Canada’s residential real estate market will undergo a fundamental shift when a two-year ban on foreign buyers takes effect in January. Recently released regulations provide greater clarity on how the ban will work in practice.
In a November blog post, we discussed the impact of the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”) and the upcoming two-year ban on foreign buyers purchasing certain residential real estate in Canada (the “Ban”). Notably, the ban includes significant penalties for Canadian residents who knowingly help a person or entity subject to the ban buy property in Canada.
In our blog, we noted that certain key components of the Ban would be subject to additional regulations (the “Regulations”) that had yet to be released. On December 21, 2022, the Canada Gazette published those Regulations, which will come into force along with the Act on January 1, 2023.
Who Is Impacted by the Ban?
In our previous blog we noted that persons who meet the definition of “non-Canadian” under the Act will be subject to the Ban, including corporations that are “controlled” by foreign corporations or individuals who are not permanent residents of Canada or Canadian citizens.
The Regulations define “control” as follows:
with respect to a corporation or entity, direct or indirect ownership of shares or ownership interests of the corporation or entity representing 3% or more of the value of the equity in it, or carrying 3% of more of its voting rights; or control in fact of the corporation or entity, whether directly or indirectly, through ownership, agreement or otherwise.
Furthermore, Section 2 of the Regulations expands the definition of “non-Canadian” under the Act to include:
entities formed outside of Canada; and entities formed in Canada that are controlled by