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After January 1, 2023, it will be illegal for any non-Canadian to purchase residential property anywhere in Canada.
The prohibition is contained in a law passed by Parliament in June called the Prohibition on the Purchase of Residential Property by Non-Canadians Act.
But the law may well be unconstitutional.
Under pending regulations, it is expected that vacant land and cottages outside of major metropolitan areas will be exempt from the ban. Contracts signed prior to January 1, 2023 are also exempt from the prohibition.
The law, which will have a two-year limit according to the federal Department of Finance website, affects individuals who are not Canadian citizens or permanent residents. It does not apply to a temporary resident under the Immigration and Refugee Protection Act, or to a non-Canadian who buys residential property with his or her Canadian spouse or common-law partner.
But anyone violating the law or assisting anyone to violate the law will be liable to a fine of $10,000.
Following a conviction for a violation of the new law, the federal government may apply to a provincial superior court for an order requiring the property to be sold at no more than the original purchase price.
In addition to purchasers, the law imposes potential liability on developers, lawyers and real estate agents involved in a purchase by a non-Canadian.
In my opinion, there is a good chance that a court will rule the law unconstitutional. Under the Constitution, laws affecting property are the exclusive jurisdiction of the provinces, while laws about naturalization and immigration fall under the exclusive authority of the federal Parliament.
The issue is whether the new law is a genuine effort by Parliament to regulate immigration and citizenship, or a back door attempt to regulate property law.
My own opinion is that Ottawa has no business regulating provincial property law under the guise of its powers to deal with naturalization and immigrants.
For an informed opinion on this issue, I turned to my colleague Steven Pearlstein, of Toronto’s Minden Gross, who will be lecturing on this legislation at the Law Society next week.
Pearlstein emailed me to say: “I can appreciate your argument that under section 92 of the Constitution Act, 1867, property is a matter falling under exclusive powers of provincial legislatures. However at the same time, under section 91 of the Constitution Act, 1867, matters dealing with naturalization and aliens fall within the powers of the Parliament (federal).”
I asked Pearlstein which section of the Constitution takes priority when there is an apparent overlap of powers?
His opinion: “There is an equally strong argument that this Act regulates non-Canadians and therefore falls within the constitutional jurisdiction of the Parliament of Canada under section 91 of the Constitution Act, 1867, as its primary purpose is regulating naturalization and aliens and only incidentally dealing with property rights.”
I expect that one or more of the provinces will ask the Supreme Court for a ruling that the new law is unconstitutional.
The court could rule that either the federal law is unconstitutional or that the provincial laws over property rights and federal laws prohibiting non-resident purchases are both valid.
Time will tell.
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