Understanding the Canadian ban on non-Canadians buying real estate
Last updated on September 26, 2024
The Prohibition on the Purchase of Residential Property by Non-Canadians Act came into force on January 1st, 2023. This law, which is part of the Liberal Housing Plan, aims to stabilize a real estate market weakened by the pandemic, offset inflation within the country and reduce foreign funds on Canadian soil. The bottom line is that non-Canadians are prohibited from buying residential properties in Canada until January 1st, 2027. There are however some conditions and exceptions.
A judgement by the Cour supérieure du Québec on January 31, 2023, states that the law does not apply to any sales resulting from promises to purchase or to sell that were concluded by non-Canadians prior to January 1st, 2023.
Let’s look at the implications of the Act for buyers and sellers in the country.
Contents:
- What is the origin of the Act to prohibit the purchase of residential real estate by non-Canadians?
- What is a “non-Canadian” buyer?
- Does the Act prohibiting the purchase of residential real estate by non-Canadians apply to foreign spouses of Canadian citizens or permanent residents?
- What types of properties does the Act Prohibiting the Purchase of Residential Real Estate by Non-Canadians apply to?
- The 4 documents that non-Canadians can use to prove compliance with the Act
- Consequences for buyers not complying with the law
- Implications for sellers in Quebec
- Do third parties, such as brokers or lawyers, play a role in applying the law?
- FAQ
What is the origin of the Act to prohibit the purchase of residential real estate by non-Canadians?
This measure is intended to address a growing concern about rising real estate prices, which are making it more difficult for Canadians to buy a home due to foreign investment in the residential real estate market. By limiting the ability of non-Canadians to buy in this market, the government hopes that sales prices will stabilize and Canadians will have better access to home ownership.
What is a “non-Canadian buyer”?
Section 2 of the Prohibition on the Purchase of Residential Property by Non-Canadians Act defines non-Canadian as an “individual who is neither a Canadian citizen nor a person registered as an Indian under the Indian Act nor a permanent resident.” The definition also includes (i) corporations that are incorporated in ways other than under Canadian or provincial laws, and (ii) those that are incorporated under federal or provincial laws but whose shares are not listed on a stock exchange and are controlled by a non-Canadian.
This basically means that non-Canadians are prohibited from directly or indirectly buying a residential property in Canada.
Exclusions
There are exceptions set out in Section 4 of the Act. They state that, under certain conditions, the following categories of buyers (among others) are allowed to buy residential properties in the country:
- Temporary residents (students, young professionals with a work or work-travel visa, etc.) who meet certain conditions set out in the regulation
- Non-Canadians buying a residential property with a spouse or common-law partner who is eligible to buy under the law
- Refugees and people protected under the Immigration and Refugee Protection Act
- Diplomatic or consular agents or foreign states making a purchase for democratic or consular purposes
Does the Act prohibiting the purchase of residential real estate by non-Canadians apply to foreign spouses of Canadian citizens or permanent residents?
An exemption is provided for foreign spouses of Canadian citizens or permanent residents.
Specifically, the Act provides that foreign spouses may purchase residential real estate if the purchase is made as part of a joint transaction with a Canadian citizen or permanent resident. However, specific conditions may apply, and it is advisable to consult the details of the legislation or speak with a real estate specialist for specific advice based on individual circumstances.
This is intended to balance the need to limit foreign investment in real estate, while recognizing situations where foreign spouses may be involved in real estate purchases in Canada.
What types of property are covered by the Act?
The ban covers these types of residential buildings located in Canada:
- Individual detached houses
- Semi-detached or row houses
- Dwellings held in co-ownership (e.g. condos)
- Vacant lots zoned for residential or mixed use
- Duplexes
- Triplexes
This therefore means that multi-dwelling buildings with more than 3 units are not affected by the law, nor are commercial buildings. The government also excludes residential properties located outside census metropolitan areas or agglomerations.
The 4 documents that non-Canadians can use to prove compliance with the Act
To prove compliance with the Prohibition on the Purchase of Residential Property by Non-Canadians Act, non-Canadians are generally required to provide the following documents:
1. A document attesting to their status
A valid passport or residence certificate (if applicable).
2. Real estate transaction documents
Their contract of sale or purchase.
3. Proof of exemption
For example, documents proving the relationship with a local citizen or permanent resident if the non-Canadian is a foreign spouse.
4. Financial and legal documents
Registration documents for foreign companies.
Requirements may vary by province or territory. It is advisable to consult a legal expert for specific advice.
Consequences for buyers not complying with the law
Any non-Canadian who fails to comply with this law, as well as any person or entity that “counsels, induces, aids or abets” a non-Canadian to circumvent the law, is liable to a maximum fine of $10,000. Also, subsection 7(1) states that the superior court of the province where the residential property is located can order the property to be sold.
Implications for sellers in Quebec
It is likely that, in Quebec, there will only be minor impacts from the Prohibition on the Purchase of Residential Property by Non-Canadians Act. Data compiled by JLR Land Title Solutions shows that purchases by foreign buyers only accounted for 0.9% of all real estate transactions in the province in 2019, which was 0.2% lower than in 2018.1
What to do if you suspect your buyer is not Canadian
If you receive an offer to purchase on your property but you’re not sure the interested party is Canadian under the definition of the law, You can ask the potential buyer for a legal opinion drawn up by a notary or lawyer, confirming that the person has the right to buy a residential property in Canada. The notary handling the transaction will make the necessary checks to make sure the buyer isn’t in breach of the Prohibition on the Purchase of Residential Property by Non-Canadians Act.
Do third parties, such as brokers or lawyers, play a role in applying the law?
Yes, brokers and lawyers can play a role in enforcing the Prohibition on the Purchase of Residential Property by Non-Canadians Act. Brokers are responsible for verifying the status of buyers and ensuring that they comply with the Act, while lawyers verify legal documents, advise on compliance and can report non-compliant transactions to the authorities. In short, these professionals help ensure that transactions comply with legal requirements.
To get advice or explanations on the law’s intricacies, feel free to talk to a notary or lawyer in private practice. If you have access to DuProprio’s legal assistance, schedule a call with one of our notaries via the Help Centre or by calling us at 1-866-387-7677.
The support offered by DuProprio lets you sell your property with total peace of mind. Contact us to learn more about our team and our visibility services, or watch our short webinar.
FAQ
Can a non-resident buy a house?
A non-Canadian resident is generally restricted from buying residential property in Canada by the Prohibition on the Purchase of Residential Property by Non-Canadians Act, which came into force in January 2023. This Act prohibits most non-Canadians from purchasing residential property in Canada.
Can an immigrant buy a property?
Yes, if the immigrant is a permanent resident or Canadian citizen, he/she can buy property in Canada. Restrictions apply mainly to non-residents and people with no substantial connection to Canada.
How do you define a non-canadian?
A non-canadian is a person who is not a citizen of Canada and who does not have permanent resident status. In other words, he/she has no official residential ties with Canada, either in terms of citizenship or permanent resident status.
