New federal legislation known as the Prohibition of the Purchase of Residential Property by Non-Canadians Act will begin taking effect on January 1, 2023 and this aims at prohibiting non-Canadians from directly or indirectly purchasing residential property within Canada. This country wide ban will be in effect for a two-year period, commencing January 1, 2023, and lasting until December 31, 2024. Although further detail regarding this act has since been published via its implementing regulations (the “Regulations”), it will still remain to be seen how these rules will be applied in practice.
The prohibition bans the conclusion and signing of any agreement for the purchase and sale of residential property that is dated and effective after January 1, 2023. However, the property must be “residential” or a detached house (with less than 3 separate living quarters), a rowhouse, condominium, semi-detached home (i.e. a townhome) including vacant land (without an inhabitable building) located within a municipality, or property in the same area zoned for mixed or residential use. This means that purchases by a “non-Canadian” of rural property (i.e. property located outside of an area defined by Statistics Canada as a census metropolitan area or census agglomeration area) and commercial property are not caught within the scope of the prohibition. For more information, please refer to the Statistics Canada resources to identify the covered population centres where this prohibition applies.
In essence, this means vacation homes not located within one of Alberta’s urban centres or property that is or will be purely zoned as commercial real estate is excluded. Non-Canadians can therefore invest in, purchase, or otherwise acquire an interest in these categories of real estate.
This ban will affect foreign corporations, other investment vehicles through which non-Canadians participate, and “non-Canadian” individuals and punish them from purchasing any Canadian residential property for the two year period. The ban also applies to and penalizes every professional that advises, helps, or attempts to persuade a non-Canadian to purchase relevant property. This means that any realtor, mortgage broker, lawyer, or other professional advisor (i.e. an accountant) that assists the non-Canadian to acquire a property interest is also on the hook. If the prohibition is breached then these persons are at risk for up to a $10,000 fine. Any contravention under this new Act will not automatically invalidate a sale of a residential property. However, if the government is put on notice of a prohibited transaction, then it can apply for a court award and judgment to effectively force a re-sale of the property to a permitted Canadian buyer on any terms the court considers appropriate. More concerningly, however, the seller cannot recoup any profit for breaching the prohibition under this new law. In fact, the resale price cannot exceed the value that the seller originally purchased the property for. This means that sellers who have invested capital in their homes or whose property has appreciated due to market conditions cannot recoup any gain in equity. This law comes down with a heavy hand on those who do not do their due diligence on a buyer’s background prior to concluding a sale during these next two years.
So who is a “non-Canadian” for the purposes of these rules? Under this act, any individual without (i) a Canadian passport; (ii) permanent residency; or (iii) who does not have a valid temporary worker or student visa; (iv) who is not a qualified refugee within the remit of the Immigration and Refugee Protection Act; or (v) the spouse or common law partner of a Canadian citizen, permanent resident, or individual with a valid work or study permit is a “non-Canadian” prohibited from buying Canadian residential property. This also includes business ventures through which a non-Canadian acts to buy property, so companies incorporated in Canada (where a non-Canadian has even a de minimis equity or voting interest of 3% or more), companies incorporated outside Canada, and other investment vehicles like partnerships, joint ventures and the like are also “non-Canadians” to which the prohibition applies.
It will be interesting to watch if this Act could be found to be unconstitutional on the basis that the property rights fall under the purview of provincial governments, pursuant to section 92 of the Constitution Act, 1867.
In Alberta, the sale of residential property is typically completed by realtors preparing and having signed the Alberta Real Estate Association (“AREA”) standard form “Residential Purchase Contract”. However, note that the current provisions and form of this document do not yet provide sufficient protections for sellers. The Real Estate Council of Alberta (“RECA”) has not put forward any formal guidance on the measures and contract language that real estate professionals and advisors can take to revise this standard form agreement to accord with this new law. However, certain steps and contract language can be included to provide appropriate protection.
Are you concerned about the application of this law and how it might affect you or your clients? Contact us to see how we can help streamline your due diligence process and what you can do with the sale and purchase agreements you work with. We are prepared and we stand ready to help.
By Nicole Duchesne, Student-at-Law and Emily Yeow, Associate Lawyer, Real Estate, Corporate, and Estate Planning
 Prohibition on the Purchase of Residential Property by Non-Canadians Act, SC 2022, c 10, s 4(1).
 Ibid at s 4(2).
 Ibid at s 5.
 Ibid at s 6(1).
 Ibid at s 7(1).