Skip to content

Regulations and other considerations: further impacts of the Prohibition of Residential Property by Non-Canadians Act

Wednesday’s Thought Leadership piece from our Immigration Group detailed the impacts of recent Federal legislation limiting housing purchases by non-Canadians on Foreign Nationals, international students and temporary and permanent residents.

Today, lawyers from our Real Property Group provide additional insight on the impacts of the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”), with a specific focus on the Regulations and other considerations for non-resident, non-Canadians looking to purchase property.

 

By Eyoab Begashaw, Cullen Mullally, Brian Tabor, K.C. & James Cruickshank

The Regulations associated with the Act, which were released in early December 2022, provide additional detail on what purchases will be prohibited under the Act and what exemptions are available. As noted in yesterday’s article, there are several exceptions to the Act, and penalties for non-compliance. It should also be noted that residential property is any real property that is situated in Canada within an urban region (see below) that is:

  • a detached house or similar building containing three or less dwelling units;
  • a part of a building that is a semi-detached house, rowhouse unit, residential condominium unit or other similar premises that is a separate parcel or other division of real property;
  • any land that is zoned for residential use or mixed use, even if the land does contain any habitable dwelling.

Impact of the Regulations

The Regulations exclude from the definition of residential property any property that is not within an urban region, which is defined in the Regulations as either a census agglomeration or a census metropolitan area. The terms “census agglomeration” and “census metropolitan area” are defined by Statistics Canada, and include all major Canadian cities, and also many other urban centres across the country. The data used to make this determination is based on Statistic Canada’s Census of Population Program. Based on 2021 data, the definition would not only capture large urban centres, such as Halifax, but also smaller regions where individuals may own recreational homes (such as Kentville, Nova Scotia or Summerside, Prince Edward Island). A full list of current census agglomeration areas and census metropolitan areas can be found online.

As noted in our previous article, the Regulations confirm that the prohibition also applies to entities not formed under the laws of Canada or a Canadian province, as well as entities that are formed under the laws of Canada or a Canadian province but are controlled by non-Canadian individuals or entities formed under the laws of non-Canadian jurisdictions.

The Regulations provide for a uniquely low threshold as to what constitutes control, that is:

  • direct or indirect ownership of shares, or ownership interests of the corporation or entity representing three percent or more of the value of the equity in it, or carrying three percent or more of its voting rights; or
  • control in fact of the corporation or entity, whether directly or indirectly, through ownership, agreement or otherwise.

With a uniquely low threshold for what constitutes “control”, potential buyers and builders must ensure that they are fully aware of their status and how they are affected by the relevant provisions of the Act and associated Regulations.

Additional impacts on residential property purchases

While this Act is the most recent legislation impacting the purchase of residential property by non-Canadians (it came into force on January 1, 2023), it is not the only one. The following Federal and provincial legislations from 2022 also had impacts.

  • Underused Housing Tax (Federal)

Bill C-8, the Underused Housing Tax Act (“UHT Act”) received Royal Assent on June 9, 2022, and came into effect retroactively on January 1, 2022, creating a new tax on underused (i.e. vacant) residential properties owned by non-resident, non-Canadians. The UHT Act dictates that every non-excluded owner of residential property must file a return on December 31st of each year (UHT Act, s. 7(1)), and pay a tax equal to one percent of their ownership share of the value of the property. Owners can elect a fair market value or the prescribed value, or the property’s most recent sale price (UHT Act, s. 6(3)).

Excluded owners, as defined in the UHT Act, include government, a citizen or permanent resident of Canada, a publicly listed corporation incorporated federally or provincially, a trustee, a registered charity, a co-op, hospital, municipality, college or university, an Indigenous governing body or a prescribed person (UHT Act, s. 2).

  • Provincial Deed Transfer Tax (Nova Scotia)

Effective April 1, 2022, the province of Nova Scotia introduced the Non-resident Deed Transfer and Property Taxes Act with respect to the Provincial Non-Resident Deed Transfer Tax (“PDTT”). The PDTT levies a five percent tax on the greater of the purchase price or the assessed value of the property, and applies to all residential properties, or a portion of the property that is deemed residential, including vacant land classified as residential.

For additional information with respect to the PDTT, please see our previous Thought Leadership piece, Provincial Non-Resident Deed Transfer Tax Guidelines. Note, the
non-resident property tax which had originally been contemplated in Nova Scotia, was subsequently repealed.

