New Rules for Foreign Home Buyers in Canada Now In Force: Here's What You Need to Know

March 28, 2023


Written By Mark Lewis, Alixe Cameron, Jane Helmstadter, Kiera Stel and Kyle Laplante

Note: This blog has been updated as of March 27, 2023, following the registration of the Regulations Amending the Prohibition on the Purchase of Residential Property by Non-Canadians Regulations (the Amending Regulation).

On December 2, 2022, the Privy Council passed an Order in Council confirming regulations related to the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the Act). The Prohibition on the Purchase of Residential Property by Non-Canadians Regulations (the Regulation) was published on December 21, 2022, in the Canada Gazette. The Regulation came into force on January 1, 2023, along with the Act.

The Regulation addresses certain aspects of how the Act operates and clarifies several of the outstanding issues identified in our previous blog, Canada's Ban on Foreign Home Buyers Soon In Effect: Update and What's Next.

Broadly speaking, the Act prohibits "non-Canadians" from purchasing any residential property directly or indirectly from January 1, 2023, to December 31, 2024. The Regulation provides greater detail on five key elements of the Act. The Amending Regulation modified the Regulation three months after the Act came into force, changing several key aspects of the Regulation and we have explained these changes below.

1. Residential Properties Not In a Census Agglomeration or Census Metropolitan Area Are Exempt

In its 2022 Budget, the federal government signaled its commitment to exempt recreational properties from the prohibition in the Act. The government has followed through on that commitment by applying the Act only to residential properties in either a "census agglomeration" or a "census metropolitan area". Those terms bear the same meanings in the Act as set out in Statistics Canada's Standard Geographical Classification (SGC) 2021, being an area where one or more adjacent municipalities are centered on a population centre, otherwise known as a core.

As now defined, a census agglomeration area requires only a core population of at least 10,000 people based on data from the previous Census of Population Program. In comparison, to be defined as a census metropolitan area, an area must have a total population of at least 100,000 people based on data from the current Census of Population Program, of which at least 50,000 must live in the core based on adjusted data from the previous Census of Population Program. A link to a map of the impacted areas is available here.

The effect of this definition is to include not only urban centres such as Vancouver, Calgary, Edmonton, Toronto and Ottawa but also many smaller centres (where many people will own recreational properties) such as Squamish, Chilliwack, Penticton, Ladysmith, Sylvan Lake, Medicine Hat, Canmore, Collingwood, Kawartha Lakes and Wasaga Beach.

The Amending Regulation repealed the inclusion of land in a census agglomeration or census metropolitan area that is zoned for residential or mixed use from its definition of "residential property". As a result, the purchase of a property is not prohibited if the property is zoned for mixed commercial and residential purposes, is used solely for commercial purposes and does not contain a dwelling unit. This change in the Amending Regulation addresses one of the most problematic aspects of the Act and the Regulation as originally passed and implemented.

2. Exempt and Included Purchases 

Definition of "Purchase"

The operative restriction in section 4(1) of the Act prohibits the "purchase, directly or indirectly, [of] any residential property" [emphasis added]. Section 4(1) of the Regulation adds that the "acquisition, with or without conditions, of a legal or equitable interest or a real right in a residential property constitutes a purchase" [emphasis added].

When the Act was introduced, there were questions about what would constitute a restricted purchase; in particular, would the ban apply to the entering into of an agreement of purchase and sale, to the completion of the conveyance contemplated by that agreement, or both? Section 4(1) of the Regulation does not provide precise clarity on this question but it suggests that both are captured by the prohibition.

A consultation paper issued by Canada Mortgage and Housing Corporation (CMHC) earlier this year included a proposal to define "purchase" in the Regulation as "[a]cquire, or agree conditionally or unconditionally to acquire, a legal or equitable interest … in a residential property …". The same CMHC paper includes the following:

Acquisition by a non-Canadian of control of a corporation or entity which has an interest … in residential property constitutes a purchase for the purposes of the Act and these Regulations. … For greater certainty, this definition would apply to conditional offers or arrangements to purchase residential property, leases structured to include purchase options, and purchases involving the use of nominee buyers.

While much of the proposed Regulation language contained in the CMHC paper was included in the final version of the Regulation, the language adopted with respect to what constitutes a purchase diverges by not expressly including the concept of agreeing to acquire land and by not including specific language with respect to the use of nominee buyers or the purchase of nominee entities. It is our view that both should be considered as being subject to the prohibition in the Act.

Where an assignment of a purchase agreement is being contemplated, based on the definition in the Regulations, we interpret the prohibition to capture the assignment of a purchase agreement to a non-Canadian assignee if the effective date of the assignment occurs after December 31, 2022 and before January 1, 2025. This means the assignment of an agreement is prohibited even if the original agreement was written and executed before January 1, 2023 and whether or not the assignor is or is not a non-Canadian.

