Canada’s Foreign Buyer Ban on Residential Property for 2023-2025

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The Prohibition on the Purchase of Residential Property by Non-Canadians Act (the Act) will be a two year foreign buyer ban on certain types of Canadian residential properties.

**UPDATE**

The federal government released the Regulations with more details on exemptions and enforcements on December 21st 2022, this article has been updated to include those new details.

**March 28th 2023 UPDATE**

The regulations were amended on March 27th 2023. The foreign ownership percentage of a corporation or entity was changed from 3% to 10% to be considered a Non-Canadian entity. The exemption for work permit holders was also amended, the exemption now only requires that the work permit has 183 days or more validity as of the date of purchase and they have not purchased more than one residential property. Non-Canadians are also now allowed to purchase residential property if the purpose is for development and can also buy vacant land. The article below will be updated with these changes while noting the old regulations.

Key points of the foreign buyer ban:

• It comes into force on January 1st 2023 but will not prohibit any agreements entered into prior to this date.
• There are exemptions for some “Non-Canadians”.
  • Temporary residents who are studying at a designated learning institution and meet all the following: filed all required income tax returns in the five preceding tax years in which the purchase was made, 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, purchase price does not exceed $500,000, and have not purchased any other residential property in Canada.
  • Temporary residents who hold a work permit or are otherwise authorized to work in Canada and meet all the following: they have 183 days or more remaining on their work permit on the date of purchase and they have not purchased any other residential property in Canada.*
  • Foreign nationals who are diplomats, consular staff and members of international organizations.
  • Temporary residents in Canada due to an exemption under section 25.2 of the Immigration and Refugee Protection Act (IRPA). This is a special exemption for those fleeing international crises (ie. war in Ukraine, Hong Kong residents public policy, etc.) and an immigration professional should be consulted to see if the buyer meets this exemption.
  • A refugee with a successful claim in accordance with subsection 99(3) or IRPA. Again, please consult with an immigration professional.
• The ban only applies for some residential properties.
  • Does not apply to residential properties outside of census agglomerations or census metropolitan areas. This exemption is meant to exempt certain recreational properties (ie. cottages) that would otherwise be caught in the foreign buyer ban but it should be noted that some cottage areas are not excluded.
  • Does not apply to residential properties with four or more individual dwelling units (ie. quadplexes and more, or apartment buildings).
• There are exemptions for some types of purchases
  • Acquisition due to death, divorce, separation or a gift.
  • Rental of a property to a tenant for the purpose of its occupation by the tenant.
  • Transfer under the terms of a trust that was created prior to January 1st 2023.
  • Transfer resulting from the exercise of a security interest or secured right by a secured creditor.
• Consequences for any person who contravenes the foreign buyer ban is a $10,000 fine.
  • Furthermore, the non-Canadian can be ordered to sell the property bought in contravention of the ban and the most the non-Canadian purchaser can receive from the sale is the purchase price they paid for the property when they bought it.

How long does the foreign buyer ban last?

The Act comes into force on January 1st 2023 until December 31st 2024 and is meant to be a temporary measure to reduce foreign demand for Canadian real estate to alleviate the housing crisis in Canada.

The foreign buyer ban will not affect foreign buyers who have already entered into a binding agreement of purchase and sale prior to January 1st 2023. The ban also applies to buyers signing pre-construction APSs and assignees during the period of the ban.

Who is banned from buying?

The Act applies to “non-Canadians”. Section 2 of the Act defines “non-Canadian” to mean:

• Individuals who are neither Canadian citizens, registered Indian, nor permanent residents of Canada.
• Corporations incorporated outside Canada.
• Corporations incorporated in Canada but controlled by foreign corporations or individuals who are not Canadian citizens nor permanent residents of Canada. The Regulations have a strict definition of control; direct or indirect ownership of shares representing 10% or more of the value of the equity or voting rights OR control in fact through ownership agreements, etc.
• Other persons/entities to be defined in the Regulations.

