Lawyer raises procedural issues in federal government’s foreign home buyer ban

Parliament, not Cabinet, should determine the geographic scope of the Act, says John Edmond

Lawyer raises procedural issues in federal government’s foreign home buyer ban
John Edmond

The federal government deliberately omitted dealing with a critical question when drafting its foreign home-buyer ban, says John Edmond, a retired constitutional lawyer.

The Act omitted where the prohibition would apply, a question answered in the regulations which were registered December 2, a little over five months after the legislation received Royal Assent, and eight months after it was introduced. During that time there was a “great deal of uncertainty” about where it would apply, he says.

Postponing that element of the law also put it in the hands of Cabinet, rather than parliament.

“The act inappropriately entrusts to cabinet the central issue of where in Canada the prohibition applies,” he says. “In our democracy, approval of the most significant elements of a statute is the prerogative of Parliament.”

“In leaving to cabinet whether the prohibition was to apply everywhere in Canada or in a more limited way, Parliament abrogated its responsibility to determine a critical element of the law.”

While there is no “bright line” between regulation and statute, Edmond says normally the regulations simply define more precisely the terms in the statue.

Edmond is a former legal counsel at the Department of Justice Canada and for the Attorney General of B.C. He later served as Commission Counsel to the Indian Claims Commission. He was Aboriginal Law counsel at a national firm; later with a boutique firm serving Indigenous clients. He holds a LL.M. in constitutional law, and he retired from the Law Societies of Ontario and B.C. at the end of 2016.

Section 3.1 of the regulations sets out that the prohibition will apply only in densely populated areas – those with a population of at least 10,000.

“Not knowing whether a given property was prohibited will have created market uncertainty. Even with clarification, months of uncertainty will have left a chill on international marketability of Canadian land,” says Edmond.

According to the Liberal housing plan, the ban on new foreign ownership is intended to enhance access to housing for Canadians and stabilize the housing market as the country emerges from COVID. As part of these efforts, the Liberal government also implemented a national tax on non-resident, non-Canadian owners of “vacant, underused housing.”

The definitions and exceptions outlined in the Regulations reflect the commitments the Government of Canada made when the Prohibition was announced in Budget 2022,” says Mahreen Dasoo, director of communications at the Office of the Minister of Housing and Diversity and Inclusion. “These exceptions are relieving in nature and reduce the regulatory burden on newcomers and developers growing Canada's housing supply.”

“It is also important to mention that Canada Mortgage and Housing Corporation (CMHC), on the behalf of the Government of Canada, led a broad-based consultation inviting a diverse range of impacted stakeholders and Canadians to comment on a public consultation document, which contained proposals for the regulations,” says Dasoo. “CMHC received and reviewed more than 200 submissions from a broad range of individuals, organizations, governments and private companies from across Canada. The creation and public release of the Regulations reflects the thorough and thoughtful consultation process that took place.”

The Prohibition on the Purchase of Residential Property by Non-Canadians Act received Royal Assent on June 23, 2022. The measure prevents people who are neither Canadian citizens nor permanent residents from purchasing residential property and from using corporate structures to evade the prohibition. The Act defines residential property as a building with three dwelling units or fewer, including semi-detached houses and condominium units. It came in force on Jan. 1, 2023, and will remain in place for two years.

The prohibition creates penalties for non-Canadian purchasers and those knowingly assisting them. If a purchaser is convicted, the government can apply to a court to sell the property illicitly purchased. There are also fines of up-to-$10,000.

Minister of Housing and Diversity and Inclusion Ahmed Hussen recently announced amendments to the Act’s accompanying regulations. Initially, many non-Canadian work-permit holders were prohibited from buying residential property. Following the changes, those who have at least 183 days left on their work authorization at the time of purchase will be exempt from the ban.

The amendments to the regulations also included a change which clarifies that land which does not contain a habitable dwelling and is zoned for mixed use or residential use is not a “residential property.” Non-Canadians are not prohibiting from purchasing such a property.

Another amendment allows foreign purchase of any residential property for the "purposes of development." Edmond says that this may "defeat the purpose of the act." Deep-pocketed foreign buyers could tear down and rebuild, which would take that residential property off the market.

"However, if greater density is achieved, that would be a benefit," he says.

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