Prohibition on the Purchase of Residential Property by Non-Canadians Regulations: SOR/2022-250
Canada Gazette, Part II, Volume 156, Number 26
SOR/2022-250 December 2, 2022
PROHIBITION ON THE PURCHASE OF RESIDENTIAL PROPERTY BY NON-CANADIANS ACT
P.C. 2022-1259 December 2, 2022
Her Excellency the Governor General in Council, on the recommendation of the Minister of Housing and Diversity and Inclusion after consultation with the Minister of Finance, makes the annexed Prohibition on the Purchase of Residential Property by Non-Canadians Regulations under section 8 of the Prohibition on the Purchase of Residential Property by Non-Canadians Act footnote a.
Prohibition on the Purchase of Residential Property by Non-Canadians Regulations
1 The following definitions apply in these Regulations.
- means the Prohibition on the Purchase of Residential Property by Non-Canadians Act. (Loi)
- census agglomeration
- means a census agglomeration within the meaning of the Statistics Canada document entitled Standard Geographical Classification (SGC) 2021. (agglomération de recensement)
- census metropolitan area
- means a census metropolitan area within the meaning of the Statistics Canada document entitled Standard Geographical Classification (SGC) 2021. (région métropolitaine de recensement)
- with respect to a corporation or entity, means
- (a) direct or indirect ownership of shares or ownership interests of the corporation or entity representing 3% or more of the value of the equity in it, or carrying 3% or more of its voting rights; or
- (b) control in fact of the corporation or entity, whether directly or indirectly, through ownership, agreement or otherwise. (contrôle)
Non-Canadian — prescribed entities
2 For the purposes of paragraph (d) of the definition non-Canadian in section 2 of the Act, the following entities are prescribed:
- (a) an entity formed otherwise than under the laws of Canada or a province; and
- (b) an entity formed under the laws of Canada or a province and controlled by an entity referred to in paragraph (a) or controlled by a person referred to in paragraph (a), (b) or (c) of the definition non-Canadian in section 2 of the Act.
Residential property — exclusion
3 (1) For the purposes of the portion of the definition residential property in section 2 of the Act before paragraph (a), a property that is located in an area of Canada that is not within either a census agglomeration or a census metropolitan area is a prescribed real property or immovable.
Prescribed real property or immovable
(2) For the purposes of paragraph (c) of the definition of residential property in section 2 of the Act, 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, is a prescribed real property or immovable.
4 (1) For the purposes of the Act, the acquisition, with or without conditions, of a legal or equitable interest or a real right in a residential property constitutes a purchase.
(2) However, a purchase referred to in subsection (1) does not include
- (a) the acquisition by an individual of an interest or a real right resulting from death, divorce, separation or a gift;
- (b) the rental of a dwelling unit to a tenant for the purpose of its occupation by the tenant;
- (c) the transfer under the terms of a trust that was created prior to the coming into force of the Act; or
- (d) the transfer resulting from the exercise of a security interest or secured right by a secured creditor.
Temporary residents — prescribed conditions
5 For the purposes of paragraph 4(2)(a) of the Act, the temporary resident must satisfy one of the following conditions:
- (a) if they are enrolled in a program of authorized study at a designated learning institution, as defined in section 211.1 of the Immigration and Refugee Protection Regulations,
- (i) they filed all required income tax returns under the Income Tax Act for each of the five taxation years preceding the year in which the purchase was made,
- (ii) they were physically present in Canada for a minimum of 244 days in each of the five calendar years preceding the year in which the purchase was made,
- (iii) the purchase price of the residential property does not exceed $500,000, and
- (iv) they have not purchased more than one residential property; or
- (b) if they hold a work permit, as defined in section 2 of the Immigration and Refugee Protection Regulations, or are authorized to work in Canada under section 186 of those Regulations,
- (i) they worked in Canada for a minimum period of three years within the four years preceding the year in which the purchase was made, if the work is full-time work as defined in subsection 73(1) of the Immigration and Refugee Protection Regulations,
- (ii) they filed all required income tax returns under the Income Tax Act for a minimum of three of the four taxation years preceding the year in which the purchase was made, and
- (iii) they have not purchased more than one residential property.
