The Federal Government has brought into force the “Prohibition on the Purchase of Residential Property by Non-Canadians Act”.
For a two year period commencing 1 January 2023, a Non-Canadian will not be able to purchase residential property in Canada. That person and any person who assists them is guilty of an offence which carries a $10,000.00 fine.
This applies to real estate registrants, namely salespersons and brokers. It also applies to Brokerages, and should the Brokerage be incorporated it applies to:
(a) an officer, director or agent or mandatary of the corporation or entity;
(b) a senior official of the corporation or entity; and
(c) any individual authorized to exercise managerial or supervisory functions on behalf of the corporation or entity.
Consequently, it will be important to ensure that every person who wishes to acquire residential property is aware of the prohibition, agrees to proceed and confirms that they are not non-Canadians, nor is any non-Canadian part of the transaction, either directly or indirectly.
You will want to protect yourself by ensuring that you have the Buyer’s “informed consent” to proceed.
As a result, you will want to highlight the Act, but not provide any advice concerning the application of the Act to the Buyer’s circumstances.
You might consider adding the following Schedule to your Buyer Representation Agreement:
Schedule “NC”
Re: Prohibition on the Purchase of Residential Property by Non-Canadians Act
- The Buyer is aware that the Prohibition on the Purchase of Residential Property by Non-Canadians Act creates an offence under federal law for a Non-Canadian to purchase any residential property in Canada, either directly or indirectly from 1 January 2023 to 1 January 2025.
- The definitions of Non-Canadian, residential property and the exceptions are outlined in the Act.
- The Buyer confirms that he is not a Non-Canadian for the purposes of the Act.
- The Buyer confirms that he will not purchase a prohibited property either directly or indirectly on behalf of a person or corporate entity which is Non-Canadian.
- The Buyer will consult with a lawyer in order to obtain legal advice if necessary.
Date: _______ January, 2023
Name: ___________________
Signature: ________________
COMMENT
Naturally, you will want to obtain legal advice before including this Schedule in your Buyer Representation Agreements. It will also be important to keep up to date with the legislation. Ensure that if a person is entering Canada or might be caught by the Act, that they obtain legal advice.
There are consequences for a non-compliant acquisition, including the $10,000.00 fine ($20,000.00, if there were two spouses), as well as the Court sale of the property at a price not greater than the original purchase price.
The failure to properly advise a client would also constitute a breach of an agent’s fiduciary duties.
Brian Madigan LL.B., Broker