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The Details Of Canada’s Foreign Buyers Ban

April 5, 2023

On March 27, 2023, the Canadian federal government made important changes to the Prohibition on the Purchase of Residential Property by Non-Canadians Act, commonly known as the Foreign Buyers Ban. The changes are aimed at enhancing the flexibility of newcomers and businesses looking to add to Canada’s housing supply. As a real estate agent or broker, it is essential to understand these updates to properly advise and refer clients to appropriate legal or financial professionals when necessary. In this blog post we will cover the details of Canada’s foreign buyers ban.

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The following are the four significant changes that have been made to the Foreign Buyers Ban:

  1. Work permit holders and those authorized to work in Canada under the Immigration and Refugee Protection Regulations can now purchase residential properties. To be eligible, work permit holders must have 183 days or more of validity remaining on their work permit or work authorization at the time of purchase and not have purchased more than one residential property. The current provisions on tax filings and previous work experience in Canada are also being repealed.
  2. Non-Canadians can now purchase vacant land zoned for residential and mixed-use and use it for any purpose, including residential development.
  3. An exception has been added to allow non-Canadians to purchase residential properties for development. The amendments also extend the exception currently applicable to publicly traded corporations under the Act to publicly traded entities formed under the laws of Canada or a province and controlled by a non-Canadian.
  4. The corporation foreign control threshold has increased from 3% to 10% for the purposes of the prohibition concerning privately held corporations or privately held entities formed under the laws of Canada or a province and controlled by a non-Canadian. This aligns with the definition of ‘specified Canadian Corporation’ in the Underused Housing Tax Act.

As a real estate agent or broker, it is essential to take the necessary steps to protect yourself when working with clients to ensure that they are in compliance with this legislation. Below are some best practices to follow when working with buyers and sellers.

When working with a buyer:

  • Verify the purchaser’s citizenship, residency, or exemption status before showing them any properties or signing any representation agreements. Check that the ID (such as a passport) is valid, current, and authentic.
  • Keep a record of the buyer’s identification and the steps you’ve taken to verify the document.
  • If your buyer is a non-Canadian who may be exempt, refer them to an appropriate legal or financial third-party professional. Provide a range of options and let your client choose.
  • Complete the Certificate and Consent of Purchaser from the Canadian Real Estate Association (CREA) and have it ready to submit with offers.

When working with a seller:

  • Insert the following clause in your agreement: “Subject to (b) below, the Buyer represents and warrants that the Buyer is not and on completion will not be a non-Canadian as defined by the Prohibition on the Purchase of Residential Property by Non-Canadians Act (Canada) (the “Foreign Buyer Ban”), and therefore the Buyer is not prohibited from purchasing residential property in Canada. (b) Provided that if the Buyer is a non-Canadian as defined by the Foreign Buyer Ban, the Buyer represents and warrants that the Buyer qualifies for an exception under Section 4 of the Foreign Buyer Ban and is therefore not prohibited from purchasing residential property in Canada. These representations and warranties shall survive and shall not merge on closing. The Buyer hereby indemnifies the Seller against any costs, claims, or any other damages incurred by the Seller as a result of the Buyer being prohibited from purchasing residential property under the Foreign Buyer Ban.”

In conclusion, the changes made to the Foreign Buyers Ban are aimed at enhancing the flexibility of newcomers and businesses looking to add to Canada’s housing supply. As a real estate agent or broker, it is essential to understand these updates and follow best practices when working with buyers.