Amendments to the rules prohibiting Canadian foreign buyers from purchasing homes abroad have been published.

27 On March 2023, the Minister of Housing and Inclusion proposed amendments to regulation based on the federal Non-Canadians Buying Real Estate Prohibition Act. The purpose of these amendments is to provide further clarity on the new ban. The amendments took effect on the same day they were introduced.

The Act prohibits non-Canadians from acquiring residential real estate directly or indirectly for two years beginning January 1, 2023. The regulatory amendments narrow the scope of the Act to mitigate its impact on commercial transactions and real estate development. This bulletin supplements our previous bulletins distributed on November 3, 2022 and December 28, 2022 and should be read in conjunction with them, as some of the information contained in those previous bulletins is no longer current.

Change #1: Zoning is no longer a criterion

Initially, s. 3(2) of the regulation prohibited "non-Canadians" (as defined in the Act) from purchasing property in most metros zoned for "residential" or "mixed use" status. This provision prevented non-Canadians from purchasing commercial properties with "residential" or "mixed use" status. As a result, the Canada Mortgage and Housing Corporation (CMHC) formally clarified that this prohibitive measure was only for vacant land with "residential" or "mixed" status. The amendments removed this provision altogether, so that the prohibition no longer applies to the acquisition of real property (regardless of occupancy) without residential buildings and zoning for residential and commercial use.

Change #2: The threshold for controlling interest ownership has been raised.

In a previous publication, we noted that the definition of "control" of a legal entity in the regulation restricts a much larger group of corporations from participating in real estate transactions than was intended.

Exception #1: Public Canadian investment funds and limited partnerships

The amendments expand the scope of permissible real estate transactions among public companies. The previous paragraph 2(b) of the regulation excluded public corporations listed on a designer Canadian stock exchange from the definition of "non-Canadian". However, this exemption did not apply to publicly traded unincorporated legal entities such as Canadian real estate investment trusts ("REITs") and Canadian limited partnerships. Under the amendments, Canadian REITs and other Canadian public companies (including limited partnerships) can now participate in real estate transactions without passing the control threshold.

Exception #2: Development Exception

The most significant change introduced by the amendments is the introduction of an exception for the acquisition of residential real estate by a non-Canadian for "development" purposes. The amendments do not define "development," but CMHC has published guidance that establishes criteria and indicators for what may constitute "development." CMHC defines "development" as "the process of evaluating, planning, and implementing changes or improvements (with or without a change of use) to residential real property or land on which residential property is located and, for clarity, includes the renovation of an existing building." The key element is "sincere intention at the time of purchase".

Expanding buyers

The amendments change the requirements for non-Canadians with work authorization under the provisions of the Immigration and Refugee Protection Act to be able to purchase residential real estate. Such persons may purchase property if they have 183 days or more of validity remaining on their work authorization at the time of purchase and if they have not previously purchased more than one residential property. The amendments removed the previous requirement to have a minimum of three years of tax returns from the previous four years and full-time employment in Canada.

In conclusion, while not all proposals from the real estate industry were accepted, the amendments are a significant improvement allowing commercial transactions that are obviously not covered by the Act to be executed without prohibitions. Nevertheless, parties to a real estate transaction should be alert to the Act before conducting the transaction, especially if residential real estate is involved.