Exception — persons
6 For the purposes of paragraph 4(2)(d) of the Act, the following classes of persons are prescribed:
- (a) foreign nationals who hold a passport that contains a valid diplomatic, consular, official or special representative acceptance issued by the Chief of Protocol for the Department of Foreign Affairs, Trade and Development;
- (b) foreign nationals, with valid temporary resident status, whose temporary resident visa was issued, or temporary resident status was granted, following an exemption provided under section 25.2 of the Immigration and Refugee Protection Act, if the Minister is of the opinion that the exemption was justified based on public policy considerations to provide safe haven to those fleeing conflict; and
- (c) persons that have made a claim for refugee protection in accordance with subsection 99(3) of the Immigration and Refugee Protection Act, if that claim has been found eligible and referred to the Refugee Protection Division under subsection 100(1) of that Act.
7 (1) An order referred to in subsection 7(1) of the Act may only be made if the following conditions are met:
- (a) the non-Canadian is the owner of the residential property at the time the order is made;
- (b) notice has been given to every person who may be entitled to receive proceeds from the sale; and
- (c) the superior court of the province is satisfied that the impact of the order would not be disproportionate to the nature and gravity of the contravention, the circumstances surrounding the commission of the contravention and the resulting conviction.
Conditions of order
(2) The order made under subsection 7(1) of the Act must provide that the proceeds of the sale are distributed in the following order:
- (a) the payment of the costs of the sale, including the costs incurred by the Minister in bringing the application for the order and any unpaid fines by the non-Canadian under the Act;
- (b) the payment of those, other than the non-Canadian, who are entitled to receive the proceeds of the sale in amounts and according to priorities that the superior court may determine;
- (c) the repayment of the non-Canadian of an amount that is not greater than the purchase price they paid for the residential property; and
- (d) the payment of any amount remaining to the Receiver General for Canada.
Exception — circumstances
8 For the purposes of subsection 4(3) of the Act, subsection 4(1) of the Act does not apply if it is incompatible with the rights recognized and affirmed by section 35 of the Constitution Act, 1982.
9 These Regulations are repealed on the day on which section 236 of the Budget Implementation Act, 2022, No. 1, chapter 10 of the Statutes of Canada, 2022, comes into force.
Coming into force
10 These Regulations come into force on January 1 2023, but if they are registered after that day, they come into force on the day on which they are registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
The Prohibition on the Purchase of Residential Property by Non-Canadians Regulations (the Regulations) are required to fully implement the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the Act), a measure announced by the Government in Budget 2022 and legislated through Budget Implementation Act 2022, No. 1.
The Regulations serve to provide relieving exceptions for certain groups of individuals and types of residential property from the prohibition in the Act. Providing clarification in the Regulations is necessary to meet the Government’s policy intent announced in Budget 2022, and to avoid public and stakeholder confusion. The Regulations are also required to establish definitions necessary for the interpretation of the Act by non-Canadians and the Canadian professionals they may interact with in seeking to purchase residential property, as well as by members of the legal profession and courts when considering potential breaches of the Act.
In Budget 2022, the Government announced its intent to prohibit non-Canadians from purchasing residential property in Canada for a period of two years. This measure was previously included in the respective mandate letters of the Minister of Housing and Diversity and Inclusion and the Minister of Finance published in December 2021.
