What must I know about the Foreign Buyer Ban?

By now, you have heard of the new federal legislation called The Prohibition on the Purchase of Residential Property by Non-Canadians Act, known as the Foreign Buyer Ban. This legislation was approved in June 2022, received regulations in December 2022, and became enforceable in law as of January 1, 2023. Because this law affects some consumers’ ability to purchase property, there are implications for any REALTOR^® helping buyers over the next two years. This article will highlight some key points to understand the legislation and regulations, so REALTORS^® know enough to direct consumers to a lawyer.

Who is NOT affected?

It is probably best to start with the largest group of the population that most REALTORS^® will be dealing with in purchasing residential property, namely NOT Non-Canadians. I have placed that term in the negative because the legislation consistently uses the term Non-Canadian to refer to those for whom the legislation does apply. Hence, the group considered NOT Non-Canadians are those to whom the legislation does not apply. These include Canadian citizens, registered permanent residents, or Indians under the Indian Act. If a buyer falls into one of these categories, the act does not apply to them.

What is prohibited by the legislation for everyone else?

As mentioned, the remaining group is everybody else, and the legislation does apply. There is hope, though, because the Foreign Buyer Ban only prohibits purchasing residential property within a Census Agglomeration (CA) or a Census Metropolitan Area (CMA). For this reason, a Non-Canadian is not banned from buying residential property outside of the specified areas. With no small effort, I have located some of the best available maps for Alberta North (https://bit.ly/3YdPwyP) and Alberta South (http://bit.ly/3Xbigaq) so members can quickly identify CA’s and CMA’s in their region of Alberta. These maps show CA’s and CMA’s either shaded or outlined in grey and containing an 800 series number. These areas are prohibited for Non-Canadians to purchase residential property in, but by implication, everywhere outside the grey areas is permitted for foreign buyers.

What is a residential property according to this legislation?

The legislation and regulations make clear that a residential property is any property containing a dwelling unit anywhere with a CA or CMA. This means any residential, rural, recreational, rural residential, or even commercial mixed-use property within a CA or CMA that has a dwelling unit is prohibited. This, of course, prompts the question of what constitutes a dwelling unit under the act. Specific to this act, a dwelling unit is extensive, bearing the definition of any residential unit that contains private kitchen facilities, a private bath, and a private living area. All property styles are included, including condominium properties, but the ban does clarify an exception for multi-family properties with four or more units (i.e. Four-plex or bigger).

What about residential lots?

I’m glad you asked! Originally the regulations made a special note to include vacant land or lots that are zoned residential or commercial mixed-use, even where that lot contains an uninhabitable dwelling and is sold for lot value. However in a subsequent amendment on March 27, 2023 the minister relaxed the prohibition on vacant lots or uninhabitable dwellings so they no longer apply in the ban including land used for development.

Are there any exceptions for specific people groups?

The short answer is yes, but the regulations narrow the exceptions by a list of required conditions designed to ensure those excepted in this legislation have been participating in the Canadian community actively and legally for years before the start of the legislation. For example, a non-Canadian who holds a valid work permit that has at least 183 days remaining as at the date of purchase is exempt from the ban if they only buy/own one property. Not too bad, but an international student who has temporary resident status may have an exception if they have filed tax returns for the last five years, they were physically present for a minimum of 244 days of each of those five years, their purchase does not exceed $500,000, and they have not purchased more than one property. As you can see, the exceptions are only simple to meet if the buyer has already been in Canada and participated in the community of Canadians for some years before the legislation. There are other potential exceptions for those with refugee status, some persons excepted by the minister as fleeing conflict, and even diplomatic exceptions. Still, all exceptions should be sought only with proper legal counsel before proceeding.

Does the legislation allow corporations to purchase?

If a corporation is incorporated under the laws of Canada or Alberta, then the answer is maybe. A Canadian Corporation controlled by a Non-Canadian or a Non-Canadian corporation or other entity, even though it is a corporation in Canada, becomes a Non-Canadian. The regulations define what control concerning a corporation or entity means by stating that any Non-Canadian who controls 10% or more of the equity or voting rights makes the whole corporation or entity a Non-Canadian.

What are the consequences of violation?

Any Non-Canadian who contravenes the act or any person who aids, abets, counsels, or induces a Non-Canadian to contravene the act is subject to a summary fine of $10,000. But that is not all. Suppose the Non-Canadian is successful in purchasing a prohibited property. In that case, the minister can order the property sold by the courts and all costs paid by the Non-Canadian for the sale. Suppose there are any remaining proceeds from the sale after all expenses are covered. In that case, the remaining proceeds will be paid directly to the Government of Canada, so the Non-Canadian will not profit in any way by their contravention of the act.

How can REALTORS^® best verify the status of a buyer?

This is the critical question of the whole article! Brokerages must ensure the best practices of their REALTORS® representing buyers by adding guidelines and policies to their Brokerage policy manuals. Every brokerage can set its own policies for accomplishing the task. Still, at a minimum, this should include the requirement to ask buyers if they are Canadian Citizens or permanent residents and seek verification of the same by way of identification. If they are not, then a conversation with their broker needs to happen, and the broker should advise the client to seek counsel from a lawyer before proceeding.

As a final reminder regarding this legislation, according to the government, the prohibition on the Purchase of Residential Property by Non-Canadians Act was designed with a built-in expiry date of 2 years. That means this is not intended to permanently prohibit foreign buyers from buying in Canada, but only for the next two years. Canadians would still love for foreigners to come to Canada and experience the true north strong and free for themselves, but for now, they may need to rent.