Unpacking the complexities of Canada’s ban on non-Canadians from purchasing property
The federal government has provided additional clarification on the prohibition of non-Canadians from purchasing residential property in Canada. You may be surprised to learn that non-Canadians are also banned from purchasing residential property in several less urban areas across the country, despite the understood goal of the legislation to cool off the housing market in highly populated cities across Canada.
Although the federal government did not elaborate on whether rural properties would be included under the Prohibition on the Purchase of Residential Property by Non-Canadians Act, the federal government has since released regulations passed pursuant to section 8 of the act.
The regulations have made the act more prohibitive than anyone could have anticipated. The Regulatory Impact Analysis Statement published by the federal government in conjunction with the regulations describes the objective of the regulations as establishing specific exceptions, definitions, and clarifications necessary to fully implement the act.
Expanded Definition of Non-Canadians
The regulations clarify that a non-Canadian is defined to include the following prescribed entities: a) a company formed outside of Canada (a "non-Canadian company"); and b) a Canadian company that is controlled by a non-Canadian company, or controlled by a person referred to in paragraph (a), (b) or (c) of the definition of non-Canadian in section 2 of the Act.
Control was previously left undefined by the act. The regulations have defined control with respect to a corporation or entity, as: 1) direct or indirect ownership of shares or interests of the corporation or entity representing 10% or more of the value of the equity in it, or carrying 10% or more of its voting rights; or, 2) control in fact of the corporation or entity, whether directly or indirectly, through ownership, agreement or otherwise.
Note that in many circumstances, control typically refers to the majority, or more than 50% ownership. Setting the bar for control at 10% ownership inevitably withholds a large number of corporations from purchasing property.
Who's Exempt from Foreign Buyer Ban
As noted in our first article about the foreign buyer ban, individuals exempt from the prohibition include 1) temporary residents within the meaning of the Immigration and Refugee Protection Act, 2) non-Canadians who purchase property with a Canadian spouse, and 3) people registered under the Indian Act.
In order to meet the definition of a temporary resident for the purpose of the Prohibition on the Purchase of Residential Property by Non-Canadians Act, the resident must either be enrolled in a program of authorized study at a designated learning institution, or, hold a work permit. Depending on which criteria the temporary resident falls under, there are additional conditions that must be met that fall beyond the scope of this article.
People of a prescribed class of persons are also exempt. The regulations specify that the prescribed class of persons include:
- 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; and
- persons that have made a claim for refugee protection, if that claim has been found eligible and referred to the Refugee Protection Division.
Expanded Definition of Residential Property
The act defines residential property to include any real property or immovable that is situated in Canada and that includes, inter alia, detached houses containing no more than three dwelling units, semi-detached houses, rowhouse units, residential condominium units, any other similar property as those listed, and any prescribed real property or immovable.
The regulations specify that residential property must be located within a CA or CMA for the property to fall subject to the act. Statistics Canada defines a census agglomeration (CA) as a municipality that must have a core population of at least 10,000, and a census metropolitan area (CMA) as a municipality that must have a total population of at least 100,000, 50,000 or more of which must live in the municipalities' core.
The regulations clarify that residential property located in both CAs and CMAs are included for the purpose of the act; in Manitoba, some of these locations include Brandon, Portage la Prairie, Steinbach, Thompson, Winkler and Winnipeg.
Property Outside CA and CMA
Property that is located in an area of Canada that is not within either a CA or CMA is excluded from the definition of residential property under the act. Statistics Canada’s list of CAs and CMAs in Canada shows that the geographical location of each municipality may expand much further out than initially expected, impacting a number of rural areas that wouldn’t otherwise be impacted by the act. For example, Oak Bluff, Manitoba, has a population of approximately 1,000 to 2,000 people. At first glance, it appears as though residential property located in Oak Bluff would be excluded from the definition of residential property under the act. However, if you look at the map of Winnipeg on Statistics Canada’s website, you can see that Oak Bluff is in fact captured by the CMA of Winnipeg, preventing non-Canadians from purchasing property in this municipality.
Purchasing property under the act includes acquiring a property with or without any conditions of a legal or equitable interest or a real right. Exceptions to the rule include: 1) individuals who acquire property as a result of an interest or real right resulting from death, divorce, separation or a gift; 2) the rental of a dwelling unit to a tenant for the purpose of its occupation by the tenant; 3) the transfer under the terms of a trust that was created prior to the coming into force of the act; or 4) a transfer resulting from the exercise of a security interest or secured right by a secured creditor, are all exempt from the scope of purchasing or acquiring property under the act.
Order to Sell
The superior court of the applicable province may order the sale of a property purchased in contravention of the act. An order may only be made if the non-Canadian is the owner of the residential property at the time the order is made, notice has been given to every person who may be entitled to receive proceeds from the sale, and the superior court of the province is satisfied that the impact of the order would not be disproportionate to the nature and gravity of the contravention, the circumstances surrounding the commission of the contravention and the resulting conviction.
Article updated April 3, 2023
Fillmore Riley LLP's Real Estate Practice
We have a multidisciplinary real estate practice built on decades of advising purchasers, vendors, landlords, tenants and developers of commercial, office, industrial, hotel and multifamily residential properties. Our real estate lawyers have the in-depth knowledge and experience to adeptly assist you through all aspects of real property transactions. For more information, or if you have any questions, please contact a member of Fillmore Riley's Real Estate practice.