Legislation to implement the prohibition, the Prohibition on the Purchase of Residential Property by Non-Canadians Act, received royal assent on June 23, 2022, and will come into force on January 1, 2023. The Act sets out the legislative framework for the prohibition by
- prohibiting people who are neither Canadian citizens nor permanent residents from purchasing residential property in Canada for a period of two years, including preventing non-Canadians from using corporate structures to avoid the prohibition;
- establishing penalties for non-Canadians purchasing residential property (and those knowingly assisting them), and allowing for the responsible minister, following a conviction, to apply to a court for the judicial sale of a property that was purchased in breach of the prohibition; and
- providing authorities to establish in the Regulations specific exceptions, definitions and clarifications, including exceptions for certain groups of people and types of property announced by the Government in Budget 2022.
The objective of the Regulations is to establish specific exceptions, definitions and clarifications necessary to fully implement the Act, as passed by Parliament. These final details include exceptions from the prohibition announced by the Government through Budget 2022 that are relieving in nature, as well as other definitions and clarifications necessary to provide stakeholders sufficient clarity with respect to the application of the prohibition in different circumstances. In supporting the effective and timely implementation of the Act, the Regulations form part of the Government’s broader policy response to prevailing housing affordability concerns experienced by Canadians.
The Regulations establish specific exceptions, definitions and clarifications necessary to fully implement the Act, including by
- setting out exceptions for certain groups of people from the prohibition in the Act. These include exceptions for temporary residents that are demonstrably working toward permanent residency by studying or working in Canada. These also include exceptions for certain vulnerable populations, such as people fleeing international crises, as well as diplomats, consular staff and members of international organizations residing in Canada;
- clarifying the treatment of specific types of residential property under the Act by setting out an exception for recreational property and clarifying the application of the prohibition to vacant land in limited circumstances;
- defining the concepts of “purchase” and “control” in the Act. These definitions provide greater clarity around the specific situations in which the prohibition applies. For example, certain unexpected or transitional life situations, such as a divorce or succession process following a death, are excluded from the definition of “purchase” to avoid undue hardship;
- providing further detail around the process set out in the Act whereby a court may order the sale of a residential property purchased by a non-Canadian in contravention of the prohibition. These details are limited to clarifying the conditions under which a court may issue an order, and providing guidance for a court with respect to how any proceeds resulting from a sale would be distributed; and
- clarifying that the prohibition in the Act does not apply in circumstances where it would conflict with Indigenous rights recognized and affirmed by section 35 of the Constitution Act, 1982.
The Regulations have been subject to a broad-based consultation process led by the Canada Mortgage and Housing Corporation (CMHC). This included the publication of a detailed consultation document containing the specific policy proposals intended for the Regulations, and supporting public notices on the Regulations in the Canada Gazette and on the Consulting with Canadians website. The consultation process also included direct outreach to a diverse range of stakeholders, such as industry groups (e.g. real estate, legal and housing finance professionals), provinces and territories, Indigenous governments and organizations, and other interested parties (e.g. post-secondary institutions, newcomer organizations, and police associations), inviting them to comment on the consultation document.
The Regulations serve to fully implement the Act, which has been subject to public engagement, including consultation. The Government committed to bring forward a prohibition in the mandate letters of the Minister of Housing and Diversity and Inclusion and the Minister of Finance. Following pre-Budget consultation, the prohibition was announced in Budget 2022, and the legislation was deliberated on in Parliament as part of Budget Implementation Act, 2022 No. 1. Prior to the release of the consultation document, advance outreach and meetings occurred with provinces and territories, other federal government departments, and interested stakeholders, such as financial institutions and organizations representing post-secondary institutions.
In undertaking consultations on the specific policy proposals intended for the Regulations, CMHC received approximately 200 written submissions from individual Canadians and stakeholders, particularly real estate, legal and housing finance professionals. Submissions offered a range of different viewpoints, with some expressing strong support for a robust and unmitigated prohibition of non-Canadians purchasing residential property, and others emphasizing the need for a more targeted approach with relieving exceptions to avoid unintended economic and labour market consequences. Certain submissions pertained directly to the Act, such as feedback on the merits of the prohibition, associated penalties, or the coming-into-force date, and fell outside the authorities for the Regulations.
