On March 27, 2023, new amendments to the Prohibition on the Purchase of Residential Property by Non-Canadians Regulation came into force (the “Amendments”). These Amendments were announced by the Minister of Housing and Diversity and Inclusion and follow the much-discussed Prohibition Act and Regulations of the same name that took effect on January 1, 2023.
One of the ostensible goals of the Amendments is to narrow the scope of the Act so that it has less of an impact on foreign buyers in the commercial sphere. Of course, the title of the Act makes it clear that the legislature intended to limit foreign buyers from purchasing only residential property. Accordingly, the Amendments have largely clarified the scope of both the types of purchasers and the purposes for acquiring property that are exempt from the prohibition.
Formerly, “control” in section 1 of the Regulations in respect of a corporation or entity was defined as “direct or indirect ownership of 3% or more of the value of the equity in it, or carrying 3% or more of its voting rights”. Now, the Amendments have increased this 3% cap to 10%. This means that up to 10% of a corporation or entity may be owned or controlled by non-Canadians, and that corporation or entity may still purchase residential property in Canada.
Paragraph 2(b) of the Regulations, which previously created an exception for publicly traded corporations under the Act, has now been expanded to include publicly traded entities.
Subsection 3(2) of the Regulations has been repealed altogether. This section previously included within the definition of “residential property” vacant land that was zoned for residential or mixed use and that was located within a census agglomeration or a census metropolitan area. With this section now removed from the Regulations entirely, this means that foreign purchasers may now buy vacant land that is zoned for residential and mixed use.
In keeping with the partly commercial focus of the Amendments, acquisition of residential property by a non-Canadian for the purposes of development will not be prohibited under the newly added paragraph 4(2)(e) of the Regulations.
Finally, the Regulations relating to the exemption of temporary workers in subsection 5(b) have now been more precisely defined to allow foreign workers to purchase a residential property who have 183 days or more of validity remaining on their work permit or work authorization on the date of purchase. Consequently, the requirement that temporary workers file all required income tax returns and work for three out of four years prior to purchasing the property has been replaced by the new addition to subsection 5(b). However, this group of potential purchasers is still limited to purchasing only one residential property.
The Amendments are helpful for clarifying certain sections of the Act and Regulations that had been previously been unclear, particularly regarding the rules around purchasing vacant land zoned for mixed use. The Amendments also now permit corporations to have a higher foreign ownership cap of 10%, up from the former 3%, and the exceptions to the prohibition extend from publicly traded corporations to publicly traded entities. Furthermore, land acquired by foreign buyers for the purpose of development is no longer prohibited, and foreign workers with at least 183 days left on their work permit or authorization are eligible to purchase a residential property.
As the legislation will likely continue to evolve, it is recommended to stay current with any future amendments to the Act and Regulations for those involved in real estate transactions in Canada.