Recently, the federal government made amendments to the Prohibition on the Purchase of Residential Property by Non-Canadian’s Act (the “Act”). The Act was initially passed in June 2022 in an effort to cool the Canadian residential real estate market and increase affordable housing for Canadians.
The goal of the amendments, which came into effect on March 27, 2023, is to enhance flexibility for newcomers and businesses seeking to add to Canada’s housing supply and to expand the exceptions which allow non-Canadians to purchase residential properties. Below are five key takeaways from the amendments:
EXCEPTIONS FOR CERTAIN TEMPORARY WORK PERMIT HOLDERS
There will no longer be a blanket prohibition restricting those holding temporary work permits from purchasing residential property. In fact, those individuals who have 183 days or more of validity remaining on their work permit or work authorization at the time of purchase may be eligible to purchase residential property. This is so long as they have not already purchased a residential property.
INCREASE IN CORPORATE FOREIGN CONTROL THRESHOLD
By way of the amendments, the threshold of allowable non-Canadian ownership in privately held corporations or privately held entities formed under Canadian law has increased from 3% to 10%. As a result, private corporations can have up to 10% of non-Canadian ownership and still purchase residential property in Canada.
NO LONGER APPLICABLE TO VACANT LAND
As part of the amendments, the Act will no longer apply to entities purchasing vacant land, regardless of whether they are a Canadian or foreign.
EXCEPTIONS FOR DEVELOPMENT PURPOSES
The amendments will also allow for non-Canadians to purchase residential property for the purpose of redevelopment. More specifically, developers can now purchase vacant land zoned for residential and mixed use regardless of whether they are a non-Canadian entity and may use that land for any purpose, including residential development.
EXCEPTIONS AVAILABLE FOR PUBLICLY TRADED ENTITIES
The exception that previously extended only to publicly traded companies incorporated under the laws of Canada or a Canadian Province has now been broadened to include more public entities, including entities such as real estate investment trusts. These public entities must be established in Canada and listed on a designated stock exchange.