Some stakeholders expressed concerns around the rigour or complexity of eligibility conditions applicable to temporary residents studying or working in Canada. Certain submissions also expressed concerns regarding the compliance burden on vulnerable populations of non-Canadians, including recent immigrants, young adults and workers in precarious employment. In response, the Regulations contain streamlined and/or simplified eligibility language to make it easier for non-Canadians to determine the application of the prohibition in their respective circumstances. These include tailored physical presence requirements for students to align with the academic year, simplified program enrollment requirements for students, and a clarified requirement that minimum work experience in Canada does not have to be continuous to accommodate routine changes in employment and to avoid penalizing workers impacted by pandemic-related labour market disruptions.
Some stakeholders raised questions or made proposals related to the exception for recreational property and the application of the prohibition to vacant land. In response, the Regulations contain clear definitions of “census metropolitan area” and “census agglomeration” and associated federal reference materials. A proposed exception for vacant land purchased for development purposes was considered but assessed as being too administratively complex. Other stakeholders sought clarity or proposed modifications to the definition of “purchase” to avoid unintended impacts or ambiguity. In response, the Regulations contain a streamlined definition of “purchase” and its associated exceptions, including to avoid disruption to the established rights of creditors and the provision of housing finance.
A number of submissions called on the federal government to make available information and guidance materials for individuals and industry professionals to promote understanding and help them comply with the Act and the Regulations. In response, the Act and the Regulations will be supported by plain language information materials, including frequently asked questions and answers for individuals and industry professionals.
All provinces and territories were consulted in the development of the Regulations; two provided submissions. One province raised concerns around the application of the Act and the Regulations to the activities of provincial land registries. An assessment was conducted to reaffirm that the Act and the Regulations do not impose specific obligations on provincial land registries and other administrative bodies, given the self-executing enforcement framework set out in the Act. Another province raised concerns around the economic and labour market impacts of the Act and the Regulations applying to temporary residents (particularly in smaller urban centres), the Regulations applying to Ukrainians resettling in Canada, and the potential negative reputational impacts of the Act on Canada’s position as a destination for immigrants and refugees. In this respect, the Regulations contain a dedicated exception for persons fleeing international crises (in addition to an exception in the Act for refugees), as well as streamlined and/or simplified eligibility language for temporary residents studying or working in Canada. The plain language materials noted above will help to provide clarity on these points.
The Regulations received an exemption from prepublication in the Canada Gazette. This exemption supports the timely and efficient implementation of the Act by enabling the Regulations to come into force in time for the legislated coming into force of the Act on January 1, 2023, as set by Parliament. It was assessed that prepublication consultation would not result in additional stakeholder feedback of a material nature, taking into account prior public engagement on the prohibition and subsequent stakeholder consultations, including the release of a detailed consultation document outlining the Government’s intentions with respect to specific policy proposals for the Regulations.
Delaying the finalization of the Regulations could have led to public confusion around the application and enforcement of the Act. For example, the Regulations implement exceptions publicly committed to by the Government through Budget 2022. Any delays would have also undermined the policy intent of the Act as a temporary, two-year measure that forms part of the Government’s near-term response to prevailing housing affordability concerns experienced by Canadians. The Government has publicly committed to move forward promptly with the full implementation of the Act, as supported by Parliament.
Modern treaty obligations and Indigenous engagement and consultation
The Regulations explicitly clarify that the prohibition in the Act does not apply in circumstances where it would conflict with Indigenous rights recognized and affirmed by section 35 of the Constitution Act, 1982. This provision was subject to public consultation, including direct outreach to Indigenous governments and organizations.
Regulations were selected as the appropriate, legally binding instrument to establish specific exceptions, definitions and clarifications already announced by the Government in Budget 2022 or otherwise necessary to fully implement the Act. The Act, as passed by Parliament, contains specific authorities to make regulations for this purpose; utilizing these prescribed regulation-making authorities is consistent with the will of Parliament.
