If you have never heard of the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”), you are probably not alone. This new legislation came into effect on January 1, 2023, and prohibits “non-Canadians” (as defined in the Act) from purchasing residential property in Canada for a period of two years unless further extended.
The Act makes it an offence to violate the prohibition.
The penalty for violating this legislation is different for individuals and corporations.
Non-Canadians that violate the prohibition, or any person that knowingly assists, can be fined up to $10,000.[1] If a corporation or entity commits an offence, anyone that directed, authorized, assented to, acquiesced in or participated in the commission of the offence may be liable for the offence.
It is important to note that while the Act punishes contravention, it does not void or invalidate the sale of the residential property to which the contravention relates.[2] Enforcement of the Act will not relieve a party of its contractual obligations relating to the sale of the contravening residential property.
How should sellers protect themselves from being offside on the legislation?
Professionals who assist in the purchase and sale of property in Canada, such as lawyers, brokers, developers, realtors, and others, should make appropriate/reasonable inquiries as to whether any purchasers are non-Canadian to avoid being liable under the Act.
To mitigate against violating the prohibition, protective measures should be taken. For example, a contract for purchase and sale of property should incorporate representations and warranties that allow purchasers to verify their citizenship. This verification factor will clarify whether or not purchasers are considered non-Canadians, what kinds of restrictions they are subject to, and remedies accessible to them.
A declaration could also serve as a means of satisfying this obligation.
- A typical statutory declaration which states that the purchaser is a Canadian citizen OR is a non-Canadian citizen, which fits into an exception as prescribed under the Act should suffice.
Do third parties, like real estate agents or lawyers, have a role in enforcing the Prohibition on the Purchase of Residential Property by Non-Canadians Act?
A person buying a home must make sure they are in compliance with the Act. As such, it is the responsibility of a non-Canadian purchaser to ensure they are eligible to purchase a residential property while the Act is in force.
The Act does not impose information collection, processing or reporting requirements upon third parties such as lawyers and real estate agents. These professionals are responsible for ensuring what is required of them to meet their professional responsibilities and duties.[1]
Written by Meghan Praught and Lovleen Khosa
*This article does not constitute legal advice, always consult legal counsel.
[1] Prohibition on the Purchase of Residential Property by Non-Canadians Act – Frequently Asked Questions (March 2023), online: CMHC-SCHL. Retrieved from: Hyperlink
[1] Prohibition on the Purchase of Residential Property by Non-Canadians Act, SC 2022, c 10, s 235 [Act], s. 6(1).
The content of this article is intended to provide a general guide to the subject matter and is not legal advice. Specialist advice should be sought regarding your specific circumstance.