For the most part, the new legislation is just another law in the books that you need to be aware of. The goal of the new rules is to make more residential properties available for residents. By targeting international real estate sales, the act aims to prevent non-Canadians and non-Canadian corporations from purchasing residential real estate in Canada. In a time when interest rates are rising and home sales are falling, this may not have any effect on the current market. Real estate agents should understand the ban, so they comply with the regulations. The questions everyone is asking are, will this change how you market properties and will it interfere with current sales?
Non-Canadian according to the Foreign Home Buyer Ban
Selling a property in Canada to a foreign buyer just got a little more complicated. You strive to market residential properties using 3D virtual tours and floor plans only to discover that your potential buyer may not be able to complete a sale. As of January 1, 2023, the recent legislation prevents non-Canadians from buying a home for the next 2 years. A non-Canadian, according to the act, is described as follows:
- (a) an individual who is neither a Canadian citizen nor a person registered as an Indian under the Indian Act nor a permanent resident;
- (b) a corporation that is incorporated otherwise than under the laws of Canada or a province;
- (c) a corporation incorporated under the laws of Canada or a province whose shares are not listed on a stock exchange in Canada for which a designation under section 262 of the Income Tax Act is in effect and that is controlled by a person referred to in paragraph (a) or (b); and
- (d) a prescribed person or entity. (non-Canadien)
Residential properties described
International real estate sales are difficult to track. According to a recent CBC article, Statistics Canada indicates that there is less than 6% foreign home ownership in Canada. With limited data available, it would appear that the foreign home buyer ban will not play a huge role in the day-to-day operations of most real estate agents. However, it is best to be aware of the types of properties included. According to the Government of Canada’s website, residential properties are described as follows:
Residential property means any real property or immovable, other than a prescribed real property or immovable, that is situated in Canada and that is
- (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, rowhouse 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. (immeuble résidentiel)
Impact of the foreign home buyer ban
Awareness. As with every new piece of legislation, real estate agents need to be aware of any implications pertaining to residential real estate. Part of your marketing plan is to entice buyers by supplying them with the information they need and want. Easily navigated floor plans with accurate measurements capture the attention of potential buyers across the globe. But beware of the new act that prevents some buyers from closing the deal. It is important to note that the foreign home buyer ban applies to properties within a metropolitan area with a population of 100,000 or more. Loosely translated, this means rural areas and vacation homes are likely exempt from the ban.
Penalties and fines
Real estate agents are aware of fines for misrepresentation. Failing to perform your fiduciary duties can end up in a costly lawsuit. The best way to avoid property measurement discrepancies is to use accurate floor plans when marketing a property. Be aware that international real estate sales come with hefty fines too. Non-Canadians who contravene the foreign home buyer ban will be fined $10,000. Real estate agents who knowingly assist a non-resident may also be subjected to a penalty.
It is important to stay current in real estate, whether that means keeping up with technology, analyzing the market, or acquainting yourself with legislation affecting the industry. The foreign home buyer ban is something to be familiar with but for the most part, it is business as usual. It is unlikely that the ban will increase the number of available residential properties on the market. A better way to win listings is to use proven methods of marketing. iGUIDE makes a difference.
