Real Difficulty for Newcomers or a Political Commitment Without Consequence?
Real Difficulty for Newcomers or a Political Commitment Without Consequence?
It was deemed necessary to provide clarifications following the adoption of the Act Prohibiting the Purchase of Residential Properties by Non-Canadians, which will come into effect on January 1, 2023. There has been a dissemination of partial and sometimes incorrect information on the internet (especially on sites related to immigration to Canada) for several months, whereas the regulation was only recorded on December 2, 2022.
A certain degree of diligence and reading is required.
What do the law and its regulations state?
Starting January 1, 2023, and for two years, it will no longer be possible for anyone who is neither a Canadian citizen nor a permanent resident to acquire residential property in Canada.
Like any law that establishes principles, exceptions are provided by regulation.
Which properties are affected?
Truthfully, almost all residential properties. The principle established by the Act Prohibiting the Purchase of Residential Properties by Non-Canadians only allows for minor exceptions that do not affect the majority of newcomers:
Acquisition by an individual of an interest or a real right resulting from death, divorce, separation, or a gift;
Renting a residential unit to a tenant for the tenant's use;
Transfer according to the terms of a trust established before the law comes into effect;
Transfer resulting from the enforcement by a secured creditor of the right or interest secured on the residential property.
These provisions aim to regulate the real estate market, potentially making it more accessible to Canadians and permanent residents by reducing the competition from non-Canadian buyers. The law reflects a political commitment to address concerns about housing affordability and availability for Canadians, amidst the growing global trend of real estate investment by non-residents. However, the effectiveness and impact of these measures on newcomers and the real estate market in general remain subjects of debate.
Who is affected by the prohibition?
In principle, anyone who is neither a Canadian citizen nor a permanent resident is prohibited from purchasing residential property in Canada starting January 1, 2023. Further details are provided by both the law and the regulation:
Non-Canadians as defined by the Act Prohibiting the Purchase of Residential Properties by Non-Canadians include:
Individuals other than Canadian citizens, persons registered as Indians under the Indian Act, or permanent residents;
Corporations incorporated otherwise than by a federal or provincial law;
Corporations incorporated by a federal or provincial law whose shares are not listed on a designated stock exchange under section 262 of the Income Tax Act and are controlled by an individual mentioned in points (1) or (2);
Persons or entities specified by regulation.
Can a temporary resident purchase residential property in Canada?
This is where the Regulation on the Prohibition of the Purchase of Residential Properties by Non-Canadians provides significant clarifications.
A temporary resident can acquire residential property in Canada under certain conditions, depending on whether they are a student or a temporary worker:
Temporary resident with a study permit:
Prerequisite: be enrolled in an authorized study program at a designated learning institution, as defined in section 211.1 of the Immigration and Refugee Protection Regulations,
Following cumulative conditions (All of these conditions must be met, not just one):
Has filed, for the five taxation years preceding the year of purchase, any required income tax returns under the Income Tax Act,
Has been physically present in Canada for at least 244 days during each of the five calendar years preceding the year of purchase,
The purchase price of the residential property does not exceed $500,000,
Has purchased only one residential property.
Temporary resident with a work permit or work authorization:
Prerequisite: Holds a work permit as defined in section 2 of the Immigration and Refugee Protection Regulations or is authorized to work in Canada under section 186 of these regulations,
Following cumulative conditions (All of these conditions must be met, not just one):
Has engaged in full-time work as defined in subsection 73(1) of these regulations, in Canada, for at least three years during the four years preceding the year of purchase,
Has filed, for the four taxation years preceding the year of purchase, at least three income tax returns under the Income Tax Act,
Has purchased only one residential property.
Non-compliance with the law and its regulation carries severe penalties: a non-Canadian who violates the prohibition, or any person or entity knowingly assisting a non-Canadian in violating the prohibition, commits an offense and is liable, on summary conviction, to a fine of up to $10,000. The Act stipulates that if a non-Canadian is found guilty of violating the prohibition, the superior court of the province where the residential property in question is located may, upon request of the responsible minister, order the sale of the residential property. Any order for judicial sale will be at the discretion of the concerned court.
In conclusion, an immigrant wishing to purchase residential property will need to have filed at least 3 tax returns before the purchase and have worked at least 3 years over the past 4 years...
Most immigrants, after spending 2 years in Canada, are however in the process of applying for permanent residence. As of the writing of this document, the processing times for obtaining permanent residence are relatively short (less than 6 months). This means that temporary residents authorized to acquire residential property will, in fact, likely be permanent residents.