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Advocacy Practice Areas Real Estate

FOLA Writes to Ministers on the Prohibition on the Purchase of Residential Property by Non-Canadians Act

Oct 21, 2022 Modified: January 6, 2024

The Honourable Chrystia Freeland, M.P.
Deputy Prime Minister and Minister of Finance
Department of Finance Canada
90 Elgin Street
Ottawa ON K1A 0G5
The Honourable Ahmed Hussen, M.P.
Minister of Housing and Diversity and Inclusion
P.O. Box 8777, Postal Station T
Ottawa, ON K1G 1C0
The Honourable David Lametti
Minister of Justice and Attorney General of Canada
284 Wellington Street
Ottawa, Ontario K1A 0H8;
Dear Ministers
Re: Proposed Regulations under Prohibition on the Purchase of Residential
Property by Non-Canadians Act

  1. Overview
    As representatives of Ontario lawyers in private practice, we are writing to inform you of
    various concerns with the above legislation, currently set to come into force on January
    1, 2023 and the consultation process that was concluded last month in respect of
    regulations proposed thereunder. The consultation process was extraordinarily short and
    did not offer sufficient time for any meaningful response from the various associations
    and their members that stand to be impacted by this legislation, particularly since most
    of the legislation is to be detailed by regulation. We are hopeful you will consider and
    include these comments in the scope of the regulations being considered for
    implementation in January, should the government not revoke the statute instead.
  2. Who is FOLA and What is Our Role?
    The Federation of Ontario Law Associations (FOLA), is an organization that represents
    the associations and members of the 46 local law associations across Ontario. Together
    with our associate member, The Toronto Lawyers Association, we represent
    approximately 12,000 lawyers, most of who are in private practice in firms across the
    province. These lawyers are on the front lines of the justice system, and a significant
    proportion are full-time or part-time solicitors in communities across Ontario.
  3. Our Concerns
    A. Ultra Vires and Jurisdictional Challenges
    The essence of this legislation is to regulate matters which fall within the Provincial
    jurisdiction of property and civil rights. Ontario, British Columbia and other provinces
    have already taken steps to impose restrictions on purchase of certain property by nonresidents and those regimes should be left in place to govern the policy matter or to
    address the Government’s goals of preserving residential inventory for Canadians.
    Threatening resident advisors with fines for participating in transactions, which can
    often occur quickly and come to lawyers already signed and contractually committed, is
    how this legislation is being perceived and may, in fact, operate in practice.
    It would not appear, from the language in the Act, that a failure to comply or to ‘knowingly
    assist’ in a purchase by a non-Canadian would be a criminal offence, requiring federal
    involvement. Without a reasonable need for federal interference, the subject matter
    should fall to the provinces to legislate based on their own needs to protect residential
    inventory as required.
    B. Advisory Offences, Enforcement & Standard of Care
    The Act appears to target real estate professionals and lawyers who fail to ‘stop’ nonCanadians from purchasing residential properties in Canada. The $10,000 maximum fine
    for these assistive parties is material and consequential. There is a possibility that many
    lawyers may simply stop assisting clients on the prospect that they ‘may’ be a nonCanadian, in particular if the means to verify control of a corporation or as a distant
    beneficiary of a trust is too onerous to confirm. This could open professionals to claims
    of human rights violations.
    The Act and regulations will create a standard of care for lawyers who are engaged in
    such transactions. In Kau v The Queen, it was held that one could not rely solely on a
    declaration from an individual as to his/her residency status, but rather the lawyer must
    make a ‘reasonable inquiry’ in the context regarding residency. This will be more
    significant in the context of a corporate purchaser where almost every shareholder will
    have to be scrutinized as to whether they are ‘Canadian’ citizens or permanent residents.
    This standard will likely only be clarified following charges being laid against lawyers who
    find themselves in such a precarious position.
    In many cases, lawyers are engaged after an agreement is signed and committed
    between purchaser and vendor. The legislation does not allow a purchaser who has
    entered into the transaction to rescind the agreement. It is unclear what the purchaser
    can or ought to do in that case. A vendor may refuse to close for fear of being subject to
    the penalties under the Act (notwithstanding language proposed that suggests a sale
    made to a non-Canadian does not invalidate the sale, it is still open for the government
    to charge the Vendor for its role in the transaction). Similarly, if a non-Canadian who,
    after committing herself to a transaction, finds out that the purchase is illegal but wants
    to close and then resell the property to divest herself of the interest, she has no redress
    to use counsel, who would be charged as facilitating the closing, even if it were to
    demonstrate compliance by immediate resale. No solicitor would want to assist in light of
    the sanction. Would the non-Purchaser in this case only have recourse to self-disclose
    to the Minister and wait for the Minister to issue a sale order under the Act? This would
