Restrictions on Non-Canadians Buying Residential Property Amended to Reduce Impact on Commercial Real Estate
On December 23, 2022, we published a bulletin advising of legislation and regulations the federal government enacted restricting non-Canadians from purchasing residential real estate. The bulletin can be found here.
The extent to which those restrictions applied to commercial properties was to some degree problematic or unclear. The government has accordingly made amendments, summarized below, that came into force on March 23, 2023. These amendments can be found here. The changes have been incorporated into our summary at the above indicated link.
The restrictions previously set a threshold of 3% direct or indirect ownership of shares or ownership to determining whether a non-Canadian person or entity controlled a Canadian or provincial corporation or entity. That threshold has been increased to 10%.
As well, publicly traded entities formed under Canadian or provincial laws provided they are listed on a Canadian stock exchange designated by the Canadian Minister of Finance are now not consider non-Canadian for purposes of the Act. The amendment may serve to exempt those REITs that meet the above criteria.
Non-Canadians can now purchase land that, regardless of its zoning, does not contain any dwelling unit. This means that non-Canadians can now purchase vacant land, commercial malls, and buildings so long as they do not contain any dwelling unit.
Non-Canadians can now purchase residential properties provided there is a good-faith intention to develop the property.
The threshold has been lowered for non-Canadians authorized to work in Canada under a work permit or otherwise under the Immigration and Refugee Protection Regulations. They are now eligible to purchase residential real estate if they have 183 days or more of validity on their work permit or work authorization on the day of purchase and have not purchased more than one residential property.
While CMHC’s policies or interpretations of law do not carry the weight of law or regulations, they can be helpful. CMHC’s Frequently Asked Questions site contains the following of particular interest to mortgage brokers. The CMHC FAQ site can be found here.
“Non-Canadians who have already purchased residential property before January 1, 2023 can still grant or renew mortgages or hypothecs of that residential property while the prohibition is in effect.”
“The taking of a mortgage, hypothec or other security by a non-Canadian lender over residential property does not in itself constitute an offence under the Act. However, lenders should also take note of the following question and answer.”
“Making a loan to a non-Canadian who owns residential property does not in itself constitute an offence under the Act. However, a loan, whether secured or unsecured and whether made by a Canadian or a non-Canadian, made to a non-Canadian which assists the non-Canadian to purchase, directly or indirectly, any residential property while the Act is in force would be an offence under the Act if the lender knows that the purchase is contrary to the Act.”