An additional issue arising from the initial implementation of the Act and the Regulation is whether the taking of a mortgage falls within the definition of "purchase" under the Regulation ("the acquisition … of a legal or equitable interest or a real right in a residential property constitutes a purchase"). Canadian courts recognize the common law principle that "A mortgage is an interest in land" (see for example, Crossroads-DMD Mortgage Investment Corp. v. Gauthier, 2015 ABQB 703 at para 59). As a result, we are of the view that the broad definition of "purchase" captures mortgages (whether intended by the government or not).

However, in its Frequently Asked Questions (FAQ) webpage about the legislation, which has become the government's de facto bulletin board for publishing interpretative guidance with respect to the legislation, CMHC has stated that the taking of a mortgage by a non-Canadian mortgagee over residential property, in and of itself, is not intended to be prohibited but the making a loan to a non-Canadian for the purpose, directly or indirectly, of acquiring new residential property is prohibited. Noting the broad disclaimer language that has recently been added to the beginning of the CMHC FAQ webpage, lenders will need to consider these issues, especially in the context of the Amending Regulation, and determine their comfort in relying upon the CHMC guidance in future transactions.

Execution vs Completion

Given the intentions signaled in the consultation paper, and the definition language in the Regulation, signing a valid purchase and sale agreement is likely captured by this definition, as the execution of an agreement for property has been held to transfer the beneficial ownership of the property to the purchaser. Lysaght v Edwards (1876), 2 Ch. D. 499 (Eng. Ch. Div.) is a seminal English case on this issue, and it rules that beneficial ownership passes to the purchaser when the parties sign agreements for the sale of property. Courts have adopted this analysis in Canada over the past one hundred years. For example, it was adopted as law in 1922 in Alberta in Re Church, [1922] 3 WWR 1207, [1923] 1 DLR 203.

In 2018, the Ontario Court of Appeal stated that "[e]ven if the purchaser pays the sale price upon closing, the purchaser becomes the beneficial owner of the property as soon as the contract is formed" (See Mercado Capital Corporation v. Qureshi, 2018 ONCA 711 at paragraph 31).

This subject was considered in 2012 by the B.C. Court of Appeal in Terasen Gas Inc. v. Utzig Holdings, 2012 BCCA 444. In this case, the issues were not decided on the question of whether the purchaser had a beneficial interest in the property, because, as stated in the dissent, "it was clear that beneficial title … passed to the purchaser while the agreement for sale was pending" (paragraph 68). Similarly, in Main Acquisitions Consultants Inc. v. Prior Properties Inc., 2021 BCSC 1449, the court found that "it could not be doubted that some form of an equitable interest in the Lands passed upon the signing of the [Agreement]" (paragraph 57).

As such, it is not necessary for a non-Canadian to complete a residential purchase or to defer the conveyance of the residential property until after 2024; the mere act of signing a contract is captured by the scope of the legislation based on common law principles.

Additional Exemptions 

Section 4(2) of the Regulation provides for several specific exemptions from the prohibition:

  1. the acquisition by an individual of an interest or a real right resulting from death, divorce, separation or a gift;
  2. the rental of a dwelling unit to a tenant for the purpose of its occupation by the tenant;
  3. the transfer under the terms of a trust that was created prior to the coming into force of the Act;
  4. the transfer resulting from the exercise of a security interest or secured right by a secured creditor; or
  5. the acquisition by a non-Canadian of residential property for the purposes of development.

Subsection (e) was added to the Regulation by the Amending Regulation as of March 27, 2023, to address the supply-side impact of the Act, which, ostensibly, was not an intended target of the Act. While "purposes of development" is not defined by the Amending Regulation, as of March 27, 2023, CMHC provided the following commentary on "development" on its FAQ webpage:

"Development means the process of evaluating, planning and undertaking of alterations or improvements (with or without a change in use) to a residential property or the land on which the residential property is located and, for greater certainty, includes redevelopment of an existing building. …

[In scenarios in which] an expansion or remodel is so extensive that it is tantamount to the construction of a new building or a change of use, for example because it creates a new residential property or other types of new and independently usable premises, this would constitute 'development'."

This new exemption will allow entities that would otherwise be prohibited, such as partnerships with 10 percent or more foreign control, to purchase residential property for the purpose of new construction or substantial remodelling of existing structures, and will mitigate the supply-side impact of the Act. Notably, the CMHC FAQ webpage also states that a good faith intention to pursue development of a purchased residential property in reliance on the development exemption can be enough to satisfy the exemption provided that the purchaser can demonstrate the efforts that were made to carry out the intended development.

