Important Amendments to Regulations under the Prohibition on the Purchase of Residential Property by Non-Canadians Act

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On March 27, 2023, the Federal Government of Canada announced Regulations Amending the Prohibition on the Purchase of Residential Property by Non-Canadians Regulations (together “the Amended Regulations”) which come into force immediately. The Amended Regulations have been designed to enhance the flexibility of newcomers and businesses looking to add to Canada's housing supply by allowing non-Canadians to purchase a residential property in certain circumstances.

This is an update of our post published on January 9, 2023, Canada’s Two-Year Prohibition on Foreign Purchases of Residential Property: What You Need to Know.

For information regarding the amendments relating to the ability of foreign workers to buy residential property in Canada, see our related post.

Higher Ownership Threshold

The Prohibition on the Purchase of Residential Property by Non-Canadians Act and its accompanying Regulations (together, “the Act”) which came into force on January 1, 2023, originally provided that “control” of a corporation or entity by a Non-Canadian – meaning direct or indirect ownership amounting to 3% or more of the value of the corporation’s or entity’s equity or its voting rights – would render that corporation or entity itself “Non-Canadian” and therefore make it subject to the ban. The Amended Regulations raise that ownership threshold to 10%.

Exception for Publicly Traded Entities

The Act originally provided an exception for corporations whose shares are listed on a stock exchange in Canada even though they are “controlled” by a non-Canadian, but had not extended this exception to “entities”. The Amended Regulations extend this exception to entities whose shares or ownership interests are so listed.

Repeal of Provision regarding Land Zoned for Residential or Mixed Use

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” was prescribed as “residential property” in the original Act. This raised significant concerns in the commercial real estate industry since, among other adverse implications, it would catch a large number of properties with residential or mixed use zoning but that had already been developed for commercial use. The Amended Regulations have repealed this category so that, from and after March 27, 2023, the Act no longer applies to land that does not contain any habitable dwelling and that is zoned for residential use or mixed use.

New Exception for Acquisitions for Purposes of Development

The commercial real estate industry expressed some concern that the broad strokes of the Act would have the effect of stifling new residential development, which seemed incompatible with the stated purpose of making housing more affordable for Canadians. For example, the Act prohibits the purchase of detached houses with not more than three dwelling units and semi-detached homes and rowhouses by non-Canadians. This would prevent a developer from buying several single family houses for redevelopment as townhouses, apartments or condominiums – denser forms of development which would provide more, not less housing stock. Although the Act continues to apply to detached homes, semi-detached homes and rowhouses, the Amended Regulations now include an exception for “the acquisition by a non-Canadian of residential property for the purposes of development.”

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