Skip to content

Regulations and other considerations: further impacts of the Prohibition of Residential Property by Non-Canadians Act

Wednesday’s Thought Leadership piece from our Immigration Group detailed the impacts of recent Federal legislation limiting housing purchases by non-Canadians on Foreign Nationals, international students and temporary and permanent residents.

Today, lawyers from our Real Property Group provide additional insight on the impacts of the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”), with a specific focus on the Regulations and other considerations for non-resident, non-Canadians looking to purchase property.

 

By Eyoab Begashaw, Cullen Mullally, Brian Tabor, K.C. & James Cruickshank

The Regulations associated with the Act, which were released in early December 2022, provide additional detail on what purchases will be prohibited under the Act and what exemptions are available. As noted in yesterday’s article, there are several exceptions to the Act, and penalties for non-compliance. It should also be noted that residential property is any real property that is situated in Canada within an urban region (see below) that is:

  • a detached house or similar building containing three or less dwelling units;
  • a part of a building that is a semi-detached house, rowhouse unit, residential condominium unit or other similar premises that is a separate parcel or other division of real property;
  • any land that is zoned for residential use or mixed use, even if the land does contain any habitable dwelling.

Impact of the Regulations

The Regulations exclude from the definition of residential property any property that is not within an urban region, which is defined in the Regulations as either a census agglomeration or a census metropolitan area. The terms “census agglomeration” and “census metropolitan area” are defined by Statistics Canada, and include all major Canadian cities, and also many other urban centres across the country. The data used to make this determination is based on Statistic Canada’s Census of Population Program. Based on 2021 data, the definition would not only capture large urban centres, such as Halifax, but also smaller regions where individuals may own recreational homes (such as Kentville, Nova Scotia or Summerside, Prince Edward Island). A full list of current census agglomeration areas and census metropolitan areas can be found online.

As noted in our previous article, the Regulations confirm that the prohibition also applies to entities not formed under the laws of Canada or a Canadian province, as well as entities that are formed under the laws of Canada or a Canadian province but are controlled by non-Canadian individuals or entities formed under the laws of non-Canadian jurisdictions.

The Regulations provide for a uniquely low threshold as to what constitutes control, that is:

  • direct or indirect ownership of shares, or ownership interests of the corporation or entity representing three percent or more of the value of the equity in it, or carrying three percent or more of its voting rights; or
  • control in fact of the corporation or entity, whether directly or indirectly, through ownership, agreement or otherwise.

With a uniquely low threshold for what constitutes “control”, potential buyers and builders must ensure that they are fully aware of their status and how they are affected by the relevant provisions of the Act and associated Regulations.

Additional impacts on residential property purchases

While this Act is the most recent legislation impacting the purchase of residential property by non-Canadians (it came into force on January 1, 2023), it is not the only one. The following Federal and provincial legislations from 2022 also had impacts.

  • Underused Housing Tax (Federal)

Bill C-8, the Underused Housing Tax Act (“UHT Act”) received Royal Assent on June 9, 2022, and came into effect retroactively on January 1, 2022, creating a new tax on underused (i.e. vacant) residential properties owned by non-resident, non-Canadians. The UHT Act dictates that every non-excluded owner of residential property must file a return on December 31st of each year (UHT Act, s. 7(1)), and pay a tax equal to one percent of their ownership share of the value of the property. Owners can elect a fair market value or the prescribed value, or the property’s most recent sale price (UHT Act, s. 6(3)).

Excluded owners, as defined in the UHT Act, include government, a citizen or permanent resident of Canada, a publicly listed corporation incorporated federally or provincially, a trustee, a registered charity, a co-op, hospital, municipality, college or university, an Indigenous governing body or a prescribed person (UHT Act, s. 2).

  • Provincial Deed Transfer Tax (Nova Scotia)

Effective April 1, 2022, the province of Nova Scotia introduced the Non-resident Deed Transfer and Property Taxes Act with respect to the Provincial Non-Resident Deed Transfer Tax (“PDTT”). The PDTT levies a five percent tax on the greater of the purchase price or the assessed value of the property, and applies to all residential properties, or a portion of the property that is deemed residential, including vacant land classified as residential.

For additional information with respect to the PDTT, please see our previous Thought Leadership piece, Provincial Non-Resident Deed Transfer Tax Guidelines. Note, the
non-resident property tax which had originally been contemplated in Nova Scotia, was subsequently repealed.

