Beginning January 1, 2023, non-Canadians will be subject to a two-year ban on the purchase of certain residential real estate in Canada – and anyone who knowingly helps a non-Canadian buy a house could find themselves in hot water.

In an effort to make housing more affordable, the federal government introduced the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”)[1] in its 2022 budget. The act received Royal Assent as part of Bill C-19 on June 23, 2022, and is expected to come into force on January 1, 2023, prohibiting non-Canadians from directly or indirectly buying residential property in Canada for a period of two years (the “Ban”).

Broadly speaking, the Ban prohibits foreign corporations and individuals who are not permanent residents of Canada or Canadian citizens from purchasing residential real estate in Canada between January 1, 2023, and December 31, 2024. Any contractual obligations arising or assumed prior to January 1, 2023, will not be subject to the Ban.

Certain key components of the Ban have yet to be determined and will be subject to additional regulations (the “Anticipated Regulations”) expected later this year. For example, the classes of persons exempt from the Ban and whether the Ban will apply to vacant land that could be subject to residential real estate development in the future have yet to be determined, among other items.

Who Is Impacted by the Ban?

Beginning January 1, 2023, persons who meet the definition of “non-Canadian” under the Act will be subject to the Ban, including:

• corporations incorporated outside of Canada;
• corporations “controlled” by foreign corporations or individuals who are not permanent residents of Canada or Canadian citizens (with “control” to be defined in the Anticipated Regulations);
• individuals who are neither a Canadian citizen nor a permanent resident of Canada; and
• such other individuals and entities to be listed in the Anticipated Regulations.

Types of Property Affected

The Ban will apply to certain property located in Canada that meets the definition of “residential property” under the Act, including:

• detached houses or similar buildings containing three dwelling units or less;
• a part of any building that is a rowhouse, semi-detached house, residential condominium or other similar premises intended to be owned apart from other units in the building; and
• such other residential properties to be listed in the Anticipated Regulations.

Available Exemptions

Notwithstanding the Definition of “non-Canadian” set out in the Act, the Ban will not apply to the following persons:

• refugees;
• non-Canadian individuals who purchase residential real estate with a spouse or common law-partner provided that their spouse or common law-partner is a Canadian citizen, a permanent resident of Canada, a person registered as an Indian under the Indian Act, or a refugee;
• temporary residents who meet certain criteria to be prescribed in the Anticipated Regulations; and
• such other classes or persons to be set out in the Anticipated Regulations.

Penalties and Enforcement

Notably, every person or entity who contravenes the Ban and every person or entity who knowingly helps someone who is subject to the Ban buy a residential property will be guilty of an offence and liable to be fined up to $10,000. Furthermore, any directors, officers, agents, mandataries, senior officials or managers of a corporation or entity that contravenes the Ban may be held personally liable if they direct, authorize, assent, acquiesce in or otherwise participate in contravening the Ban.

If a person or entity is found guilty of an offence under the Act, the Minister will have the authority to apply to the local superior court to seek an order that the residential property be sold in accordance with the Anticipated Regulations.

Because the offence provisions under the Act are not limited solely to the purchasers of residential properties, liability may arise for a plethora of persons involved in Canada’s residential real estate industry, including sellers, real estate agents, developers, assignors, assignees, lawyers and other professionals involved in any alleged contravention of the Act.

Contractual Validity

It is important to note that a contravention of the Ban will not affect the validity of the sale of a residential property. As a result, buyers and sellers of residential property subject to the Ban will still be legally required to comply with their contractual obligations despite any contravention of the Act and, accordingly, the provisions of such contracts are still likely to be enforceable pursuant to standard legal mechanisms.

Moving Forward

Looking to the future, a variety of important details of the Ban have yet to be determined. We will know more once the Anticipated Regulations are published by the Government of Canada. However, what is clear based on the language of the Act is that those involved in the residential real estate industry will need to be cautious and make reasonable efforts to identify non-Canadian buyers and sellers who cannot utilize an available exemption under the Act.

To mitigate the risks associated with violating the Ban, developers and other persons involved in the purchase and sale of residential property in Canada may wish to consider whether the addition of protective contractual provisions to a purchase and sale agreement may be appropriate. For further information on the upcoming Ban and how the Act may affect you or your business, please contact a member of our Real Estate Group.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.

 [1] Prohibition on the Purchase of Residential Property by Non-Canadians Act, SC 2022, c 10, s 235 [the “Act”].

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Financial Mistakes to Avoid in Today’s Economy.

2022 has been nothing but bad news financially for most Canadians. Our stock portfolios are worth a lot less, everything we buy costs more, and interest rates are making our mortgages and other loans a lot more expensive. More than ever it is time to tread carefully and avoid any financial mistakes, so we gathered up the top 5 missteps you definitely want to steer clear of for the rest of this year and beyond!

1. Not understanding your loan agreements.
It is shocking to see how many people fail to understand the terms and conditions before entering into potentially life-changing contracts like a mortgage or student loan. Don’t assume your student loan will have a low-interest rate and make sure to investigate the amount of your monthly payment post-graduation, and how many years you will be paying.

Mortgages can be complicated, but that’s no excuse and a good mortgage broker will take the time to answer all of your questions. Trigger rates in mortgage agreements have recently been in the news with rising interest rates and are a good example of people not fully understanding what they signed.

2. Not having any system to track your expenses.
“I don’t know where my money goes” is a common refrain as prices continue to rise. However, given the number of mobile applications, web programs, and other online tools available to simplify this task (or just use a pencil!), there isn’t any excuse. Regardless of how much income you have coming in, monitoring and controlling expenses is a critical step as plenty of high-earning-now-bankrupt athletes and actors have proven!

3. Investing before paying off debt.
The question of whether it’s better to invest any “extra” cash or pay down debt needs a re-think given recent economic changes. In 2021, mortgages and lines of credit could be had for around 2% and most stock indexes reported double-digit gains. Paying down those debts with money you could have invested in the markets was not the best option.

A year later, borrowing rates have doubled in many cases (mortgages for example) and financial markets are wobbly at best, with many deep into the red year to date. These aren’t the only factors to consider, and you need to do the math for your situation, but the case for paying down debt is getting stronger by the day.

In case you are wondering, credit card debt is another deal altogether! In almost every case you would be much better off by throwing all you have at the unpaid balance before investing any of that money.

4. Not saving and investing.
As higher prices and interest rates suck up more of our disposable cash, something has to give, and putting a little bit of money away each month may be on the chopping block. If you need the money for essentials like food or rent, then you have no choice but to be honest with yourself about what is essential! Once you break the saving habit it’s hard to get it back and saving is not really a discretionary expense unless you have an alternative plan to fund your retirement.  Catching up on savings might be possible when things get better, but that could be years and the earlier you start, the more your savings will grow.

5. Spending too much on a car.
You should be aiming for 15% of your take-home pay for total car costs including the loan payment, insurance, and gas. This leaves you between $30K and $35K for a vehicle if you make $100k annually. That’s not a lot given that new and used cars have been in short supply in 2022 and prices are rising. Although repairs aren’t cheap and you won’t get that new car smell, hanging on to your current ride may be the best option financially.

At the end of the day, financial knowledge is the best defense for avoiding mistakes and we hope you continue to learn with us.