Importantly, there are several exemptions to the foreign buyer ban outlined in subsection 4(2) of the Act:

• Temporary residents within the meaning of the Immigration and Refugee Protection Act and meet the requirements in the Regulations, specifically:
  • Certain students in Canada who meet the following requirements:
    • Must be studying at a designated learning institution (a list which can be found here). There are some small private colleges that might not be on this list.
    • Filed all required income taxes in the preceding five years in which the purchase was made. Note that only required income taxes need to be filed, students who had no income or other filing requirements do not need to file those preceding year tax returns.
    • Physically present in Canada for a minimum of 244 days in each of the five years preceding the date of purchase. This means that the students needs to have been in Canada for at least five years to meet this requirement. The 244 days is meant to cover the typical school term.
    • The purchase price of the residential property does not exceed $500,000.
    • They have not purchased more than one residential property. The wording in the Regulations is not very clear but my interpretation is that the purchase must be their first residential property. Property owned outside Canada does not count based on the Regulations.
  • Certain workers in Canada who meet the following requirements.
    • Hold a work permit or are otherwise authorized to work in Canada. Some temporary residents in Canada do not need a work permit and they would still be eligible for this exemption.
    • Have 183 days or more of validity remaining on their work permit or work authorization on the date of purchase. The date of purchase being the closing date on the APS. This requirement was added in the March 27th amendment to the Regulations.
    • They have not purchased more than one residential property. Again, similar to the student exemption, my interpretation is that the purchase must be their first residential property and property owned outside Canada does not count.
• Diplomats, consular staff, and members of international organizations.
• Temporary residents in Canada under a visa provided under section 25.2 of the IRPA. This visa is provided for humanitarian and compassionate reasons and meant to exempt those fleeing international crises (ie. war in Ukraine, Hong Kong residents public policy, etc.). This is a very useful exemption as it means the buyer does not need to meet the other requirements for temporary resident students and workers above.
• Refugees who have made a claim for refugee protection under subsection 99(3) of the IRPA and the claim has been found eligible.
• Non-Canadian individuals who purchase with a spouse who is a Canadian citizen, permanent resident, registered Indian, a refugee, or a temporary resident who meets the student and worker exemptions above.

Types of Property Affected?

The foreign buyer ban applies to “residential property” under the Act, meaning:

• Detached houses or similar buildings containing less than four dwelling units.
• A part of a building that is intended to be owned apart from any other unit in the building (ie. semi-detached house, rowhouse, condominium unit).
• Vacant land that is zoned for residential or mixed use located within a census agglomeration or a census metropolitan area (more on the definitions below).

The Regulations exclude property outside a census agglomeration (CA) or a census metropolitan area (CMA). A CA has a core population of at least 10,000 and a CMA has a total population of at least 100,000 of which 50,000 or more live in the core. This exclusion is meant to exclude recreational properties, mainly cottages, from the ban but some popular areas such as Squamish in BC and Collingwood, Wasaga Beach and Kawartha Lakes in Ontario are included. CA and CMAs can be confirmed here by filtering for CA/CMA.

What are the consequences?

Every person who contravenes OR helps contravene the foreign buyer ban will be guilty of an offence and liable to be fined up to $10,000. Real estate agents, lawyers, builders, and even sellers should be aware of the wide reaching implications of these penalties.

Section 7 of the Act also states that the court may order the property bought under the foreign buyer ban to be sold. The Regulations state that the order for sale can only be made; if the non-Canadian is still the owner when the order is made, notice has been given to every person who may be entitled to receive proceed from the sale, and the impact would not be disproportionate to the nature and gravity of the contravention.

More importantly the order will result in the non-Canadian receiving an amount not greater than the purchase price they paid for the residential property. Meaning that after repaying any court costs and Canadian co-owners or third parties (ie. mortgage, liens, other creditors, etc), any net gain is paid to the government. This is potentially a much bigger “fine” than the $10,000.00 for contravening the foreign buyer ban.

Conclusion

The two year foreign buyer ban along with the recent changes to the GST/HST on Assignments and Ontario’s expansion of the NRST is a continuing trend of government intervention to tackle the housing affordability crisis. Combined with the rising interest rate environment and the potential for a recession in the coming years, there will be a lot of uncertainty.

Notes

*Prior to March 28th 2023, the requirements were: worked full time (30hr/week) in Canada for a minimum three years within the four years preceding the year in which the purchase was made, filed required income tax returns for said years, and have not purchased any other residential property in Canada