Comprehensive Summary of the Prohibition of Purchase of Residential Property by Non-Canadians Act

On January 1, 2023, the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”) came into force. Under section 4(1) of the Act, non-Canadians will be prohibited from purchased any residential property in Canada.

Defining The Meaning Of “Residential Property”

The term “Residential Property” is defined section 2 of the Act 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.

Liability and Duration

Crucially, the Act does not invalidate the agreements which have been entered into by buyers and sellers before January 1, 2023. However, moving forward, every seller of residential property must be more vigilant when investigating to whom they are selling their property to. Individuals in contravention of the Act are liable of an offence and on summary conviction to a fine of not more than $10,000.00

The Act is intended to remain in effect for two years, and is the Federal Government’s attempt to combat the rise in vacant homes being owned by foreigners and real estate inflation.

Exemptions to the Prohibition of Purchase of Residential Property by Non-Canadians Act

Regulations accompanying the Act were published in the Canada Gazette on December 2, 2022 by the Minister of Finance (the “Regulations”), and clarify the exceptions to the Act. ‘Prescribed real property or immovable’ that would be exempt from the Act are properties located in areas of Canada that are not within a census agglomeration or census metropolitan area. In British Columbia, this means that foreigners would still be able to purchase vacation homes located in places such as Whistler or Sun Peaks. According to the Regulations, certain individuals holding prescribed classes of temporary resident status would also be exempt from the Act.

It will be interesting to see if the Act will face challenges from the Provinces based on federalism and division of power arguments.

Move Forward With Confidence In Your Real Estate Contracts

Sellers and developers should consider building in additional representations and warranties regarding the Canadian status of their buyers into their contracts of sale.

Watson Goepel’s Real Estate Law group has extensive experience with the leasing, financing, developing and conveyancing of real estate in British Columbia, with a highly skilled conveyancing department for both residential and commercial transactions. Our professionals have managed projects of all sizes for a variety of clients including individual owners, lenders, and developers, and can assist with all residential and commercial real estate transactions including strata property transactions.

Contact Watson Goepel’s experienced Real Estate Associate Henry Ka today to receive strategic and practical legal guidance.