    not be a good use of government resources.
    In any event, it is extremely unclear how the Government would respond to these (and
    many other) gaps in how this legislation would work.
    C. Geographical and Property Scope
    One such concern relates to the scope of the legislation. The consultation paper suggests
    that regulations will identify census metropolitan areas that would be applicable to the
    scope of the prohibition. Lawyers work in the area of exact details and the jurisdictional
    boundaries of these census metropolitan areas will need to be precisely identified and
    defined with respect to each province’s land titles system and, ideally, municipal
    boundary. In many cases, the federal boundary identification standards (such as electoral
    districts, ridings, postal code areas and such) are not aligned with the actual municipal
    Similarly, a suggestion that the Act would not apply to recreational properties as a
    category is not sufficient as there are a number of such properties located within census
    metropolitan areas that contribute towards tourism and other economic effects.
    The arbitrary limit of 3 or less dwelling units in a property is also a concern as it suggests
    that a non-Canadian purchaser would not be interested in larger buildings (like apartment
    buildings or condominium/strata projects) and there is no prohibition on those under the
    Act. We can envision situations such as a non-Canadian parent wanting to purchase a
    single home for her child who is studying or working in Canada; she would be precluded
    from this under the Act, and only if the child qualified under the proposed exemptions,
    would she then be able to lend the money to the child (assuming this too is not an indirect
    ownership interest). There is no clarification proposed in the consultation paper about
    situations like this.
    D. Other Exemptions
    Most of the exemptions relating to non-Canadians are mirrored in the Ontario Land
    Transfer Tax Act which imposes the non-resident speculation tax, namely the refugee
    status and work or student visa exemptions. Given the timing to get status and visas, it
    may be that the two year statutory prohibition will end before some of these exemptions
    can materialize.
    The financial threshold of $500,000 or higher, which would apply to prohibited residential
    properties, is arbitrary. As the prohibition is against certain properties in census
    metropolitan areas, there are few properties that would be available under this price point
    and, if there were, it is unclear why non-Canadians would not be prohibited from
    accessing those lower-valued properties. If the intention is to promote housing inventory
    for local residents and citizens, this financial threshold complicates the policy rationale of
    the Act.
    The notion that a non-Canadian shareholder of 3% or more of the voting control of a
    corporation renders the entire corporation incapable of acquiring residential property
    under the Act is a very low threshold. A recent regulatory threshold of 25% has been
    applied when assessing control in a corporate context, particularly to comply with
    FINTRAC guidelines.
    It is unclear why certain trusts that devolve real property to beneficiaries would be caught
    by the prohibition, particularly when a trust has reached its maturity or is required to
    distribute under provincial trust laws. This raises the above concern about complexity of
    real property rights that is better left to the Provinces to regulate. A trustee would now be
    potentially liable under the Act if she administers the trust contrary to the Act but in
    accordance with the trust.
    The Act and regulations do not speak to properties that include residential premises as
    part of a larger parcel of land or a mixed use building. It is increasingly frequent to see
    ground level commercial/retail properties with one or two levels of residential housing
    above it. A non-Canadian would now be precluded from such an investment because of
    the tied residential component. Similarly agricultural properties often have housing on the
    farm for workers or family; would a non-Canadian be precluded from acquiring the farm
    in this context?
    This discussion identifies a number of possible complications with the Act that would
    require more planning and consultation rather than hastily promulgating it and leaving
    such wide gaps of interpretation open for debate, or before the Courts in the context of a
    regulatory sanction.
  4. Conclusion
    This legislation has not been thoroughly thought out and the consultation process not
    vastly disseminated to provide meaningful feedback to guide prohibitions of this nature
    and with such implications for local professionals. The preference is to revoke the Act
    and if the Government feels that the policy in having such restrictions is still reasonable,
    a more fulsome dialogue would be appropriate.
    As noted, the jurisdictional issues are material and may pose a significant issue of
    constitutional validity. Clearly there are practical implications to be sorted out in its
    passage. Both reasons are sufficient to revoke the Act prior to its coming-into-force date
    of January 1, 2023 and to better prepare professionals, trustees, investors and nonCanadians who may have transactions in the works, to understand how they can comply
    or manage this without liability.
    If there is still an opportunity for further discussion, we would be pleased to arrange a
    meeting at your convenience.
    Yours truly,
    Mark Giavedoni
    FOLA Real Estate Chair