IRPA;
d. foreign states that purchase residential property for diplomatic or consular purposes; and
e. a non-Canadian who 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, January 1, 2023.
Although there is no set definition of “purchase” within the Act to determine at what point a purchase is being made, non-Canadian buyers will likely not be able to enter into an agreement of purchase and sale. Entering into an agreement of purchase and sale will likely be seen as a contravention of the Act but is important to note that it will not invalidate the transactions. The sale will still be valid, but consequences will follow, namely:
a. Under Section 6(1), every non-Canadian who contravenes the Act will be guilty of an offence and will be liable on summary conviction to a fine of not more than $10,000. This penalty also applies to every person or entity that attempts to or actually counsels, induces, aids or abets a non-Canadian to directly or indirectly, purchase any residential property knowing that the non-Canadian is prohibited from purchasing residential property under the Act.
b. Under Section 6(2), If a corporation or entity commits an offence under the Act, any of the below listed persons who directed, authorized, assented to, acquiesced in or participated in the commission of the offence will be deemed to be a party to and liable for the offence, whether or not the corporation has been prosecuted or convicted. These persons include:
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.
c. Under Sections 7(1) and (2), if a non-Canadian is convicted of having contravened the Act, the superior court of the province in which the relevant residential property is located may, on application of the Minister, order the residential property to be sold subject to any terms that the court considers appropriate. Upon the sale of the property, the non-Canadian purchaser will not receive more than the amount paid for the property under Section 8(2), and could receive less.
For more information, please contact:
Certified Specialist in Real Estate Law
Briefing prepared by Jonathan Liu, Student-at-Law.