Clarity on the "Act" impacting "non-Canadians" and their ability to purchase real estate in Canada

Back in November, we shared that Canada was moving forward with The Purchase of Residential Property by Non-Canadians Act and that over the next two years it would prevent direct and indirect purchases of residential real estate by individuals who are not Canadian citizens or permanent residents, foreign corporations, and others deemed to be “non-Canadian". The "Act" went into effect at the start of 2023. Further regulations posted back on December 21, 2022 have provided some degree of further clarity. 

As mentioned, the Act is intended to only be in effect for the calendar years of 2023 and 2024. For mobile employees relocating or going on assignment to Canada, in general, most relocating employees will not be able to buy a residential home and the obvious implication here is that they are now more likely to be forced to rent. Additionally, on the home sale side of things, because of the Act, companies and their global mobility functions must consider potential policy and process changes where a BVO (buyer value option) and/or GBO (guaranteed buyout option) program is currently being offered and determine whether and what adjustments need to be made going forward if the property is in a location impacted by the ban. 

In this post from Sorbara Law, the authors explain one of the exceptions to the Act that was made more clear in the regulations that came out. The Act states that properties within a Census Metropolitan Area (having a population of at least 100,000) or Census Agglomeration Area (having a population of at least 10,000) are subject to the prohibition against non-Canadian purchasers. (See "Residential property - exclusion 3 (1) of the Act). Per Sorbara Law:

For me, examples and maps are very helpful. A better version of the map can be found here. Per Sorbara Law, areas in dark and light orange on the map below are subject to this ban, while areas in shades of green are not. So, if a non-Canadian individual were looking to buy a recreational cottage somewhere in green on the map, they could. And if a company has an employee selling a property in those areas, a non-Canadian relocation management company could still coordinate it in the same manner they have been.

However, if the property is in an area that is orange (anything appearing grey becomes green or orange as you zoom in), like most of Southern Ontario which includes areas like Toronto, Hamilton, London, and Kitchener for example, those are subject to the ban. So, non-Canadian employees who do not meet the exception criteria, cannot purchase property and non-Canadian RMCs cannot coordinate home sale services in those orange areas.

As a reminder there are fines for violating the prohibition where any person or entity that knowingly assists a non-Canadian in violating the prohibition, is guilty of an offense and liable to a fine of up to $10,000 CAD if convicted. Professionals across the real estate industry (real estate agents, developers, assignors, assignees, lawyers, relocation management personnel, and other professionals) are at risk as the penalties are not limited to the purchaser but to anyone aiding and abetting the buyer in the process.  

It will be important for companies and service partners to educate employees that are relocating into, out of, and within Canada on this new Act. If there is a candidate in Canada, and there is consideration for offering a home sale benefit to someone who may live in a location that is considered an exception, our home sale team can conduct a verification process. In this process, we obtain confirmation from the closing attorney in Canada whether this Act impacts that specific property to validate the exclusion. With that determination, we can advise and move forward as the company has determined.

Non-Canadian corporations with employees selling a home in Canada that would have been previously provided with a BVO or GBO will need to ensure the relocating employee knows that this is no longer available and either provide a direct reimbursement for customary closing costs or offer no support on the home sale side. Alternatively, we've heard some companies offering to extend the period for the employee to utilize their home sale benefit, allowing the employee to rent out their home for these two years, and to utilize the BVO or GBO once the ban has expired. These situations may come with other types of policy or program exceptions that arise like the need for extra return trips, property management services, and long-term storage of household goods.

For employees and families moving to Canada, they need to be made aware of the Act and its impact on their potential housing options. Companies may want to consider extending the benefit usage period to one year past the end of the Act and allow the employee to utilize home purchase benefits if those would have been provided previously. Mobility programs may expect a greater number of exception requests, potentially for benefits like home search (rental) assistance, temporary lodging, and long-term storage of household goods.

There are many companies and associations involved in seeking measures that can be taken to amend these recently released regulations and address the concerns, without undermining the spirit and intent of the Act. CERC has requested that:

• The regulations should include an exemption from the Act for any foreign national with a valid work permit who is working and residing in Canada to purchase a home.
• The regulations should provide an exemption for all transactions related to the purchase/sale of residential properties for employer sponsored employee relocations, where the transaction involves non-Canadian owned relocation management companies or, wholly owned subsidiaries of non-Canadian corporations without share capital in Canada.

We will be excited to share the news at some point in the future, should these requests be acted upon, and further exceptions granted. Until that time, we will work with our clients to determine the best path forward for supporting their mobility programs and the employees impacted by the Act.