The Non-Resident Purchase Ban: Legislative Context
In response to Canada's housing affordability crisis, the fédéral government enacted the Prohibition on the Purchase of Residential Property by Non-Canadians Act (S.C. 2022, c. 10, s. 235), which came into force on January 1, 2023. The objective of this measure is to limit real estate speculation by foreign buyers and free up housing for Canadian residents. Originally set for a two-year period, the ban has been extended multiple times and now applies until January 1, 2027.
Scope of the Ban
The ban targets non-Canadians, defined as persons who are neither Canadian citizens nor permanent residents under the Immigration and Refugee Protection Act. It also applies to foreign entities (corporations incorporated outside Canada) and entities controlled by non-Canadians (Canadian corporations controlled by foreign nationals). The ban covers residential properties of one to three units (houses, condos, semi-detached) located in a census metropolitan area (CMA) or census agglomeration (CA) with at least 100,000 inhabitants.
Exceptions Under the Regulations
The Prohibition on the Purchase of Residential Property by Non-Canadians Regulations (SOR/2022-250) provide several exceptions to the ban. These exceptions are essential for mortgage brokers serving an international clientele.
- Temporary residents holding a valid work permit who have filed tax returns for 3 of the 4 preceding years (maximum one property)
- Protected persons under the Immigration and Refugee Protection Act
- Spouses or common-law partners of Canadian citizens or permanent residents
- Members of diplomatic missions, consular posts, and international organizations
- Purchases located outside a CMA or CA of 100,000 inhabitants or more
Mortgage Broker Liability
The law provides that anyone who knowingly helps a non-Canadian purchase residential property in violation of the law commits an offence. Mortgage brokers, real estate agents, and lawyers can be held liable if they facilitate a prohibited transaction. The maximum fine is $10,000 and a court may order the sale of the property. Under Quebec's Act Respecting the Distribution of Financial Products and Services (LDPSF) and professional obligations to the AMF, mortgage brokers must exercise reasonable diligence to verify their clients' immigration status before proceeding with a mortgage application.
Application to the Quebec Market
The main Quebec CMAs affected by the ban include Montreal, Quebec City, Gatineau (Quebec portion of the Ottawa-Gatineau CMA), Sherbrooke, Trois-Rivieres, and Saguenay. The Montreal market, due to its international appeal, is particularly affected. Mortgage brokers operating in these regions must integrate immigration status verification into their client intake process and document this verification in their file. If there is any doubt about a buyer's eligibility, the broker should recommend a consultation with an immigration lawyer before proceeding with the mortgage process.
Practical Client Status Verification
- Step 1: Identify immigration status: During the first meeting, ask the client whether they are a Canadian citizen, permanent resident, temporary resident, or non-resident. Examine identification documents: Canadian passport, permanent resident card, work permit, or study permit.
- Step 2: Verify eligibility under exceptions: If the client is a temporary resident, verify they hold a valid work permit and have filed Canadian tax returns for three of the four years preceding the purchase. Confirm they have not already purchased a residential property in Canada.
- Step 3: Confirm property location: Verify whether the target property is located in a CMA or CA of 100,000 inhabitants or more. Properties located outside these areas are not covered by the ban, even for non-Canadians.
- Step 4: Document and refer: Document immigration status verification in the client file. If there is any doubt about eligibility, recommend consultation with an immigration lawyer before proceeding with the mortgage process. Retain copies of verified documents.
Due diligence in verifying immigration status is a professional responsibility of mortgage brokers in Quebec. The Act Respecting the Distribution of Financial Products and Services (LDPSF) and applicable codes of ethics require brokers to act with competence and prudence. Failing to verify a client's status could expose the broker to AMF disciplinary sanctions and civil liability if a prohibited transaction is facilitated.