  • Island Regulatory and Appeals Commission (Prince Edward Island)

 Non-Canadians looking to buy in Prince Edward Island must comply with the Lands Protection Act (PEI) (“LPA”). This legislation is administered and enforced by the Island Regulatory and Appeals Commission (“IRAC”), and while not new, it does require non-residents of Prince Edward Island and corporations to make application to IRAC if they are looking to acquire lands that results in total applicant landholdings in excess of five acres or shore frontage in excess of 165 feet. Each application is considered upon its merits based on a number of factors.

The landholding parameters will seldom present as a hurdle for non-Canadians looking to purchase a residential home. However, all properties are unique and compliance with the LPA must be ensured to avoid fines or other actions.

Conclusions

Given the low control threshold, the broad definition of “residential property”, the unique
two-year time period of the legislation, and the potential penalties for non-compliance, it is important for prospective non-resident, non-Canadian residential property purchasers to understand the requirements under the Act. Non-resident, non-Canadians who are considering a purchase of real property within Canada, either directly or through a corporation or other entity, should seek the advice of counsel to ensure compliance.

Any questions surrounding the Act, the Regulations, or their implications can be directed to the authors, or a member of our Real Property Group.

 

This update is intended for general information only, and does not constitute legal advice.

Click here to subscribe to Stewart McKelvey Thought Leadership.

SHARE

Archive

Search Archive


 
 

IRCC expands authorization for foreign workers to study without a study permit: Four things you need to know

July 13, 2023

By Sara Espinal Henao Immigration, Refugees and Citizenship Canada (“IRCC”) has announced a promising new temporary measure that allows foreign workers to study for a longer duration without a study permit, opening the door for…

Read More

Canada’s first-ever Tech Talent Strategy announced

July 12, 2023

By Brendan Sheridan The Government of Canada recently announced a number of aggressive immigration measures to help attract top talent to Canada in high-growth industries in an effort to fuel innovation and drive emerging technologies.…

Read More

ESG and dispute resolution: fighting for greener ways

July 5, 2023

By Daniela Bassan, K.C. All stakeholders in the legal profession, including litigators, have a shared interest in promoting environmental, social, and governance (ESG) pathways towards building a greener society. It is crucial for litigators to…

Read More

Amendments to the Canada Business Corporations Act affecting registers of individuals with significant control

June 30, 2023

By Kimberly Bungay and Colton Smith Since June of 2019, corporations formed under the Canada Business Corporations Act have been required to prepare and maintain a register of individuals with significant control (an “ISC Register”).…

Read More

Navigating the waters: Compliance with multiple regimes

June 22, 2023

By Kim Walsh and Olivia Bungay Compliance with Russian sanctions goes beyond complying with Canada’s Russia Regulations. Canadian individuals and businesses may be unaware of several other sanctions regimes that apply to them. In conjunction…

Read More

Nova Scotia releases offshore wind roadmap

June 21, 2023

By David Randell, Robert Grant, K.C., Sadira Jan, and James Gamblin On June 14, 2023, the Province of Nova Scotia released the first of three modules (the “Module”) which will comprise the Nova Scotia Offshore…

Read More

Board, Bye!: Changes to the Municipal Appeal Process under the Urban and Rural Planning Act, 2000

June 19, 2023

By: Joe Thorne, Giles Ayers, and Jayna Green Introduction Prior to June 1, 2023, decisions made by municipal town councils in Newfoundland and Labrador could be appealed to one of four Regional Appeal Boards pursuant…

Read More

Navigating Canada’s sanctions against Russia: New guidance on ownership and control of an entity

June 16, 2023

By Kim Walsh and Olivia Bungay Canadian sanctions targeting Russia in relation to Russia’s ongoing invasion of Ukraine were significantly expanded over the past year. Critical to compliance with Canada’s sanctions targeting Russia, individuals and…

Read More

Navigating Canada’s economic sanctions against Russia

June 6, 2023

By Kim Walsh and Olivia Bungay Canadian sanctions targeting Russia in relation to Russia’s ongoing invasion of Ukraine were significantly expanded over the past year. The Special Economic Measures (Russia) Regulations impose sanctions on individuals…

Read More

Federal Government introduces amendments to expand the mandates of the two historic Atlantic Accord Acts to include offshore wind energy

June 1, 2023

David Randell, Sadira Jan, Robert Grant, K.C., Greg Moores, G. John Samms, and James Gamblin The recent tabling of federal legislation is an important step for offshore wind development in the offshore areas of Nova…

Read More

Search Archive


Scroll To Top