Canadian government enacts a two-year ban on purchases of residential real estate by non-Canadians10/13/2022
DENTON'S CANADA (REAL ESTATE GROUP) - Starting January 1, 2023, non-Canadians will be prohibited from purchasing residential real estate in Canada for a period of two years under the newly enacted Prohibition on the Purchase of Residential Property by Non-Canadians Act (the Act).1
Developers and vendors should familiarize themselves with the requirements of the new legislation. The following are key points to keep in mind:
An overview of the legislation The Act prohibits direct and indirect purchases of residential real estate by individuals who are not Canadian citizens or permanent residents, foreign corporations, and others deemed to be “non-Canadian.”3 Contractual obligations that arise or are assumed prior to January 1, 2023, are not impacted. Key details that will define the precise scope of the prohibition, including the activities that will constitute a “purchase,” whether vacant land with development potential will be considered “residential real estate,” the classes of persons exempted from the prohibition, and the level of non-Canadian investment that will be permitted before a corporation will be deemed to be a non-Canadian, have not yet been finalized and released. They will be addressed in supporting regulations expected to be issued in the coming months (the Future Regulations). The Government’s initial proposals on these issues were outlined in an earlier consultation paper (the Consultation Paper), and the Future Regulations will likely take a similar approach. Key aspects of the legislation Who will be deemed “non-Canadian” under the Act?4
What types of “residential property” will be impacted?5
What exemptions will be available?6
How will pre-existing and future contracts be impacted?
Impacts on existing and future contracts Significantly, the Act will not impact the underlying validity of sales of residential property that may contravene the Act.7 The implication is that purchasers and vendors will still be legally bound to comply with their obligations under contracts that contravene the Act unless contracts contain termination provisions or other protective measures. It is expected that these contracts will continue to be enforceable by usual legal means. Presumably, assignment and assumption contracts will be similarly enforceable, notwithstanding any contravention of the Act. The prohibition on purchases by non-Canadians does not apply to contractual obligations arising or assumed prior to January 1, 2023.8 Subject to the requirements of the Future Regulations, it is implied that conveyances are allowed during or after the two-year prohibition period if the contractual obligation to purchase arose prior to January 1, 2023. What is unclear is whether this exclusion applies to conditional contracts entered into prior to January 1, 2023, that become unconditional on or after January 1, 2023. The Future Regulations delineate the kinds of transactions that will constitute prohibited “purchases.” The Consultation Paper indicated that a “purchase” would include both acquiring and entering into a conditional or unconditional contract to acquire a legal or beneficial interest in residential property. If that is the case, non-Canadians will be prohibited from entering into pre-sale contracts and from completing the purchase transactions (other than in respect of contracts entered into or assumed prior to January 1, 2023) during the two-year period. There is currently no indication that the prohibition will be extended beyond two years. Enforcement and penalties Anyone who “knowingly…counsels, induces, aids or abets” in a contravention of the Act by a non-Canadian, or attempts to do so, is guilty of an offence and liable on summary conviction to a fine of up to CA$10,000.9 Furthermore, if a corporation or entity commits an offence, its directors, officers, managers, supervisors, agents, and others who have directed authorized, assented to, acquiesced in, or participated in the contravention may be personally liable.10 This broadly-worded offence provision will have a wide reach. Liability could arise not only for non-Canadian purchasers but also for developers and vendors, assignors, lawyers and professional advisors, and others involved in the contravention. For instance, a vendor who enters into an impugned contract or consents to an assignment of a contract to a non-Canadian may be “aiding” or “abetting” the impugned purchase. Furthermore, services ordinarily offered in connection with residential conveyancing by real estate agents, notaries, lawyers, mortgage brokers, and other professional advisors may constitute “counseling” or “aiding” in a purchase by a non-Canadian. An issue may arise where it is later discovered that a purchaser under a binding contract is a non-Canadian. Completing the conveyance in accordance with the purchase contract, and providing services in connection with the conveyance, may be an offence under the Act. At the same time, refusing to complete or advise in the completion of the conveyance may be a breach of contractual and possibly professional obligations. In addition to imposing penalties, the Minister may apply to the court for an order to sell a property that has been purchased in contravention of the Act.11 The manner and conditions for this type of sale remain to be set by the Future Regulations. The Act provides that in no event may the seller recover more from the sale of the property than what they paid for it. Next steps People participating in the residential real estate market may wish to consider whether purchase and sale contracts ought to include protective provisions, such as representations and warranties from purchasers regarding whether they are non-Canadians under the Act, restrictions on assignments to non-Canadians, and other remedies (for example, indemnities or termination rights) that apply if the purchaser is a non-Canadian. Developers, in particular, should train sales staff regarding the requirements of the Act and should ensure that sales staff undertake reasonable inquiries as to whether purchasers are non-Canadians. This will protect developers from being found to have entered into contracts with non-Canadians knowingly or with wilful blindness. Many key details remain to be determined by the Future Regulations, and Dentons will continue to monitor further developments relating to the Act. For more information, please contact a member of Dentons’ Real Estate group. Special thanks to Susannah Blary, Student-at-Law, who assisted in preparing this insight. 1 Prohibition on the Purchase of Residential Property by Non-Canadians Act, SC 2022, c 10, s 235 [Act]. The Act is repealed on the second anniversary of its in force date: see Bill C-19, An Act to implement certain provisions of the budget tabled in Parliament on April 7, 2022 and other measures, 1st Sess, 49th Parl, (assented to June 23, 2022), ss 236 and 237. 2 As discussed further below, this is subject to how the Future Regulations will apply to conditional contracts that become unconditional after January 1, 2023. 3 See Act, s 4(1). 4 Ibid, s 2, definition of non-Canadian. 5 Ibid, s 2, definition of residential property. 6 Ibid, s 4(2). 7 Ibid, s 5. 8 Ibid, s 4(5). 9 Act, supra 1, s 6(1). 10 Ibid, s 6(2). 11 Ibid, s 7. CLAIRE WILSON (BUSINESS IN VANCOUVER) - Oxford properties and Intracorp Homes broke ground in a ceremony today for a new multifamily development in South Vancouver that will be located at the southernmost node of the Cambie Corridor.