3. What Constitutes Control by a Non-Canadian?

The Act deferred the definition of "control" to the Regulation, and also allowed for a category of "non-Canadian" to be added by the Regulation, in particular because the Act only addressed individuals and corporations. Section 2(c) of the Act provides that a corporation incorporated under the laws of Canada or a province that is controlled by an individual or a corporation that is a non-Canadian is itself deemed to be non-Canadian unless that corporation's shares are listed on a stock exchange in Canada for which a designation under section 262 of the Income Tax Act is in effect.

Section 2 of the Regulation adds to the category of those included as "non-Canadian" any entity formed or controlled by another entity that is formed other than under the laws of Canada or a province or otherwise controlled by a non-Canadian. The Regulation has therefore picked up partnerships, trusts and all other persons who are not individuals or corporations.

The Amending Regulation has clarified that entities formed in Canada whose shares are listed on a designated stock exchange in Canada are also exempt from the definition of "Non-Canadian". This change addresses the drafting of the Act, which only provides an exemption for "corporations" listed on designated stock exchanges. As such, publicly traded real estate investment trusts, among other entities, were captured by the prohibition before the Amending Regulation. Following the Amending Regulation, these entities are permitted to purchase residential property.

Under Section 1 of the Regulation, "control" means:

  1. direct or indirect ownership of shares or ownership interests of a corporation or entity representing 10 percent or more of the value of the equity in it, or carrying 10 percent or more of its voting rights1; or
  2. control in fact of the corporation or entity, whether directly or indirectly, through ownership, agreement or otherwise.

The "control in fact" test will be familiar to those who have acquired property in B.C. or Ontario in the time since those Provinces introduced their respective "foreign buyers" taxes. While this test does not specifically reference section 256 of the federal Income Tax Act, as do the respective provincial foreign buyers tax statutes, there is at least some familiarity in those jurisdictions with the analysis required to examine control. The new threshold of prohibited foreign control (10 percent) from the Amending Regulation aligns more closely with the restrictions under the existing foreign buyer legislation than did the previous 3 percent threshold.

4. Issuing Orders for Contravening the Act

In our prior blog post, we identified several consequences for contravening the Act, which include fines of up to $10,000 per person or entity. Another additional consequence is set out in Section 7(1) of the Act, which permits a court to order that a residential property purchased by a non-Canadian in contravention of the Act be sold following an application from the Minister, and the proceeds of that sale are not fully paid back to the non-Canadian individual or entity. The Regulation provides further guidance on orders under this provision.

For a court to order that a residential property be sold, the following conditions must be met as outlined under Section 7(1) of the Regulation:

  1. the non-Canadian is the owner of the residential property at the time the order is made;
  2. notice has been given to every person who may be entitled to receive proceeds from the sale; and
  3. the superior court of the province is satisfied the impact of the order would not be disproportionate to the nature and gravity of the contravention, the circumstances surrounding the commission of the contravention and the resulting conviction.

Further, any order made under the Act must include the term that proceeds of the sale be distributed in a specific order as outlined under Section 7(2) of the Regulation, being:

  1. the Minister's costs are to be repaid, along with any outstanding fines to be paid by the non-Canadians;
  2. the payment to those Canadians entitled to proceeds of the sale;
  3. the repayment of the non-Canadian of amounts not greater than the purchase price for the sale; and
  4. any remaining sums to be paid to the Receiver General of Canada.

5. Exempt Individuals

The Regulation exempts certain temporary residents (students or workers), foreign nationals and refugees who meet the specific criteria set out in the Regulation.2

Section 8 of the Regulation provides that the Act does not apply if it is incompatible with the rights recognized and affirmed by section 35 of the Constitution Act, 1982. Section 35 recognizes and affirms the existing Aboriginal and treaty rights of Indigenous peoples of Canada.


This new federal legislation is rather unique, in particular given its limited application for only two years and noting that, as federal legislation, it covers an area that has typically (and constitutionally) been the domain of the Provinces. Buyers who may have an upstream ownership structure that could offend the prohibition under the Act should proceed with caution and under the advice of counsel to determine whether they are subject to these new restrictions imposed. Similarly, professional advisors and others involved in the spectrum of services provided to buyers of real property will need to bear the prohibition in mind to ensure that they too are not exposed to the consequences imposed by the legislation.

If you have any, please reach out to the authors of this blog or a member of our Commercial Real Estate group.

1 We note that the Amending Regulation changed the permissible threshold of existing direct or indirect foreign ownership from 3 percent to 10 percent as of March 27, 2023. This change was not made retroactive to January 1, 2023.

2 The Amending Regulation changed the exemption requirements for temporary residents. We would be happy to assist you with a fulsome review of these specific requirements upon request. 


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