RESOURCES

 Following in the footsteps of the Act (Prohibition on the Purchase of Residential Property by Non-Canadians Act) and the accompanying Regulations, the Amendments to the Regulations took all of us by surprise when they were introduced on March 27, 2023. However, a significant deviation from those footsteps is that these Amendments provide some relaxations to foreign buyers with regards to purchasing residential property in Canada. In response to fervent criticism from various stakeholders, the government has addressed certain inadequacies in the legislation by repealing or amending specific provisions that had been creating more problems than they were solving. 

Without further ado, here are the Amendments that were introduced and are effective starting March 27, 2023:

1. Allowing More Temporary Workers to Purchase

Prior to the Amendments, temporary workers were required to meet a list of requirements in order to be exempt from the ban. The requirements included tax filing history, work history in Canada and a purchase price limit. Now, temporary workers can purchase residential property in Canada as long as they fulfill the following two conditions:

1. they have 183 days or more of validity remaining on their work permit or work authorization on the date of purchase; and 
2. they have not purchased more than one residential property. 

This is a huge relief to temporary workers that wished to purchase residential property in Canada but were unable to do so due to the long list of requirements. With Canada being a major attraction for international talent to immigrate and make it their new home, it was thwarting plans for many people who intended to put down roots in Canada. 

Furthermore, the ban indirectly encompassed properties that had no contribution towards increasing the housing supply for the majority of the public. For an interesting example, under the previous Regulations, a hockey player from USA who just signed a contract with Toronto Maple Leafs and recently moved to Canada on a work permit, would not be considered exempt from purchasing a mansion on the outskirts of Toronto! 

The new Amendments provide greater flexibility and an opportunity to a greater number of temporary workers to proceed with their home-buying plans. 

The Amendments do not change the NRST provisions: It is imperative to note that the Foreign Buyer Ban and the Non-Resident Speculation Tax are two separate issues. Even though a temporary worker may be eligible to purchase residential property in Canada, NRST will most likely still be applicable, which is 25% of the purchase price for Agreements entered on or after October 25, 2022. Please find more information about the NRST by clicking here.

2. Purchase of Vacant Land is No Longer Prohibited

Another provision which resulted in transactions being jeopardized is the one that prohibited foreign buyers from purchasing vacant land that is zoned for residential use or mixed use. Vacant land was defined by the Regulations as “…. land that does not contain any habitable dwelling, that is zoned for residential use or mixed use….”. In some situations, this provision resulted in encompassing transactions involving properties that had no possible relation to housing supply. For example, a purchase transaction of a grocery store situated upon a land zoned for mixed use could be prohibited considering that it contained no habitable dwelling! 

The prohibition of purchasing vacant land did not only create situations as noted above, but also interfered with residential land development, which is contrary to the intention of the Act, i.e., generating more housing supply for the people. 

3. Exception for Development Purposes

The Act was facing much criticism from developers, businesses and other stakeholders as it was hindering residential land development by disallowing foreign corporations and businesses to invest. The government has clarified their intention of encouraging development by repealing the prohibition to purchase vacant land as noted above, and also by adding an exception for development purposes. 

The Amendments have also extended the already available exception to publicly traded corporations to include publicly traded entities formed under the laws of Canada or a province and which are controlled by a non-Canadian. 

4. Increasing Corporation Foreign Threshold to 10%

The Regulations provided a low threshold of 3% of equity value or voting rights, which if held by deemed non-Canadians, will render a privately held corporation/entity as a non-Canadian under the Act, and therefore, ineligible to purchase residential property in Canada. This threshold has now been increased to 10%, which will allow more corporations/entities to purchase residential property in Canada. 

The Amendments have also extended the already available exception to publicly traded corporations to include publicly traded entities formed under the laws of Canada or a province and which are controlled by a non-Canadian. 

Following the Amendments, we hope to see less transactions inadvertently being jeopardized by the ban, and more people being able to call a place their home in Canada. The Amendments are also a sigh of relief for businesses and developers looking to invest in residential development in Canada. 

With the Regulations being introduced right before the Act came into effect this year and the Amendments being rolled out within less than three months of the Act coming into effect, we understand that there is a lot of uncertainty surrounding the legislation. If you have any queries or concerns about the Foreign Buyer Ban, our firm is here to help. We have the resources and expertise to guide you through the process. 

Please reach out to us with your queries and we will be more than happy to assist you. 

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