A temporary ban on selling residential property to foreign buyers was recently introduced into legislation. The Foreign Buyers Ban in Canada came into effect on January 1, 2023, and will remain in force until at least December 31, 2025.
What does this mean for the Canadian housing market? More specifically, what does this mean for buyers of Canadian real estate?
John Zinati of Zinati Kay – Real Estate Lawyers in Scarborough sheds light on the complex matters of the ban and how it may affect the future of the local real estate market.
What Is the Canada Housing Foreign Buyers Ban?
First, it is important to understand the details of the Foreign Buyers Ban. The Prohibition on the Purchase of Residential Property by Non-Canadians Act was introduced during the 2022 federal budget announcement.
The legislation bans non-Canadians from directly, or indirectly, purchasing residential properties for two years. Residential property under this Act is described as the following (as published on the Government of Canada Justice Laws Website):
- a detached house or similar building, containing not more than three dwelling units, together with that proportion of the appurtenances to the building and the land subjacent or immediately contiguous to the building that is reasonably necessary for its use and enjoyment as a place of residence for individuals
- a part of a building that is a semi-detached house, rowhouse unit, residential condominium unit, or other similar premises that is, or is intended to be, a separate parcel or other division of real property or immovable owned, or intended to be owned, apart from any other unit in the building, together with that proportion of any common areas and other appurtenances to the building and the land subjacent or immediately contiguous to the building that is attributable to the house, unit or premises and that is reasonably necessary for its use and enjoyment as a place of residence for individuals, or
- any prescribed real property or immovable.
Who Is Considered a Foreign Buyer in Canada?
The Foreign Buyers Ban in Canada pertains to individuals and foreign corporations who are not permanent residents or Canadian citizens at the time of the transaction.
Who Will Be Affected By the Ban?
According to John Zinati, any real estate industry corporation, lawyer, and other related parties may face monetary penalties of up to $10,000 if found guilty of representing a foreign buyer (under the conditions of the ban).
For his law firm, Zinati states proof of Canadian citizenship or permanent resident status will need to be presented for every real estate inquiry and transaction.
Who Will Be Exempted?
However, there are exceptions to the description of a foreign buyer. Under the Act, persons who are students, refugees, married, or in a common-law relationship with a buyer not subject to the ban, are exempt. Exemptions are conditional to residency obligation and tax filing.
Other conditions that fall under the exemption clause include residential structures with more than three units, properties outside of a Census Metropolitan Area or a Census Agglomeration (CA), and properties under court conditions to be sold.
Will the Rules Be Enforced or Will They Be Challenged?
As a real estate lawyer, Zinati has decades of experience in seeing other legislation rules be challenged. In its early days, this ban has many professional organizations concerned including the Federation of Ontario Law Associations.
With the lack of detailed information and the raising of challenges within the legislation, Zinati says the underlying legalities of real estate transactions would still be upheld.
For example, if a transaction was done against the ruling of the ban, the contract between the buyer and seller would still be valid. It would require the interaction of both the federal government and the provincial government where the property is located to intervene.
What Happens to the Agreements Signed in 2022?
The Prohibition on the Purchase of Residential Property by Non-Canadians Act became official in June 2022, with full effect beginning January 1, 2023. Any Agreement of Purchase and Sale created and signed in 2022 is exempt from the ban, including those which have a 2023 closing date.
The Impact of the Foreign Buyers Ban in Canada on the Real Estate Market
The impact on the Canadian housing market is yet to be seen as there are many questions and concerns surrounding the new Act.
John Zinati suggests that there may not be a substantial effect on the local market as his law firm rarely sees foreign buyers with no permanent ties to Canada.
Furthermore, the ban was first announced last Spring, at which time the housing market was high, but has since seen a decline long before the ban came into effect.
Contact Zinati Kay to Hire a Real Estate Lawyer in Toronto
For more information on the ban or to inquire about real estate transactions, contact Zinati Kay – Real Estate Lawyers. We offer assistance with buying, selling, mortgage refinancing, and Title Transfer within the GTA. With more than 25,000 successful real estate transactions, our team provides professional and friendly services. Contact us today at (416) 321-8766.