The development, called Ashely Mar, will consist of three towers that will house 649 rental units. The project is a mixed-use development that comprises market rental and co-op homes. One tower will be dedicated to the 125 co-op units while the other two towers will house the 524 market rental units. According to the development's press release, two new 27-storey and 32-storey market rental towers and a 16-storey co-op tower will make up the three towers that will be distinct to the site. “The development will replace Ashley Mar’s previous 54 homes plus add an additional 71 co-op units, for a total of 125 units delivered back to the co-op upon completion,” said the release. The co-op members that are currently on the site will be temporarily relocated while construction is underway and will be moved back into the re-developed 16 storey tower once completed. It is expected to be ready in summer of 2025. “We had a great groundbreaking ceremony today, we're all casting our minds forward to the summer of 2025. When that site will be transformed into a real hub of life and activity,” said Tyler Seaman, senior vice-president, Canada at Oxford Properties Group. The 1.5 acre site is located at 8495 Cambie Street and 8460 Ash Street and will feature bachelor, one, two and three-bedroom homes. It is steps away from the Marine Drive Skytrain station, in addition to a movie theatre, grocery store as well as shops and restaurants. The architecture of the towers is described as “featuring a series of frames and inset panels to create a strong rhythm and bring a human scale to the lower podium,” according to Intracorp’s website. Seaman says that the project will provide roughly 1000 rental homes which will make the site vastly more efficient and optimize space by increasing density. “The design is meant for it to really integrate into the community, the fact that we have the skytrain running right along is a huge benefit,” he said. Once the project is finished, Oxford Properties Group will manage the market rental homes while Ahsley Mar will manage the co-op units. The release says that the project is meant to enhance the co-op’s sense of community, it will feature communal resident amenities like electric vehicle charging stalls and hundreds of bicycle parking spaces. Seaman says that the project is a purpose built rental project that hopes to attract renters who are looking for a stable and long term living situation. “It's an intentionally purpose built rental place where people can come to us and get the security of tenure. They can put down roots knowing that they're going to be living in a home that is owned and professionally managed by an institutional landlord, like Oxford, and we're in for the long term,” he said. Ashley Mar will be unlike other rentals like a condominium or strata who are either owner occupied or have investors who rent them out, Seaman says. The hope is that this is a project that is far more enduring and will create economic and social value through real estate. FRANK O'BRIEN (WESTERN INVESTOR) - More new office space will open in Vancouver this year than in every other major Canadian city, combined.
This reflects the fact that, with the exception of Toronto, Vancouver is the only city where new office towers were completing in the second quarter (Q2) as developers in most markets face higher vacancy rates and the spectre of work-from-homers not returning to their cubicles. As of the second quarter of 2022, the national office vacancy rate was 16.2 per cent, but it was just 9.4 per cent in Metro Vancouver, according to Altus Group’s Canadian Office Market Update, released August 2. Vancouver’s downtown vacancy rate was 8.4 per cent in the second quarter, according to a new report from JLL Canada. One of largest office building to complete in Canada this year is Vancouver Centre II in downtown Vancouver, which officially opens in Q4 2020 The 33-storey tower at 733 Seymour Street, boasts 370,000 square feet of Class A offices. The building, by GWL Realty Advisors with the Healthcare Ontario Pension Plan, is also Platinum LEED (Leadership in Energy and Environmental Design) and WELL certified. Vancouver and Toronto were the only two cities with office building completions in the second quarter. Vancouver had a 42.5 per cent availability rate with 447,508 square feet of the area occupied across its four buildings. Meanwhile, Toronto had an availability rate of 30.6 per cent across its four buildings which occupied 174,983 square feet of space. Across Canada, there are 78 office buildings under construction, totalling less than 17 million square feet, with an availability rate of 37 per cent. Vancouver had 29 buildings under construction as of Q2 2022, occupying just over five million square feet with a pre-leased rate of almost 60 per cent. Altus noted that new Class A office space is leading demand as employers leverage quality amenities to encourAGE employees to come back into offices. “The proportion of workers with a hybrid work arrangement increased, continuing their upward trend from January 2022. This further illustrates that people are transitioning slowly back into working from their offices,” said Ray Wong, vice-president, data, at Atlus Group, who co-authored the office update with senior analyst Mahek Shah of Altus Insights. This trend is apparent in Vancouver, according to JLL, which noted that several sizeable deals were signed in Q2 in new downtown office builds. “Lululemon committed to 120,000 square feet in 1280 Burrard Street and Microsoft is rumoured to be taking 400,000 square feet in 1090 West Pender Street, the B6 development that already had some pre-lease commitments that needed to be shuffled to accommodate this requirement,” JLL stated in its recent office insight report. Increasing construction costs and labour shortages continued to push back completion dates on several under construction office projects, which has raised demand for turnkey and sublease spaces the report added. Sublease space available in downtown Vancouver fell to 600,000 square feet in the second quarter, the lowest level in two years, noted Shawna Rogowski, a JLL research analyst. “While uncertainty exists regarding the economic situation, rising interest rates, large inflation numbers and widespread talk of a recession, Metro Vancouver continues to boast the lowest vacancy rate in the major North American office markets, demonstrating continued confidence in the market,” Rogowski added. |
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