On January 1, 2023, the federal government’s ban on new foreign ownership of residential property turned into law as the Prohibition on the Purchase of Residential Property by Non-Canadians Act takes effect. Since the news broke, there have been a lot of murmurs about how it will impact the common man. As the name suggests, the act shall prohibit those who are not Canadian citizens or non-permanent residents from buying residential property in Canada for a period of two years. Though mortgage professionals are not responsible and neither have they been roped in to enforce this ban, the government shall be joining hands with provinces and municipalities to regulate the role of foreign buyers in the housing market. This is primarily done to ensure that Canadians have better chances at buying properties and are given the first preference.
Penalty imposed
Those who do not adhere to this law and are found guilty of helping in buying such a property can be fined up to $10,000. The property can be forced to be sold by the government and the buyer cannot ask for more than the amount paid for the property. However, if the agreement of sale and purchase of the property by a non-Canadian is dated before January 1, 2023, the ban doesn't imply on it.
Kinds of property affected by the law
Those municipalities which have a population of fewer than 10,000 people will not be affected by the ban but those with a population of greater than 10,000 people will be regulated by the ban. According to the act, any property marked for mixed-use or residential use even if no habitable dwelling is currently part of the property comes under the ban. Rented properties are not 'purchased' by the tenant and are just occupied as a dwelling unit and hence are not affected by the ban.
Definition of residential property
Means any real property or immovable, other than a prescribed real property or immovable, that is situated in Canada and that is: For the purpose of the act, residential property
(a) a detached house or similar building, containing not more than three dwelling units, together with that proportion of the appurtenances to the building and the land subjacent or immediately contiguous to the building that is reasonably necessary for its use and enjoyment as a place of residence for individuals;
(b) a part of a building that is a semi-detached house, row house unit, residential condominium unit or other similar premises that is, or is intended to be, a separate parcel or other division of real property or immovable owned, or intended to be owned, apart from any other unit in the building, together with that proportion of any common areas and other appurtenances to the building and the land subjacent or immediately contiguous to the building that is attributable to the house, unit or premises and that is reasonably necessary for its use and enjoyment as a place of residence for individuals; or
(c) any prescribed real property or immovable.
If you need any clarification about this law or anything related to the mortgage of your current property, feel free to write to us at LendX Financial in Brampton, Greater Toronto Area.