By Sarah Jones and Manveer Sall
On March 27, 2023, the Ministry of Housing and Diversity and Inclusion announced a number of amendments (the “Amendments”) to the Prohibition on the Purchase of Residential Property by Non-Canadians Regulations (the “Regulations”). The Amendments will ease some of the restrictions imposed on non-Canadians purchasing property in Canada by revising some of the regulations previously in force. This article will highlight the key changes to the Regulations made by the Amendments, which came into force on March 27, 2023. Of particular note are new exemptions for vacant land and residential property that is being purchased for the purpose of development, as well as an increase to the foreign control threshold.
This post is a follow-up to our previous article titled “Federal Government reveals regulations to the Prohibition on the Purchase of Residential Property by Non-Canadians Act,” which contains a detailed look at the Regulations in effect prior to the Amendments. For a detailed discussion of the Act, please refer to our previous article titled “Not for Sale: Canada Closes the Door to Foreign Home Buyers”.
The prohibition no longer applies to vacant land
The Amendments have repealed section 3(2) of the Regulations which previously deemed land that does not contain any habitable dwelling, is zoned for residential use or mixed use, and that is located within a census agglomeration or a census metropolitan area, as a prescribed real property or immovable. With section 3(2) of the Regulations now repealed, vacant land zoned for residential and mixed use can now be purchased by non-Canadians and used for any purpose by the purchaser, including for residential development.
Purchase of development land is now exempt from the prohibition
A new exception has been added under section 4(2) of the Regulations to exempt the acquisition by a non-Canadian of residential property for the purposes of development. As such, non-Canadians are now permitted to purchase residential property for the purpose of development.
Foreign control threshold increased from 3% to 10%
Previously, the definition of “control” in section 1 of the Regulations held that control of a corporation amounted to direct or indirect ownership of shares or ownership interests of the corporation or entity representing just 3% or more of the value of equity in the corporation, or carrying just 3% or more of its voting rights. This 3% threshold to determine control of a corporation or entity was a much lower threshold than is applied in many other instances, such as the concept of control in various corporate statues and applicable tax legislation. The Amendments have now increased the control threshold from 3% to 10%. The 10% threshold now aligns with the definition of “specified Canadian Corporation” in the Underused Housing Tax Act.
Restrictions on work permit holders have been relaxed
The Amendments to the Regulations have eased the conditions that work permit holders, and other non-Canadians authorized to work in Canada, need to meet in order to purchase residential property in Canada. Previously, there was a limited exception from the prohibition for work permit holders that was contingent on establishing a multi-year history of residency and tax filings. The Amendments now allow work permit holders and other non-Canadians who are authorized to work in Canada to purchase residential property in Canada as long as they have 183 days or more of validity remaining on their work permit or work authorization on the date of purchase and they have not purchased more than one residential property.
Exception for publicly traded entities
The Amendments to the Regulations have replaced paragraph 2(b) of the Regulations to extend the exception currently applicable to publicly traded corporations to publicly traded entities that are formed under the laws of Canada or a province and are controlled by a non-Canadian. In other words, publicly traded entities that are formed under the laws of Canada or a province and that are controlled by a non-Canadian are no longer deemed to be “non-Canadian” for the purposes of the prohibition.
Key takeaways
The Amendments provide greater flexibility to non-Canadians seeking to purchase residential property in Canada. Specifically, non-Canadians can now purchase vacant land zoned for residential and mixed use and use the land for any purpose, including residential development. Moreover, the increased threshold for control of a corporation from 3% to 10% should provide relief to many corporations and entities that have foreign shareholders, partners or interest holders with small equity interests in such entities.
