In Real Estate & Immigration
0

To make the Canadian housing market more affordable and accessible to Canadians, the Government of Canada put into effect  on January 1, 2023 the Prohibition on the Purchase of Residential Property by Non-Canadians Act (“the Act”) which is supplemented by the Prohibition on the Purchase of Residential Property by Non-Canadians Regulations: SOR/2022-250 (“the Regulations”). This prohibition will be in effect until its expiry on January 1, 2025. 

Both, the Act and the Regulations, are not exactly lengthy texts but here, is a concise summary: 

What is the purpose of the Act?

Simply put it is to prohibit for a two year period, generally, any non-Canadians from purchasing directly or indirectly any residential property.  Canadian citizens and individuals registered as an Indian under the Indian Act are not affected by this new legislation.

Are all non-Canadians restricted from buying residential property?

No. 

There are exemptions and they are: 

  1. Permanent residents of Canada who have not yet obtained Canadian citizenship or are waiting to qualify for Canadian citizenship can purchase residential property without any restriction.
  2. International students who meet all of the following criteria:
    • They are enrolled in a program of study at a designated learning institution as defined in subsection 211.1 of IRPR,
    • They have filed income tax returns for each of the five (5) taxation years preceding the year in which the purchase was made,
    • They were physically present in Canada for at least 244 days (around 8 months and a half) in each of the five (5) calendar years preceding the year in which the purchase is to be made,
    • The purchase price of the residential property does not exceed $500,000.00, AND
    • They have not purchased more than one (1) residential property
  3. Foreign workers who meet all of the following requirements:
    • They have a work permit as defined in section 2 of IRPR OR are authorized to work in Canada without a work permit under section 186 of IRPR,
    • They have worked in Canada for a minimum period of three (3) years within the four (4) years preceding the year in which the purchase was made, as long as the work was considered full-time (at least 30 hours per week) as defined in section 73(1) of IRPR,
    • They have filed income tax returns for a minimum of three (3) taxation years in the last four (4) taxation years preceding the year in which the purchase was made, AND
    • They have not purchased more than one (1) residential property,
  4. Foreign nationals, other than international students or foreign workers as described above, who meet any of the following criteria:

What about CORPORATIONS?  Are they restricted?

Yes. For a corporation to be exempted from the prohibition, it should have been registered under Canadian federal legislation or provincial legislation. If the company is publicly traded on a Canadian stock exchange it must have a designation under section 262 of the Income Tax Act, and the company should be controlled by a Canadian Citizen, a person registered as Indian pursuant the Indian Act or be a Permanent Resident of Canada. 

Control is defined by the Regulations as having direct or indirect ownership interests of the corporation:

  1. representing 3% or more of the value of the equity in it, 
  2. carrying 3% or more of its voting rights, or
  3. control in fact of the corporation, whether directly or indirectly through ownership agreement or otherwise.

Summary and Comment

The Act and Regulations certainly prohibit foreign nationals, such as regular visitors or others with no legally recognized connection to the country, to buy residential property in Canada. This in itself will probably have a positive impact on achieving the government’s intended goal with this new legislation. However, clarity will only come, with time, as we deal with some unintended or unforeseen issues such as: 

  • The Act and Regulations do not place any legal test or conditions to be met in cases where the foreign national is buying property based on his marriage-like relationship. In other words, proving that the relationship is genuine is not a requirement, as it is for instance in Permanent Residence application through spousal or common-law sponsorships pursuant to subsection 4(1) of IRPR.  Also if a foreign national purchases a residential property with an authorized person,  what is the meaning and extent of “with”. Does that include an ownership allocation of 99% to the former and 1% to the latter?
  • It is totally understandable why persons who were granted refugee protection in Canada should be able to purchase residential property in Canada. After the Immigration Refugee Board (“IRB”) has assessed all the relevant evidence and is satisfied that the refugee claimant, is indeed a convention refugee or a person in need of protection pursuant section 96 and 97 of IRPA, the person should be given all the legal guarantees that the country can provide. However, the fact that a refugee protection claim is deemed eligible to be referred to the Refugee Protection Division in itself does not make someone a protected person. As a matter of fact the claim can, as usually happens, be refused and the same applicant may withdraw the application. The IRB could see an even greater spike on refugee protection claims in the next two years.
  • Lastly, it should also be mentioned that the Act and Regulations do not provide a mechanism for current workers to combine their time spent in Canada as an international student, assuming that they had filed income tax returns while studying for two years and working for two years. Even though this person paid high tuition fees and contributed in several ways to the Canadian society, he/she would not meet the criteria to purchase residential property as an international student or as a work permit holder. 

 

Stay tuned!

 

An Associate of

Crease Harman LLP