Canada Foreign Buyers Ban: Amendments and Exceptions

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What is the Canada Foreign Buyers Ban?

The Canada Foreign Buyers Ban is a federal government-imposed restriction on non-resident foreign individuals from purchasing residential property in Canada.

The formal legislation is The Prohibition on the Purchase of Residential Property by Non-Canadians Act.

The Act prohibits individuals who are not Canadian from purchasing residential property from January 1, 2023, to December 31, 2026. The Regulation provides more information on the important aspects of the Act.

For clarity, a Non-Canadian is defined as a person who is not:

• A Canadian citizen
• A permanent resident
• Registered as an Indian under the Indian Act

There are certain exemptions to this Ban, in addition to Amendments made approximately three months after its implementation. These are explained below.

Amendments to the Canada Foreign Buyers Ban

On March 27, 2023, the legislation was amended, resulting in four (4) major changes:

1. Increased Access for Temporary Workers to Purchase

Before the Amendments, temporary workers had to fulfill a set of requirements to be exempt from the ban, including tax filing history, work history in Canada, and a purchase price limit. After the Amendment, temporary workers can buy residential property in Canada as long as they meet the following two conditions:

• they have 183 days or more of validity remaining on their work permit or work authorization on the date of purchase; and
• they have not purchased more than one residential property.

NOTE: The Amendments have no impact on NRST provisions.

The Foreign Buyer Ban and the Non-Resident Speculation Tax (NRST) are different. Even if a temporary worker qualifies under the Foreign Buyers Ban exemptions, NRST will still apply in the amount of 25% of the purchase price. For more information on NRST, click here.

2. Vacant Land is No Longer Prohibited

The prohibition no longer applies to vacant lands that are zoned for residential and mixed use. Meaning, non-Canadians can purchase vacant land that is zoned for residential and mixed use and use it for any purpose, including residential development. The land simply cannot contain any habitable dwelling.

3. Exception for Development

The Ban was criticized by developers, for slowing residential land development by disallowing foreign corporations and businesses to invest. An unintended consequence from the legislation that would hurt the housing supply and housing affordability.

The government clarified their intention to encourage development by repealing the prohibition to purchase vacant land as noted above, and also adding an additional exemption for development, allowing foreign investors to participate.

4. Relaxing Corporation Regulations

The original legislation stated that if a corporation included 3% of equity value or voting rights, held by deemed non-Canadians, it will render the corporation as a non-Canadian under the Act. This would make Canadian Corporations ineligible to purchase residential property in Canada.

After the Amendments, the equity value and voting rights threshold was increased to 10%.

Are you eligible to purchase property in Canada?

Exceptions to the Canada Foreign Buyers Ban

The following types of persons are exempt from the prohibition:

• a temporary resident within the meaning of the Immigration and Refugee Protection Act who satisfies prescribed conditions;
  • If they hold a work permit:
    • (i) they have 183 days or more of validity remaining on their work permit or work authorization on the date of purchase, and
    • (ii) they have not purchased more than one residential property.
  • If they are enrolled in a program of authorized study at a designated learning institution:
    • (i) they filed all required income tax returns under the Income Tax Act for each of the five taxation years preceding the year in which the purchase was made,
    • (ii) they were physically present in Canada for a minimum of 244 days in each of the five calendar years preceding the year in which the purchase was made,
    • (iii) the purchase price of the residential property does not exceed $500,000, and
    • (iv) they have not purchased more than one residential property; or
• a protected person within the meaning of subsection 95(2) of that Act;
• 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, permanent resident, person registered as an Indian under the Indian Act, or person referred to in paragraph (a) or (b); or
• a person of a prescribed class of person:
  • foreign nationals who hold a passport that contains a valid diplomatic, consular, official or special representative acceptance issued by the Chief of Protocol for the Department of Foreign Affairs, Trade and Development;
  • foreign nationals, with valid temporary resident status, whose temporary resident visa was issued, or temporary resident status was granted, following an exemption provided under section 25.2 of the Immigration and Refugee Protection Act, if the Minister is of the opinion that the exemption was justified based on public policy considerations to provide safe haven to those fleeing conflict; and
  • persons that have made a claim for refugee protection in accordance with subsection 99(3) of the Immigration and Refugee Protection Act, if that claim has been found eligible and referred to the Refugee Protection Division under subsection 100(1) of that Act.

The following types of properties are exempt from the prohibition:

• A property not located within a census agglomeration (“CA”) or a census metropolitan area (“CMA”).

A CA must have a core population centre of at least 10,000 based on data from the previous Census of Population Program (“CPP”).

A CMA must have a total population of at least 100,000, based on data from the then-current CPP, and 50,000 or more must live in the core based on adjusted data from the previous CPP.

Essentially, this allows for an exemption on most recreational property.

These areas are outlined by Statistics Canada here.

The following types of purchases are exempt from the prohibition:

• the acquisition by an individual of an interest or a real right resulting from death, divorce, separation or a gift;
• the rental of a dwelling unit to a tenant for the purpose of its occupation by the tenant;
• the transfer under the terms of a trust that was created prior to the coming into force of the Act;
• the transfer resulting from the exercise of a security interest or secured right by a secured creditor; or
• the acquisition by a non-Canadian of residential property for the purposes of development.

Legal Consequences

So what happens if a non-Canadian breaks the law with respect to the prohibition?

6(1) Every non-Canadian that contravenes section 4 and every person or entity that counsels, induces, aids or abets or attempts 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 from purchasing the residential property is guilty of an offence and liable on summary conviction to a fine of not more than $10,000.

Some of you might be thinking, $10,000 isn't actually that much money in the context of real estate. And you're right.

But the government went ahead and included additional legislation that allows them to force the sale of any property purchased by a non-Canadian during the prohibition and stop them from receiving any profits (if any).

Are you eligible to purchase property in Canada?

Summary

The Canadian government implemented a ban on foreign buyers in an effort to cool down the housing market, control foreign ownership, and make properties more affordable for residents.

Shortly after the implementation of these laws, the government made several amendments to ensure that any unintended consequences were fixed.Despite the thorough legislation, certain exceptions exist to allow for non-Canadians to purchase residential property, if they qualify.

To confirm eligibility, consult an experienced real estate lawyer.

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