The notion of residency in the purchase of residential real estate in Canada

Co-authored by Vincent Le Saux and Me Paul Vigneron 

In 2022, federal legislators passed a law prohibiting foreigners from buying real estate in Canada, subject to certain exceptions.

This law prohibiting the purchase of residential real estate by non-Canadians was assented to on June 23, 2022, to take effect on January 1, 2023.

Debated and hastily drafted, the law raised more questions than it solved, both for prospective buyers and for legal professionals, notaries and lawyers, as well as real estate and mortgage financing professionals(real estate brokers and mortgage brokers).

Federal deputies delegate their legislative powers to the government to determine these exceptions, by means of regulations.

It was against this backdrop that an implementing regulation was rushed through 2 weeks before the fateful date of January 1, 2023.

Subsequently, a new bylaw was adopted on March 27, 2023, amending the initial bylaw, adding further complexity to the image of a “gas factory”.

Once again, the government distinguishes between Canadian citizens/permanent residents and temporary residents (PVT, Jeune Professionnel, Permis de travail…) and foreigners.

The approach adopted by the government in distinguishing between immigration statuses is the same as that implemented for entry restrictions at COVID.

In doing so, the notion of residence is essential to understand, and is the first step in determining whether or not it is possible to buy.

Then it’s up to you to analyze the conditions applicable to its status, the purchase area and the number of units.

It’s important to understand that this law only applies to residential buildings as defined in the text.

The notion of residence, from the point of view of the aforementioned law, is one of immigration law.

Consequently, the notion of tax residence is irrelevant, except for the purpose of qualifying mortgage financing.

Canadian citizens or permanent residents can buy real estate in Canada, without any restrictions.
Regardless of their place of domicile or tax residence.

However, a permanent resident will have to ensure that he or she remains in Canada for a sufficient period of time if he or she hopes to renew his or her residency, and access to mortgage financing will not follow the same rules depending on whether the permanent resident or Canadian can confirm income in Canada.

In recent months, banks have been confusing Canadian citizenship/permanent residency with tax residency, making it difficult for citizens or permanent residents who are not Canadian tax residents to access mortgage financing.

More specifically, the change in regulations on March 27, 2023 allows :

Temporary residents, those holding a work permit or a study permit to buy real estate in Canada, subject to certain conditions.

1- Work permit holders must hold a work permit valid for at least 183 days from the date of purchase, i.e. from the date of notarization of the title deed, and not from the date of acceptance of the offer or profession of purchase.

Finally, this modification corresponds to what is required by mortgage insurers or banks to obtain financing.

2- He or she must not already own a residential building.

The by-law allows temporary residents to purchase a single building for the purpose of occupying it. However, it is possible to purchase a property and rent a unit in a duplex or triplex and rent the other unit(s).
For holders of a study permit, the conditions are more restrictive:

• Be enrolled in a program of study at a designated institution
• Have filed an income tax return for the 5 taxation years preceding the year of purchase.
• Have been present for at least 244 days during each of the five calendar years preceding the year of purchase
• Purchase price not to exceed $500,000
• Not already a homeowner in Canada

As you can see, it’s very difficult for students to invest in real estate.

Consequently, purchase by foreign parents could be a solution, depending on the area of purchase.

For foreigners (who are not temporary residents), it is essential to analyze the notion of residential property in terms of the law and geographical zones.

For example, in a census metropolitan area, a foreigner will not be able to buy a building with no more than three residential units. However, he or she will be able to buy a quadruplex or quintuplex.

To this end, SHCL has made a map of these zones available at the following link: https://www.cmhc-schl.gc.ca/fr/professionnels/marche-du-logement-donnees-et-recherche/recherche-sur-le-logement/consultations/loi-interdiction-achat-immeubles-residentiels-non-canadiens

The following tables are not exhaustive and do not cover the situation of other properties, such as land.