The consequences of not proceeding with the Regulations include significant public confusion around the application and enforcement of the Act, and the absence of exceptions publicly committed by the Government when the Act was announced. An alternative, non-regulatory mechanism — the development of amended and consolidated legislation — was considered as an alternative. However, it was determined that the Regulations are most appropriately suited to the implementation of the final details of the prohibition, which are technical in nature, and are the subject of specific regulation-making authorities in the Act.
Benefits and costs
The Regulations contain exceptions from the prohibition in the Act that are relieving in nature and confer limited indirect benefits to non-Canadians demonstrably working toward permanent residency, who have resided in Canada for extended periods of time and intend to settle permanently. These include individuals pursuing studies in Canada or working in Canada under existing work permits or authorizations. Specific indirect benefits may include enabling non-Canadians to transition to Canada and pursue home ownership in their communities sooner. Without the exceptions in the Regulations, these individuals could experience a more difficult or prolonged transition to Canada, as well as less choice or availability in housing options in Canada that meet their needs.
The Regulations also confer limited indirect benefits to non-Canadians (and their Canadian spouses or common-law partners, where applicable) by clarifying that certain unexpected or transitional life situations are not subject to the prohibition contained in the Act. These include scenarios involving divorce, separation and succession following a death. Without the clarification in the Regulations, the application of the prohibition could otherwise result in undue hardship for non-Canadians and Canadians alike.
In providing exceptions from the prohibition in the Act, the Regulations may create minor, incremental costs for Canadian professionals that facilitate or support the purchase of residential property by eligible non-Canadians. These costs may exist in situations where a Canadian professional is directly transacting with a non-Canadian client who is asserting eligibility under the Regulations to purchase a residential property. We expect these costs to be low, capable of being absorbed from existing resources, and offset by existing practices. Activities related to “know your customer” and the demonstration of eligibility are largely consistent with current business practices, derived from industry standards and/or existing legislative requirements related to customer identification and due diligence. Professionals will continue to have discretion as to whether and how they choose to conduct business with non-Canadians. Any such costs will be further limited by the temporary, two-year duration of the Act.
It is the responsibility of the non-Canadian to demonstrate eligibility to the Canadian professional, where it exists. Specific costs associated with demonstrating eligibility will be incurred by the non-Canadian. These may include costs associated with retrieving or preparing documentation for a Canadian professional acting on their behalf, such as a realtor or a lawyer. The Regulations contain eligibility requirements, which may be demonstrated by a non-Canadian using various measures including documentation issued by Canadian government agencies or authorities (e.g. work permit, notice of assessment), as well as documentation commonly relied on to demonstrate a physical presence in Canada (e.g. rental agreement, utility bills, entry and exit records associated with travel), with which Canadian professionals will already have an established level of familiarity.
In the event of legal proceedings arising under the Act (i.e. an application for the judicial sale of a property purchased by a non-Canadian in contravention of the prohibition), such proceedings may require incremental court resources. However, by introducing exceptions and providing for cost recovery via proceeds distribution, the Regulations will reduce any incremental burden on judicial and prosecutorial resources stemming from the introduction of the Act.
Small business lens
The Regulations will generate nominal, incremental costs for some small businesses, namely the subset of Canadian professionals involved in facilitating the purchase of residential property in Canada by eligible non-Canadians. These professionals will need to familiarize themselves with the Act and the Regulations, but will continue to have discretion as to how and whether they choose to do business with non-Canadians.
The Regulations do not impose information collection, processing or reporting requirements on Canadian professionals, nor do they impose requirements with respect to the completion of forms or other types of documentation. Canadian professionals may elect to establish prudent business practices with respect to the review of information provided by non-Canadians in the course of a business transaction. For greater certainty, the Regulations do not introduce compliance requirements applicable to Canadian professionals, and do not rely on these third parties for enforcement purposes.