  • Island Regulatory and Appeals Commission (Prince Edward Island)

 Non-Canadians looking to buy in Prince Edward Island must comply with the Lands Protection Act (PEI) (“LPA”). This legislation is administered and enforced by the Island Regulatory and Appeals Commission (“IRAC”), and while not new, it does require non-residents of Prince Edward Island and corporations to make application to IRAC if they are looking to acquire lands that results in total applicant landholdings in excess of five acres or shore frontage in excess of 165 feet. Each application is considered upon its merits based on a number of factors.

The landholding parameters will seldom present as a hurdle for non-Canadians looking to purchase a residential home. However, all properties are unique and compliance with the LPA must be ensured to avoid fines or other actions.

Conclusions

Given the low control threshold, the broad definition of “residential property”, the unique
two-year time period of the legislation, and the potential penalties for non-compliance, it is important for prospective non-resident, non-Canadian residential property purchasers to understand the requirements under the Act. Non-resident, non-Canadians who are considering a purchase of real property within Canada, either directly or through a corporation or other entity, should seek the advice of counsel to ensure compliance.

Any questions surrounding the Act, the Regulations, or their implications can be directed to the authors, or a member of our Real Property Group.

 

This update is intended for general information only, and does not constitute legal advice.

Click here to subscribe to Stewart McKelvey Thought Leadership.

SHARE

Archive

Search Archive


 
 

Reset for renewables: Nova Scotia overhauls energy regulation and governance in advance of influx of renewable energy

April 5, 2024

By Nancy Rubin and James Gamblin The Government of Nova Scotia has embarked on a path to dramatically reshape the regulation and governance of the energy sector with the passage of Bill 404, the Energy…

Read More

An employer’s guide to human rights law in Atlantic Canada

April 2, 2024

By Kathleen Starke and Annie Gray Human rights landscape Human rights legislation prohibits discrimination in specific contexts, including employment and the provision of services. In all Atlantic Provinces, Human Rights Commissions are responsible for enforcing…

Read More

Recognizing subtle discrimination in the workplace: insights from recent legal cases

March 4, 2024

By Sheila Mecking and Michiko Gartshore Subtle discrimination can have a much stronger and longer effect on employees when not properly addressed. It can also result in costly consequences for an employer who does not…

Read More

Immediate changes to travel eligibility for citizens of Mexico

February 29, 2024

By Brittany Trafford and Brendan Sheridan Today Immigration, Refugees and Citizenship Canada (“IRCC”) has announced significant changes to the travel requirements for Mexican citizens. As of February 29, 2024 at 11:30p.m. Eastern Time, all electronic…

Read More

Updated guidance on business reporting obligations under Canada’s supply chain transparency legislation

February 23, 2024

By Christine Pound, ICD.D., Twila Reid, ICD.D., Sarah Dever Letson, CIPP/C, Hilary Newman and Daniel Roth Introduction As we reported on November 30, 2023, the Fighting Against Forced Labour and Child Labour in Supply Chains…

Read More

Trustees beware! New trust reporting and disclosure requirements under the Income Tax Act are here – are you ready for them?

February 21, 2024

By Richard Niedermayer, K.C., TEP  & Rackelle Awad New trust disclosure rules originally announced on February 27, 2018, are now in force, and trusts with taxation years ending on or after December 31, 2023 are…

Read More

Proposed Criminal Interest Rate Regulations: exemptions to the lower criminal interest rate

February 14, 2024

By David Wedlake and Andrew Paul In late December 2023, the Federal Government issued draft Criminal Interest Rate Regulations under the Criminal Code. These proposed regulations follow the Budget Implementation Act, 2023, No. 1 which…

Read More

Outlook for 2024 Proxy Season

February 9, 2024

By Andrew Burke, Colleen Keyes, Gavin Stuttard, David Slipp and Logan Walters With proxy season on the horizon, many public companies are once again preparing their annual disclosure documents and shareholder materials for their annual…

Read More

Significant changes announced for new study permit applications

February 6, 2024

By Brendan Sheridan and Tiegan Scott The Government of Canada recently announced further changes to the international student program that not only limits the number of new study permit applicants per year, but also increases…

Read More

Plans of arrangement come to Newfoundland and Labrador

January 30, 2024

By Tauna Staniland, K.C., ICD.D, Joe Thorne, and Nadine Otten What can you do when your corporation wants to complete a complex transaction requiring significant corporate restructuring that cannot be easily completed under the corporation’s…

Read More

Search Archive


Scroll To Top