On February 4th, 2024, in a significant move to address the continued concerns over housing affordability in Canada, the federal government announced an extension of the prohibition on foreign acquisition of Canadian housing for an additional two years, now set to last until January 1, 2027.1
Initially established on January 1, 2023, the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the "Act"), prohibits non-Canadians, including corporations not listed on the Canadian stock exchange and controlled by non-Canadians, from directly or indirectly acquiring an interest in residential property in Canada.2
The Act, a component of the government's strategy to address housing affordability, includes detailed Regulations outlining exceptions to the ban, which attempt to clarify the meaning of both "residential property" and "purchase." The Act was initially met with criticism for being overly broad and was subsequently amended, which amendments came into force on March 27th, 2023. Miller Thomson has previously commented on some areas of concern surrounding the Act and its Regulations last year in our January Real Estate Communiqué, our March Real Estate Communiqué and our March Construction Communiqué discussions.
Despite the federal government's attempts to clarify the Act and its operation since its introduction, ambiguity persists in some areas, and purchasers with ownership structures involving non-Canadians should seek legal counsel to ensure compliance with the Act. Industry professionals, such as notaries, lawyers, mortgage brokers, and real estate agents may also face potential liabilities when facilitating contraventions, emphasizing the need for protective provisions in purchase contracts. While the Act's penalties are broad, they do not invalidate contracts violating the prohibition, but can result in the forced sale of the property and the forfeiture of any amounts greater than the purchase price paid by the non-Canadian at the time of acquisition.
The Federal announcement comes only days after Toronto Mayor Olivia Chow's executive committee voted in favour of the City of Toronto creating a new municipal non-resident speculation tax (the "MNRST"), emulating the Provincial Non-Resident Speculation Tax, which was targeted to come into effect January 2025.3 Presumably, with the extension of the Act to 2027, the MNRST, which is scheduled to be considered by the full city council in the middle of February, would apply to notably fewer transactions.
Footnotes
1. Government of Canada, February 4, 2024 "Government announces two-year extension to ban on foreign ownership of Canadian Hosing", online: https://www.canada.ca/en/department-finance/news/2024/02/government-announces-two-year-extension-to-ban-on-foreign-ownership-of-canadian-housing.html; Prohibition on the Purchase of Residential Property by Non-Canadians Act S.C. 2022, c.10, s.235 ["Act"].
2. Canada Mortgage and Housing Corporation, March 27, 2023 "Prohibition on the Purchase of Residential Property by Non-Canadian Act", online: https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research/housing-research/consultations/prohibition-purchase-residential-property-non-canadians-act.
3. CBC News, January 30, 2024, "Toronto mayor's executive committee endorses 10% speculation tax on foreign home buyers", https://www.cbc.ca/news/canada/toronto/executive-committee-foreign-homebuyers-tax-1.7098946#:~:text=If%20approved%20by%20the%20full,properties%20starting%20in%20January%202025.
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