Any costs applicable to Canadian professionals will be incremental to existing practices, as these professionals currently make determinations and establish internal processes and systems with respect to transacting with non-Canadians. These professionals are presently likely to employ more rigorous due diligence practices in relation to non-Canadians, given a lower level of familiarity with any information or documentation, such as identity documentation, originating from a non-Canadian jurisdiction. For example, real estate professionals are presently required to have comprehensive systems in place to fulfill “know your customer” due diligence requirements and/or industry codes of conduct, and legal professionals are subject to similar measures through law society rules. Exercising due diligence under the Act and Regulations will not be unfamiliar to these professionals given current practices under their professional obligations.
The one-for-one rule does not apply, as there is no incremental change in administrative burden on business. The Regulations do not impose information collection, processing or reporting requirements on Canadian professionals, nor do they impose requirements with respect to the completion of forms or other types of documentation. Specific costs associated with a non-Canadian demonstrating their eligibility to purchase residential property under the Act and the Regulations will be incurred by the non-Canadian.
The Regulations create a new regulatory title. However, as the Regulations do not introduce new administrative burden, they do not create a requirement under the Red Tape Reduction Act to repeal an existing title. In addition, the Regulations are being made pursuant to the Act, which contains an explicit temporary duration of two years and an automatic repeal mechanism.
Regulatory cooperation and alignment
The Regulations are limited to establishing specific exceptions, definitions and clarifications necessary to fully implement the Act, which contains the prohibition on the purchase of residential property by non-Canadians. As such, the Regulations pertain to domestic housing policy in Canada, are temporary in nature, and are not the subject of an existing work plan or commitment under a formal regulatory cooperation forum.
The Regulations are made pursuant to the Act, which represents a unilateral federal measure that does not require the participation of provinces and territories for administration, enforcement or other purposes.
Strategic environmental assessment
The Regulations are not expected to result in important environmental effects, either positive or negative.
Gender-based analysis plus (GBA+)
The Regulations will not disproportionately affect any identifiable groups of Canadians, given their targeted application to non-Canadians, consistent with the scope of the Act. The Regulations are likely to have a limited mitigating effect on the negative impacts experienced by non-Canadians subject to the Act by establishing a series of exceptions. These include exceptions for certain non-Canadians demonstrably working toward permanent residency who are in the process of settling in Canada. However, it is estimated that the volume of non-Canadians that would be eligible for an exception from the prohibition and subsequently choose to pursue the purchase of residential property is limited on an annual, national basis over a two-year period (i.e. hundreds to low thousands). Data collection on foreign buyers is limited and specific figures on foreign buyer activity are not available at the national level or in most provinces and territories.
Implementation, compliance and enforcement, and service standards
The Government intends for the Regulations to come into force together with the Act, on January 1, 2023.
Consistent with the self-executing enforcement framework set out in the Act, the Regulations do not introduce compliance requirements applicable to professionals, and do not rely on these third parties for enforcement purposes. Instead, the Act allows for the imposition of penalties on any party found guilty of knowingly assisting a non-Canadian in contravening the prohibition.
As set out under the Act, a non-Canadian that contravenes the prohibition, or any person or entity that knowingly assists a non-Canadian in contravening the prohibition, is guilty of an offence and liable on summary conviction to a fine of up to $10,000. The Act establishes that, if a non-Canadian is convicted of having contravened the prohibition, the superior court of the province in which the residential property to which the contravention relates is situated may, on application of the responsible Minister, order the residential property to be sold. Any judicial sale order would be at the discretion of the applicable court.
The Act also establishes that any such court-ordered sale will result in the non-Canadian receiving no more than the purchase price paid for the residential property. For greater clarity, the sale of a property in breach of the prohibition does not affect the validity of the sale.
The Regulations play a supporting role to the Act and are limited to clarifying the conditions under which a court may issue an order, and providing guidance for a court with respect to how any proceeds resulting from a sale would be distributed.