Prohibition on the Purchase of Residential Property by Non-Canadians Act

August 12, 2024 | Danny McMullen and Ayath Azhar

The Prohibition on the Purchase of Residential Property by Non-Canadians (the “Act”) came into effect on January 1, 2023, with the aim of improving affordable housing in Canada. The Act imposes a comprehensive prohibition on the acquisition of residential property by non-Canadian individuals for a period of 2 years. This prohibition encompasses both direct and indirect forms of purchase, thereby precluding non-Canadians from holding any interest in residential property without violating the Act. Violations of the Act can result in fines of up to $10,000. However, recent amendments to the Act may present advantageous opportunities for non-Canadian purchasers.

When is this Prohibition Applicable?

According to the Act, a non-Canadian is defined as:

  • an individual who is neither a Canadian citizen nor a person registered as an Indian under the Indian Act nor a permanent resident;
  • a corporation that is incorporated otherwise than under the laws of Canada or a province;
  • a corporation incorporated under the laws of Canada or a province whose shares are not listed on a stock exchange in Canada for which a designation under section 262 of the Income Tax Act is in effect and that is controlled by a person referred to in paragraph (a) or (b); and
  • a prescribed person or entity.

Exceptions to the non-Canadian classification, with certain prescribed conditions, include:

  • temporary residents studying or working in Canada
  • refugees
  • non-Canadian spouses and common-law partners

Most recently, on February 4, 2024, the Canadian Government extended this prohibition for an additional two years, until January 1, 2027.

Residential Property Exemption

The definition of Residential property, as defined by the Act, is:

  • detached house of similar building containing not more than 3 dwelling units;
  •  part of a building that is a semi-detached house, rowhouse unit, residential condo unit or other similar premises; or
  • any prescribed real property or immovable.

The definition allows for the purchase of larger buildings that contain 4 or more dwelling units as well as properties located outside of Census Metropolitan Areas and Agglomerations.

Additionally, the recent repeal of section 3(2) of the Regulation, has introduced a new exemption for non-Canadians purchasing property. The revised definition allows for the acquisition of land that does not contain any habitable dwelling units, even if such land is zoned for residential or mixed-use and located within census agglomeration or census metropolitan areas. Consequently, purchasing vacant land intended for any purpose is now permitted.

Purposes of Development Exemption

The amendment to section 4(2) of the Regulation, has expanded the range of circumstances in which the Act does not apply, including, but not limited to, the acquisition by a non-Canadian of residential property for the purposes of development.

While the term ‘development’ is not explicitly defined in the Act, it generally encompasses the process of evaluating, planning, and undertaking alterations or improvements to a residential property or the land on which it is located.[1] However, repairs, renovations, or remodels (such as expanding or reconfiguring an existing property) are unlikely to fall under this exemption.[2]

To qualify for the exemption, there must be clear evidence of an intention to undertake development prior to the acquisition of the property.[3] Subsequent failure to develop the property once acquired may not necessarily contravene the Act, provided a good faith intention to develop can be demonstrated and that any subsequent decision not to proceed with development is also substantiated.[4]

Here at Northview Law, we are committed to helping you through this process. If you have any questions regarding foreign ownership of Canadian housing or additional exemptions, please contact our office.

[1] “Prohibition on the purchase of residential property by Non-Canadians Act”, (27 March 2023), online: CMHC <https://tinyurl.com/4vxkc3k9>.

[2] Ibid.                       

[3] Ibid.

[4] Ibid.

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