Purchase of Residential Property by Non-Canadians

On January 1, 2023, the Prohibition on the Purchase of Residential Property by Non-Canadians Act S.C. 2022, c. 10, section 235 and its related regulations (the Act) came into force in Canada. Further, the regulations have already been amended. It is a novel Act that prohibits non-Canadians from purchasing residential real estate in Canada for a period of 2 years until the end of 2024.

To determine if the Act applies, ask these questions.

1. Does land being purchased trigger the Act?

2. Does the acquisition-type trigger the Act?

3. Does the purchaser trigger the Act?

I. THE LAND

The Act applies to the following—

1. residential properties that have 3 or fewer habitable dwellings in Census Metropolitan Area or a Census Agglomeration. In BC, that means Vancouver, Victoria, Kamloops, Kelowna, Nanaimo, Chilliwack, Abbotsford-Mission, and Prince George;

2. a part of a building that is a semi-detached house, rowhouse unit, residential strata lot, or similar premises intended to be owned apart from any other unit in the building in a Census Metropolitan Area or a Census Agglomeration.

II. THE CONTRACT/ACQUISITION

The Act applies to any acquisition of a legal or equitable interest (such as a purchase contract, assignment, or a trust agreement) entered into after January 1, 2023.

The Act does not apply to

1. any acquisition of a legal or equitable interest (such as a purchase contract, assignment, or a trust agreement) that was entered into before January 1, 2023;

2. any acquisition by death, divorce, separation, or gift;

3. any acquisition of the interest from the exercise of a security interest or secured right by a secured creditor; or

4. any acquisition for the purpose of development.

III. THE PURCHASER

The Act does not apply to any of the following.

The Act does not apply to

1. rural properties, (residential properties outside a Census Metropolitan Area or a Census Agglomeration are exempt from the prohibition); or

2. properties with no residential zoning.

1. Canadians

2. Permanent Residents

3. Indians under the Indian Act

4. “Protected persons” within the meaning of section 95(2) of the Immigration and Refugee Protection Act

5. Any person who purchases with their spouse and whose spouse or common law partner is a Canadian, permanent resident, or Indian under the Indian Act

The Act applies to all temporary residents who are enrolled in a designated learning institution unless

1. all income tax returns have been filed for the 5 years prior to the purchase;

2. they were present in Canada for a minimum of 244 days in the 5 years prior to the purchase of residential property; and

3. the purchase price does not exceed $500,000.

The Act applies to all work-permit holders unless

1. they have 183 days or more of validity remaining on their work permit or work authorization on the date of purchase; and

2. the purchaser has not purchased more than 1 residential property.

In terms of corporations and entities, the Act applies to

1) non-Canadian entities or companies;

2) any privately held Canadian company or entity where a. non-Canadians hold 10 per cent or more equity in the corporation, or b. non-Canadians hold 10 per cent or more of voting rights in the corporation, or c. they are controlled by nonCanadians or non-Canadian entity or company.

Notaries and Lawyers

Legal practitioners should be aware of the Act as they will be in contravention of the Act if they counsel, induce, aid or abet, or attempt to counsel, induce, aid or abet a non-Canadian to purchase, directly or indirectly, any residential property knowing that the nonCanadian is prohibited under this Act and will be guilty of an offence and subject to a fine of not more than $10,000 (section 6 of the Act). a situation could also be a violation of the Code of Conduct prohibiting an act of fraud and requiring members to act with integrity.

As this is a novel and untested piece of legislation, there are parts and ramifications of the Act that remain unclear or unresolved.

• What qualifies as an acquisition for the purpose of development is undefined.

Legal practitioners should be aware of the Act as they will be in contravention of the Act if they counsel, induce, aid or abet, or attempt to counsel, induce, aid or abet a non-Canadian to purchase, directly or indirectly, any residential property knowing that the non-Canadian is prohibited under this Act and will be guilty of an offence and subject to a fine of not more than $10,000 (section 6 of the Act).

• Section 5 states the Act does not affect the validity of the sale of the residential property, but if a seller were to learn the buyer is prohibited to purchase via the Act after the contract is signed, then it would appear the seller would be in danger of section 6 if they were to complete the deal (along with their Notary/lawyer). Thus, if the seller were not to complete, it is unclear what remedies the seller would then have.

• There is also no clear answer for a situation where the seller or the seller’s agents suspect that the purchaser is prohibited to purchase under the Act while the purchaser refuses to provide confirmation/documentation prior to completion (unless there are contractual obligations to provide said information).

Not Legal Advice

As such, if they act for a purchaser or seller in a transaction where the purchaser is prohibited under this Act and the Notary or lawyer has knowledge of that fact prior to completion, then they would be in violation of section 6 of the Act. Further, acting in such

Information made available in this article is for information purposes only. It is not and should not be taken as legal advice. You should not rely on or take or fail to take any action based upon this information. ▲

Matthew Beharry is a partner at PLLR, a full-service firm in Richmond, BC, that has been part of the legal landscape for 4 decades. Matthew focuses on construction and general commercial litigation.