On June 23, 2022, the House of Commons in Canada declared that Canada would enact a temporary foreign buyer ban. This ban would start on January 1, 2023 and run for a period of two years. During the two year period, non-citizens or non-residents of Canada would be forbidden from purchasing property within Canada. The bill is an effort by the government to reduce foreign ownership in property and reduce speculation within Canada’s housing market.
Bill C-19: More Than the Buyer Ban
Bill C-19 is a much larger bill containing smaller Acts. Within this bill, an Act was declared, known as the “Prohibition on the Purchase of Residential Property by Non-Canadians Act”. The purpose of this act is to, in the words of the government “prohibit the purchase of residential property by non-Canadians”.
Who Does the Ban Apply to?
According to the act, anyone who is not deemed to be a citizen of Canada within the meaning of The Citizenship Act, or not a permanent resident of Canada is prohibited from purchasing property within Canada for a period of two years.
The ban only applies to residential homes with one, two, or three dwelling units, and excludes recreational property (Cottages) as well as multiplexes with 4+ units.
The ban includes non-Canadian persons as well as entities (corporations, partnerships, governments, etc). Canadian corporations controlled by foreign entities are also subject to the ban.
There are some notable exceptions to the Foreign Buyer Ban, including:
- International students having spent the majority of 5 years in Canada, with a purchase limit of $500,000.00
- Those authorized to work in Canada with at least 3 years of filed tax returns in the preceding 4 years.
- Diplomats, consulate staff, & other designated foreign dignitaries or their employees.
- Foreign nationals with temporary resident status, for example refugee status.
When Does the Foreign Buyer Ban Begin?
The effective date of the foreign buyer ban is January 1st, 2023. All sales on or after this date are applicable to the regulations of the Act. The Act does not affect sales agreed to prior to this date, but scheduled to close after January 1. The Act is scheduled to be repealed December 31st, 2024.
What is the Penalty for Contravention?
According to the Act, anyone who contravenes the foreign buyer ban or knowingly assists someone in doing so is subject to a $10,000 penalty. In addition, the courts have the authority to order sale of the property purchased by the foreign buyer.
In addition, the Act specifically notes that agreement to purchase by ineligible parties does not affect the validity of the sales contract. As such, foreign buyers who enter into an agreement and are unable to close cannot use the Act as an excuse, and are subject to the same penalties as anyone else.
Will the Foreign Buyer Ban help Toronto Real Estate?
According to Statistics Canada, it is estimated that only 4% of property in Canada is held by foreign entities. The majority of home ownership is by those already granted resident status. Further, alternate asset classes for foreign investment speculation are exempt from the ban (for example, commercial/retail, industrial, and multi residential).
However, with continued rising interest rates and increases to cost of living, it is still unclear if the foreign buyer ban coupled with other market factors will help continue to cool a traditionally high demand market.
Questions about the Foreign Buyer Ban? Contact Us.
