- Here’s a synopsis of the news release from our
- President and CEO Don Kottnick
- Dear Colleagues and Friends,
- On January 1, 2023, the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Foreign Buyers Ban”) came into effect in Canada and will be in place for two years. As agents and brokers we have an understanding of this new legislation so that we can properly advise and refer clients to an appropriate legal or financial third-party professional when necessary.
- Although some of our clients will be affected by this new legislation, many will be exempt. As a company, Sotheby’s International Realty Canada expects that we will see continued interest and demand for Canadian real estate from purchasers from abroad who will remain fully qualified to purchase a home in Canada.
- Who does the ban target?
- The legislation targets non-Canadian citizens, as well as non-Canadian commercial entities, i.e., those formed not pursuant to the laws of Canada or one of its provinces, or an entity formed under Canadian or provincial laws with direct or indirect ownership by a non-Canadian, where that ownership amounts to 3% or more of the value of the entity’s equity or voting rights.
- However, there are several exemptions subject to varying and complex conditions.
- Who is exempt from the ban?
- The ban does NOT apply to:
- Canadian citizens or permanent residents.
- The spouse or common-law partner of a Canadian citizen, permanent resident, person registered under the Indian Act, or refugee.
- Non-Canadians who are looking to rent a residential property in Canada.
- Temporary residents enrolled in a program of authorized study at a designated learning institution (as defined in Immigration and Refugee Protection Regulations), who meet the eligibility criteria.
- Temporary residents with a valid work permit or authorization to work in Canada, who meet the eligibility criteria.
- Refugees, temporary residents who are proven to be fleeing conflict, and those making a claim for refugee protection.
- Accredited members of foreign missions in Canada.
- Important: these exemptions are subject to varying and complex conditions. If you are working with a non-Canadian client who may be exempt, you must refer them to the appropriate third-party professional (e.g. a lawyer or accountant) to determine their eligibility.
- What property types are included in the ban?
- The legislation applies to residential properties, including detached homes or similar buildings, as well as semi-detached houses, rowhouse units, residential condominium units and other similar premises, that are located in a census metropolitan area or a census agglomeration. A census metropolitan area has a total population of at least 100,000 people, with at least 50,000 living in its core, and a census agglomeration has a core population of at least 10,000 people.
- This means that the Foreign Buyers Ban does not apply to non-Canadians buying a residential property outside of a census metropolitan area or census agglomeration.
- What property transaction types are affected by the ban?
- The regulations apply to purchases, defined as a direct or indirect acquisition of a right or interest in residential property.
- It does not apply to property acquisitions as a result of death, divorce, gifts, or a separation.
- What are the penalties for violating the Foreign Buyers Ban?
- There are significant penalties for violating this legislation. Any person knowingly assisting or attempting to assist a non-Canadian in the purchase of a prohibited property may be subject to a summary conviction offence under the Criminal Code and a fine of up to $10,000.
- As an agent/broker, what we do protect everyone when working with clients to ensure that my client is in compliance with this legislation?
- When working with a buyer…
- We determine the purchaser’s citizenship, residency, or exemption status, request to see your client’s identification (ID) before showing them any properties or signing any representation agreements. We check that the ID, such as a passport, is valid, current, AND authentic.
- We keep a record of the buyer’s identification and the steps we’ve taken to verify the document.
- If your buyer is a non-Canadian that may be exempt, refer them to an appropriate legal or financial third-party professional. The best practice is to provide several options and allow your client to choose.
- We complete CREA’s Certificate and Consent of Purchaser and have this ready to submit with offers.
- When working with a seller…
- We insert a FBB-specific clause in your agreement.
- And last we request a copy of the Buyer’s Certificate and Consent of Purchaser.
- A Follow-up from our President for the Amendments released on March 27th, 2023
- On March 27, 2023, the federal government announced important amendments to the Prohibition on the Purchase of Residential Property by Non-Canadians Act (“the “Foreign Buyers Ban”, which came into effect in Canada on January 1, 2023) to enhance the flexibility of newcomers and businesses looking to add to Canada’s housing supply. It is very important for agents and brokers to understand these updates so that we can properly advise and refer our clients to an appropriate legal or financial third-party professional when necessary.
- There are four key changes to be aware of:
- People who hold a work permit or are authorized to work in Canada under the Immigration and Refugee Protection Regulations are now allowed to purchase a residential property. Work permit holders are eligible if they have 183 days or more of validity remaining on their work permit or work authorization at time of purchase, and they have not purchased more than one residential property. The current provisions on tax filings and previous work experience in Canada are also being repealed.
- Vacant land zoned for residential and mixed use can now be purchased by non-Canadians and used for any purpose by the buyer, including for residential development.
- There is now an exception allowing non-Canadians to purchase residential property for the purpose of development. The amendments also extend the exception currently applicable to publicly traded corporations under the Act, to publicly traded entities formed under the laws of Canada or a province and controlled by a non-Canadian.
- The corporation foreign control threshold has increased from 3% to 10% for the purposes of the prohibition, with regards to privately held corporations or privately held entities formed under the laws of Canada or a province and controlled by a non-Canadian. This aligns with the definition of ‘specified Canadian Corporation’ in the Underused Housing Tax Act.
- As an agent/broker, we continue to take steps to protect everyone involved when working with clients to ensure that they are in compliance with this legislation:
- When working with a buyer
- To determine the purchaser’s citizenship, residency, or exemption status, ID your client BEFORE showing them any properties or signing any representation agreements. Check that the ID (such as a passport) is valid, current, AND authentic.
- Keep a record of the buyer’s identification and the steps you’ve taken to verify the document.
- If your buyer is a non-Canadian that may be exempt, refer them to an appropriate legal or financial third-party professional. The best practice is to provide a number of options, and allow your client to choose.
- Complete CREA’s Certificate and Consent of Purchaser and have this ready to submit with offers.
- When working with a seller
- Insert FBB-specific clauses into the offer.
- Request a copy of the Buyer’s Certificate and Consent of Purchaser.
- *The contents herein are not to be construed as legal advice and are not warranted. Please rely on the content of the applicable laws and Acts, and the services of your legal advice.
- The Legislation can be found here: https://laws-lois.justice.gc.ca/eng/acts/P-25.2/page-1.html
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