Table des matières
Everything you need to know about Act prohibiting the purchase of residential immovables by non-Canadians
Introduction
By adopting the Act prohibiting the purchase of residential real estate by non-Canadians, Canada has significantly altered the landscape for foreign investors interested in acquiring property in Montreal. Understanding this law is crucial, as it prohibits non-Canadians from purchasing, directly or indirectly, a property or residential building in a metropolitan area and in a census agglomeration.
In this article, we will clarify the definitions of the terms used by the law and the Regulation, analyze the exceptions and their impact on foreign investors, discuss the penalties provided for by the law in the event of non-compliance, and, finally, give you some advice as a real estate broker.
Overview of regulations regarding foreign buyers and investors
Prohibition on non-Canadians from purchasing residential real estate
The Canadian Parliament passed the Prohibiting Non-Canadians from Buying Residential Real Estate Act on June 23, 2022, and came into force on January 1, 2023, for an initial period of 2 years. Its objective is to protect Canadians' access to homeownership by limiting, as much as possible, the purchase of residential properties by foreign investors. The Canadian government hopes to do this to stem the speculative bubble and slow the price rise. This has led to a significant shift in the Montreal real estate market, with a decrease in foreign investment and a more stable pricing environment.
On February 4, 2024, the Canadian government announced that the ban on foreign purchases of residential properties, which was set to expire on January 1, 2025, will be extended for two years until January 1, 2027. This extension is in addition to a series of measures adopted to make housing affordable for many Canadians.
By extending the ban on foreign investment, we will ensure that housing serves as a home for Canadian families and does not become a speculative financial asset. Our government intends to use all the tools to make housing more affordable nationwide.
The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance
Definitions and glossary that apply to the Act prohibiting non-Canadians from purchasing residential real estate
A non-Canadian under the Act means any person who is not a Canadian citizen, a permanent resident, or an Indian within the meaning of the Indian Act. A non-Canadian also means a federally or provincially chartered corporation that is not listed on a Canadian stock exchange and controlled by a non-Canadian within the meaning of the Act.
A residential property, within the meaning of the Act, is defined as a single-family, detached or semi-detached house, a divided or undivided condominium, an apartment, or a residential building with three or fewer dwellings. Residential properties covered by the Act must be located in a census agglomeration or a metropolitan area.
A census metropolitan area (CMA), as named in the Act, is defined according to Statistics Canada's classification. A CMA must have a population of at least 100,000, and its core must have at least 50,000 inhabitants. A census metropolitan area comprises several municipalities around a central population core. Montréal is a CMA. A CMA remains a CMA even if its population falls below 100,000 and its core has fewer than 50,000 inhabitants.
A census agglomeration (CA) must have a core population greater than or equal to 10,000 inhabitants. If the population contained in the core of the CA were to decrease and fall below 10,000 inhabitants, the census agglomeration would no longer be a census agglomeration. It would be removed from the list of CAs.
As defined in the Act, a non-Canadian controlled corporation or entity means that a non-Canadian owns 10% or more of the shares and interests or 10% or more of the voting rights. Please note that this definition was amended on March 27, 2023, increasing the control threshold from 3% to 10%.
What residential properties and buildings are not covered by the Residential Real Estate Prohibition Act?
The Act does not apply when a non-Canadian foreign investor purchases:
- A residential property for significant development and development purposes.
- A residential property not part of a census agglomeration (CA) or a census metropolitan area (CMA).
- A residential income property with more than three dwellings.
- Vacant land. On March 27, 2023, a Regulation amending the Regulation respecting the prohibition on the purchase of residential real property by non-Canadians was adopted. Vacant land and lots intended for residential use that can be used for the construction of houses or residential buildings located in a metropolitan area or a census agglomeration are no longer part of the definition of "residential property" within the meaning of the Act.
Penalties under the Act
Section 6 of the Prohibiting Non-Canadians from Buying Residential Real Estate Act clearly states that contraveners are liable to a fine of up to $10,000. These penalties include:
Any non-Canadian who contravenes section 4 and any person or entity who advises, induces, assists or encourages or attempts to notify, induce, assist or promote a non-Canadian to purchase, directly or indirectly, residential real estate, knowing that this Act prohibits the purchase by the non-Canadian, is guilty of an offense and is liable on summary conviction to a fine of not more than $10,000.
In the case of a corporation controlled by a non-Canadian that purchases a residential property, within the meaning of the Act, all directors, officers, senior managers, and managers of the entity are also considered joint and several offenders.
Section 7 provides that a court may order the sale of the residential property acquired by the non-Canadian investor in violation.
If a non-Canadian is found guilty of a contravention of section 4, the superior court of the province in which the residential property to which the contravention relates is situated may, on application by the Minister, make an order requiring the sale of the residential property in the manner and on the conditions prescribed by Regulation.
Practical advice for foreign investors who want to buy a property in Montreal
Staying informed and keeping an eye on the news is a proactive step that can help you navigate the regulations and changes in the law. This is particularly important for foreign investors who want to buy a property in Montreal.
It's advisable to work with a professional such as a real estate broker who can provide expert guidance and ensure that your transaction complies with the conditions of the Act prohibiting the purchase of residential real estate by non-Canadians. This is particularly important if you are a non-Canadian within the meaning of the law or if you benefit from one of the exemptions provided for by the law:
- If you are a non-Canadian within the meaning of the law;
- If, due to your special status, you benefit from one of the exemptions provided for by the law;
- If the property you wish to purchase is part of a census metropolitan area (CMA) or a census agglomeration (CA);
- If the desired property is a residential building within the meaning of the law;
Conclusion
The Residential Real Estate Purchase Ban Act was passed to make the Canadian real estate market more accessible and affordable for Canadian residents. By limiting demand from foreign investors, the Canadian government hopes to increase the available supply and lower prices or at least slow their rise.
While it is still early to know the long-term effects, experts agree that it has not had the desired impact on real estate prices. A slight effect has been observed in condos and luxurious properties, often the entry point for foreign investors. However, the slowdown observed in the construction of new condo units due to interest rates and the increase in the price of building materials post-pandemic has ensured that the real estate market continues to increase prices.
High-end luxury properties continue to attract buyers who often pay cash. Single-family homes are the property category that continues to suffer the most from price pressure and the reduction in the supply and affordability of housing.
This law remains in force until January 1, 2027.
