Federal law prohibiting non-Canadians from purchasing residential real estate comes into force

9 minute read
24 January 2023


A version of this article was originally published on Dec. 19, 2022. It was updated on Jan. 18, 2023 to reflect the updated regulation.

The Canadian government's Prohibition on the Purchase of Residential Property by Non-Canadians Act ("The Act"), which came into force on Jan. 1, 2023, prohibits non-Canadians from directly or indirectly purchasing residential property (or property that includes residential property) in Canada. The legislative scheme is not fully developed, leaving many unintended consequences to foreign purchasers, lawyers, brokers, lenders and possibly trustees in charge of real property.

The government's short consultation process inferred an intention to restrict the Act to a two-year prohibition but this limitation is not found in the Act or in the Regulations (which have been made on December 2 but not yet registered). As such, the prohibition is very broad and will capture much more than what the Federal Government likely intended with this legislation.

The prohibition, generally

The Act defines non-Canadian and residential property as summarized below:

A Non-Canadian is:

  1. an individual who is not: (i) a Canadian citizen; (ii) a person registered as an Indian under the Indian Act; or (iii) a permanent resident;
  2. a corporation that has not been incorporated under the laws of Canada or a province;
  3. a corporation incorporated under the laws of Canada or a province that is "controlled" by foreign corporations or foreign individuals (the Regulations define 'control' as having direct or indirect ownership of shares/units representing more than 3% of the value of equity or 3% or more of the voting rights); and
  4. a prescribed person or entity.

Residential property means any real property or immovable, other than a prescribed real property or immovable, that is situated in Canada and that is:

  1. a detached house or similar building, containing not more than three dwelling units;
  2. a part of a building that is a semi-detached house, row house unit, residential condominium unit or other similar premises that are intended to be owned separately from other units in the building; or
  3. land that does not contain any habitable dwelling, is zoned for residential or mixed use and located within census agglomerations or census metropolitan areas.

The prohibition applies to census agglomerations and census metropolitan areas, as defined by Statistics Canada's Standard Geographical Classification (SGC) 2021. This includes most urbanized areas with a population of more than 10,000 (in the case of agglomerations) and 100,000 (in the case of metropolitan areas).

The prohibition also applies to 'purchases' of real property, which is defined to be the acquisition, with or without conditions, of a legal or equitable interest or a real right in a residential property. Non-residential property that has residential uses/dwelling units would fall under the prohibition, particularly in Ontario where the Planning Act would otherwise make it impossible to sever the residential from the non-residential uses.

Other potential prohibited purchases would include land exchanges or buying out other beneficiary interests in a distribution of a gift of land that includes residential property.

A purchase does not, however, include:

  1. 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 January 1, 2023; or,
  4. the transfer resulting from the exercise of a security interest or secured right by a secured creditor.


The Act prohibits a non-Canadian from purchasing, directly or indirectly, any Residential Property, and makes it an offence (with a maximum fine of $10,000) for any individual, corporation or entity to breach the Act or counsels, induces, aids or abets or attempts to counsel, induce, aid or abet in a contravention of the Act. Directors, officers, agents, senior officials, managers and supervisors of corporations or other entities can also be found liable if they aid or authorize the corporation or entity to commit or aid in the offence, regardless of whether the corporation or entity has been prosecuted or convicted.


There are, however, narrow exemptions under the Act. The Act does not apply to:

  1. temporary residents under the Immigration and Refugee Protection Act;
  2. non-Canadians who purchase residential property with a spouse or common-law partner if the spouse or common-law partner is a Canadian citizen, a person registered as an Indian under the Indian Act, or a permanent resident of Canada; and,
  3. foreign states purchasing for diplomatic or consular purposes.

Agreements signed before January 1, 2023 will not be subject to the prohibition (as long as parties are committed and liable under the agreement) and any sales of residential property contravening the Act will continue to be valid and enforceable. However, if a non-Canadian is found liable under the Act, the Minister may apply to the Superior Court of the province in which the purchase occurred and order the residential property be sold. The Regulations outline the contents of an order to sell and the application of the sale proceeds, namely: firstly to the Minister's costs; secondly, to those (other than the Non-Canadian) who are entitled to receive proceeds of the sale with priorities as the Court may determine; thirdly, repayment to the Non-Canadian of an amount not greater than the purchase price paid for the property; and fourthly, any excess to the Receiver General for Canada.

Concerning implications

The real concern and implications of the Act, at this stage, is the apparent placement of risk and liability on those surrounding the residential real estate transaction itself. Lawyers, real estate agents, brokers (real estate, business, mortgage, etc.), trustees, administrators, lenders, title insurers and intermediaries should all be cognizant that facilitating a residential real estate transaction to a non-Canadian can implicate them and lead to a fine. Significant extra due diligence is required to investigate purchasers, regardless of the side of the transaction in which they are involved. This may be disproportionately true for builders of residential properties and lenders to borrowers who are acquiring residential property, so as to demonstrate a pattern of due diligence to avoid selling or lending to non-Canadians in violation of the Act.

The Act does not allow a non-Canadian purchaser who has entered into a prohibited transaction to rescind the agreement and the Act does not invalidate a sale to a non-Canadian. It is unclear what the purchaser can or ought to do in that situation, possibly leading to a negotiated release of the transaction after accounting for the vendor's costs or potential damages.

A significant challenge the Act brings is how it can be implemented and enforced across the country. The rights the Act seek to curtail are within the jurisdiction of the Provincial governments (property and civil rights) and each province has its own systems, laws and processes to address the acquisition, disposition, registration and enforcement of real property. It is not consistent across the country and what may be permissible in one province may be prohibited in another, simply because of the way in which each province regulates property interests. This inconsistency may result in a discriminatory application of the Act and, depending on various factors, move non-Canadian purchasers to focus efforts in certain provinces that may enable acquisition of real property within the intent of the Act.

Unfortunately, there are no clear answers. There is no consideration of the fact that some provinces, including British Columbia and Ontario, currently have non-resident taxes on the purchase of residential property in those provinces; the Act will have implications on that tax revenue and reporting requirement. Until then, non-Canadians, and anyone who is advising them, should explain to a non-Canadian who is interested in purchasing property in Canada that they are not able to do so, they are not able to set up a trust or nominee to do it on their behalf, and that process to home ownership in Canada for a non-Canadian has just become exponentially more difficult to attain.

Interested in learning more? Contact any member of our global Real Estate Group to begin a conversation.

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