Canada: Amendments to Prohibition on the Purchase of Residential Property by Non-Canadians Act and Regulations

Published on Mar 28, 2023

After significant lobbying by the real estate industry, in the stated effort to “enhance the flexibility of newcomers and businesses looking to add to Canada’s housing supply”, the Honourable Ahmed Hussen, Minister of Housing and Diversity and Inclusion, announced amendments (the “Amendments”) to the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”) and the regulations thereunder (the “Regulations”). The Amendments take effect on March 27, 2023.

Background

The Act, which took effect on January 1, 2023, prohibits the “purchase” of any “residential property” directly or indirectly by “non-Canadians.” It is presently only intended to be in effect for the 2023 and 2024 calendar years. The Regulations, released on December 21, 2022, provided additional detail on key elements of the Act.

As described in our January 19, 2023 Update, What You Need to Know Re: The New Prohibition on Foreign Purchases of Real Estate, the Regulations included certain provisions that had significant unexpected (and arguably unintended) implications for commercial property transactions.

Highlights of the Amendments

Among other things, the Amendments provide as follows:

  • The Act will not apply to the acquisition of vacant land (including for purposes of residential development). Specifically, the Amendments repeal section 3(2) of the Regulations that previously expanded the definition of “residential property” to include any land that does not contain any habitable dwelling, that is zoned for residential use or mixed use, and that is located within a census agglomeration or a census metropolitan area.
  • A new exception will allow non-Canadians to purchase residential property for the purpose of development. Canada Mortgage and Housing Corporation’s commentary on the Amendments elaborates on what is and is not “development” for such purposes.
  • The exception to the definition of “non-Canadian” applicable to corporations listed on Canadian stock exchanges now extends to all publicly traded entities formed under the laws of Canada or a province (i.e., publicly traded REITs).
  • A privately held corporation or other entity formed under the laws of Canada or a province, and “controlled” by a non-Canadian, is deemed to be a non-Canadian for purposes of the Act. Under the Regulations, “control” was defined to include direct or indirect ownership representing 3% or more of equity value or voting rights. The Amendments increase this threshold from 3% to 10%. The government’s press release indicates that this aligns with the definition of “specified Canadian Corporation” in the Underused Housing Tax Act (Canada).

The regulations enacting the Amendments have not yet been published.

Looking Forward

The Minister’s announcement is a welcome development for the Canadian real estate community, including non-Canadians wishing to develop real estate in Canada.

For questions concerning the Amendments, please contact any member of our Real Estate Group.