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Prohibition on the Purchase of Residential Property by Non-Canadians

By Brendan Sheridan

Residential housing prices in Canada have been a major area of concern for many Canadians who have been looking to purchase a home in recent years. While the market for residential homes in Canada has been slowly softening since its peak in February 2022, and the average home price decreased approximately 12% between November 2021 and November 2022,[1] the average price of homes still remains out of reach for many Canadians. In light of the high  housing prices, the Federal Government has taken action to ensure residential homes in Canada are being sold to Canadian buyers.

The Federal Government’s most recent effort to aid Canadians is to implement the Prohibition on the Purchase of Residential Property by Non-Canadians Act (“the Act”). The Act is in effect as of January 1, 2023 and limits non-Canadians from purchasing residential property in Canada for a period of two years.

What Does “Residential Property” Include?

Residential property for the purposes of the Act is any real or immovable property in Canada that includes a detached house or similar building, a part of building that is a semi-detached house, row house, residential condominium unit or other similar premises.

The Prohibition on the Purchase of Residential Property by Non-Canadians Regulations (“the Regulations”) also confirms that the aforementioned property includes any land that does not contain a habitable dwelling, but that is zoned for residential use or mixed use and that is located within a census agglomeration or a census metropolitan area.

Who Can Purchase Residential Property?

The Act prohibits a “non-Canadian” from directly or indirectly purchasing any residential property in Canada. A non-Canadian is an individual who is not a Canadian citizen, a person registered as an Indian under the Indian Act, or a permanent resident of Canada.

The definition of a non-Canadian also includes corporations or other entities that are formed otherwise than under the laws of Canada or a province, or a corporation that is controlled by a person who is a non-Canadian. As such, the Act does explicitly bar non-Canadians from simply forming a company to purchase the property on their behalf.

For clarity, the Regulations do confirm in s. 4(2) that a “purchase” for the purposes of the Act does not include any of the following:

  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; or
  4. the transfer resulting from the exercise of a security interest or secured right by a secured creditor.

While the prohibition on purchasing property by non-Canadians is quite broad, there are a number of exceptions. We will briefly outline the most relevant exceptions to this prohibition below. Please note that not all the exceptions noted in the Act are discussed, and you can contact Stewart McKelvey to discuss whether there are any other exceptions relevant to you.

The exception to the prohibition on purchasing residential property for temporary residents allows certain individuals to purchase residential property if they meet specified conditions outlined for international students or foreign workers.

International students can qualify for the temporary resident exception to the prohibition and can purchase residential property in Canada if they meet the below criteria:

  1. they are enrolled in a program of authorized study at a designated learning institution,
  2. they filed all required income tax returns for each of the five taxation years preceding the year in which the purchase was made,
  3. they were physically present in Canada for a minimum of 244 days in each of the five calendar years preceding the year in which the purchase was made,
  4. the purchase price of the residential property does not exceed $500,000, and
  5. they have not purchased more than one residential property.

Temporary residents in Canada who hold a work permit or who are work permit exempt may also be exempt from the prohibition on purchasing residential property. To be eligible to purchase residential property as a temporary foreign worker in Canada, a temporary resident must meet the below requirements:

  1. they worked in Canada on a full-time basis for a minimum period of three years within the four years preceding the year in which the purchase was made,
  2. they filed all required income tax returns for a minimum of three of the four taxation years preceding the year in which the purchase was made, and
  3. they have not purchased more than one residential property.

As such, while temporary residents are generally barred from purchasing residential property, there are exceptions to this requirement for those who have resided in Canada on a long-term basis and who are purchasing this property as their sole residential property.

Similarly, non-Canadians can also purchase property if they are doing so with their spouse or common-law partner who is a Canadian citizen, permanent resident, or registered Indian, or who is considered to be a protected person or a qualifying temporary resident meeting the above criteria.

Other exemptions to the prohibition include individuals holding valid diplomatic passports, and individuals who have made a refugee claim that was found eligible and referred to the Refugee Protection Division, among others.

Note that non-Canadians are not impacted by these rules if they became liable or assumed liability under a purchase and sale agreement of residential property before January 1, 2023.

Penalties for Circumventing the Act

There are strict penalties associated with violating the Act for both the foreign national and any individual or corporation that supported a purchase of property in violation of the Act.

If a non-Canadian is found to have purchased residential property in contravention of the Act, they can be made to sell the property. The proceeds of the sale of the property will then used to cover the costs incurred by the Minister in bringing the application to court, payment to those who are entitled to proceeds of the sale other than the non-Canadian, and repayment of the non-Canadian of an amount that is not more than the price the non-Canadian paid for the property. Any remaining proceeds from the sale that have not been distributed will be provided to the Receiver General of Canada. It is, therefore, important to note that a non-Canadian cannot profit off of selling residential property if they violated the Act.

Additionally, any non-Canadian that violates the Act and any person who counsels, induces, aids or abets the non-Canadian in purchasing the residential property knowing that the non-Canadian is prohibited is guilty of an offence and liable to a fine of not more than $10,000.

If a corporation commits an offence under this Act, any officer, director, agent, senior official or individual authorized to exercise managerial or supervisory functions for the corporation and who authorized, or assented to the commission of the offence is a party and liable for the offence.

The penalties for contravening the Act can therefore be quite severe. Non-Canadians will be prevented from financially benefitting from violating the Act and may even incur monetary penalties.

Impact of Act on Foreign Nationals

While the intent of the Act is to allow Canadians to have better opportunities to purchase residential property, it conversely delays the ability of foreign nationals to settle in Canada.

Many foreign nationals come to Canada with their family and with the future intent of applying for permanent residence. Foreign nationals will now need to plan to obtain temporary accommodations for their first few years in Canada as, while there are exceptions for temporary residents, these exemptions require that the foreign nationals have been in Canada for several years before being eligible to purchase residential property. The Act could have a cooling effect on the desirability of Canada as a destination for high skilled foreign workers and other in demand international talent at a time when we are facing major labour shortages in a number of sectors, since these individuals will not be able to properly settle in the country until they obtain permanent residence or meet an exemption to the Act.


There is no question that affordable housing remains an issue in Canada. The Act may achieve the intended effect of providing Canadians more opportunities to purchase homes after the past few years of soaring prices and significant competition in the market. It is also true, however, that Canada needs to rely on immigrants, including foreign workers, to sustain our population and workforce in the coming years. Many temporary residents coming to Canada will be negatively impacted by this new legislation and will need to delay their settlement plans until they become permanent residents or meet one of the limited exceptions. As work permits in Canada are issued for three years or less in most cases, the Act could have the unintended consequence of making Canada a less desirable location for foreign nationals in the coming years and may hinder our ability to attract the workers our country must to rely on to sustain our economy.

This update is intended for general information only. If you have further questions about these programs or are an employer seeking to support your workers, please contact a member of our Immigration Group.

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