In case you hadn’t heard, Canada is in the middle of a housing shortage due to lack of supply and affordability, and demand for a solution is only increasing.
That’s why lawyers like Mariam Sarr are doing double duty when it comes to understanding legislation enacted and being enacted at multiple levels of government to solve this problem, including the Prohibition on the Purchase of Residential Property by Non-Canadians Act.
With this two-year ban on foreign buyers coming into force on January 1, 2023, Sarr and her colleagues at Perley-Robertson, Hill & McDougall LLP/s.r.l. are already on the case. “When a new law is coming in, we want to anticipate any problems that could affect our clients,” she said.
Right now, there are more questions than answers.
What we know is that the law comes into force at the start of 2023 and it likely won’t be applied retroactively, said Sarr, meaning it will not affect agreements entered into prior to January 1.
But after that, residents will need to be mindful not to run afoul of the law. “People who have knowingly assisted in contravention of the Act — meaning they knowingly sold their property to a foreign buyer — may be subject to monetary penalties,” said Sarr.
She suggests that anyone buying residential property after January 1st bring a real estate lawyer into the process earlier than usual.
“Typically people get a real estate agent or broker and sign the agreement, then look for a lawyer to close the deal,” she said. “But because the contract is binding, it can be a bit tricky to modify things down the road.”
But wait, there’s more
Sarr also wants people to know that this legislation is not being enacted in a vacuum.
There are also provincial and municipal laws being created to address the housing crisis to take note of.
Ontario has already brought forth a law to curb foreign speculation in the Canadian real estate market. “People generally know they have to pay a land transfer tax when they buy a property,” said Sarr. “But in Ontario, there’s an additional 25 per cent tax that non-residents have to pay — it’s the highest in the country.”
The City of Ottawa is also unveiling the Vacant Unit Tax, which comes into force in January, 2023.
This law will require Ottawa property owners to make an annual declaration of occupancy for their residential unit. If the unit is deemed to be vacant, additional taxes will be applied.
“They’re trying to increase the housing supply and are planning to reinvest the funds — which the City has estimated could amount to $25 million — into affordable housing initiatives across the city.”
There are a few exceptions to this law, such as an owner who has died or is in the hospital. Foreign property owners can also choose to rent out their units to avoid paying the penalty.
Even if your unit isn’t vacant, the law requires you to make the declaration. “Property owners in the city of Ottawa need to take note of the deadlines for those declarations to avoid being penalized,” said Sarr.
“Buying or selling a house is one of the biggest purchases that somebody will make in their lifetime,” said Sarr. “It’s very important to consult someone on these matters.”
Will all this legislation solve the housing crisis? Only the data knows
Sarr says at this point it’s unclear whether these measures will work because we currently don’t have the data needed to accurately assess the impact of foreign home ownership on the housing shortage.
But that’s one of the benefits of the Prohibition on the Purchase of Residential Property by Non-Canadians Act. “It’s going to give us the data necessary to assess how foreign ownership truly contributes to the problem,” she said.
With real estate transactions becoming more fraught and complex every day, it’s important to have a good lawyer on deck to help you protect your financial interests.
“Buying or selling a house is one of the biggest purchases that somebody will make in their lifetime,” said Sarr. “It’s very important to consult someone on these matters, especially if you’re not familiar with the contents of the documents you are required to sign.”