The Foreign Buyer Ban Is Still in Effect. Here Is What You Actually Need to Know.

If you have a client who is not a Canadian citizen or permanent resident and they are looking to buy a home in Canada, there is a law they need to know about. And honestly, there are a few things their realtor, accountant, and mortgage broker need to know about it too.

Let's break it down.

What is the Act?

The Prohibition on the Purchase of Residential Property by Non-Canadians Act came into force on January 1, 2023. It prevents non-Canadians and corporations controlled by non-Canadians from purchasing residential property in Canada. CMHC

It was originally supposed to be in place for two years. In February 2024, the federal government extended it to January 1, 2027. McInnes Cooper So if you were thinking this had quietly gone away,

it has not. It is very much still here.

Who does it apply to?

The Act applies to anyone who is neither a Canadian citizen, nor a person under the Indian Act, nor a permanent resident. CMHC

That covers a wide net. Foreign nationals, corporations controlled by non-Canadians, and certain entities formed outside of Canada all fall under this prohibition. Control is defined at 10 percent of equity or voting rights Taxes for Expats, so this is not just about individuals buying homes in their own name.

What properties does it cover?

This is where it gets important for anyone working in Ontario real estate.

The prohibition applies to residential property located within a Census Metropolitan Area or Census Agglomeration. CMHC A CMA is an area with a total population of at least 100,000. A CA has a population of at least 10,000. Most of the communities we work in here in Ontario fall within one of these categories.

The good news is that residential properties located outside of a CMA or CA, including recreational properties like summer cottages and vacation homes, are exempt from the prohibition. CMHC So rural purchases and true cottage country can still be an option for some non-Canadian buyers.

How do you know if a specific property is in or out?

This is exactly why the Statistics Canada interactive mapping tool exists. Statistics Canada has created an interactive mapping tool that can help determine if a specific residential property is part of a CMA or CA. You put in the address and it tells you. Simple. Use it. Every time.

Do not assume. Do not guess based on geography. Confirm it with the tool before anyone proceeds.

Are there any exceptions?

Yes, a few. The prohibition does not apply in situations where somebody acquires an interest in a residential property resulting from a divorce, separation, gift, or death. It also does not apply when a creditor exercises a security interest as part of a financing agreement, such as a seizure or foreclosure. And as of March 27, 2023, vacant land is also exempt, even if it is zoned residential or mixed-use. CMHC

There is also a development exception. Non-Canadians can purchase residential property for the purposes of development CMHC, which includes evaluating, planning, and undertaking alterations or improvements to a property.

Some temporary residents may also qualify under specific conditions related to work permits, income tax filing history, and days present in Canada. Those situations require a closer look and, frankly, a good lawyer involved.

What happens if someone gets this wrong?

The fine for attempting to circumvent this legislation is $10,000 for each party involved in the transaction, including realtors and mortgage professionals. On top of that, a court can order the sale of the residential property. CMHC

This is not a situation where anyone wants to find out after the fact that they got it wrong.

The bottom line

If you are working with a non-Canadian buyer, or if you are a non-Canadian buyer yourself, this Act is not something to navigate on your own. Use the Statistics Canada mapping tool to confirm the property location. Get a real estate lawyer involved early. And talk to your mortgage broker about what your options actually look like.

We work with clients in all kinds of situations and we are happy to help figure out what is possible. Our advice is free and a conversation now is always better than a problem later.

Never be too shy to call.

289-645-1568 | experts@laframboisemortgage.ca | www.laframboisemortgage.ca