Investment
Buying a House to Demolish in Quebec: The Permit
The math looks simple: a well located lot, a building at the end of its life, a new house in its place. Except that …
The question comes up every month: can someone who is neither a Canadian citizen nor a permanent resident buy in Laval or Montreal? The answer depends on a federal statute that is still in force today, and on a very precise list of exceptions. Here is what it prohibits, what it leaves untouched, and what a foreign buyer runs into at financing and then at resale.
Buying property in Quebec as a foreign buyer: where the federal prohibition stands
The Loi sur l’interdiction d’achat d’immeubles résidentiels par des non-Canadiens (the federal Prohibition on the Purchase of Residential Property by Non-Canadians Act) came into force on January 1, 2023. Its section 4 is blunt: it is prohibited for any non-Canadian to purchase, directly or indirectly, any residential property.
It still applies. On February 4, 2024, Ottawa announced a two-year extension, to January 1, 2027. On the federal legislation site, the repeal still appears under the heading “Amendments Not In Force”: it is section 236 of the Loi no 1 d’exécution du budget de 2022 (Budget Implementation Act, 2022, No. 1) that will repeal it. As long as that section is not in force, the prohibition runs.
The penalties are not theoretical. Section 6 provides for a maximum fine of $10,000, and it also reaches any person or entity who counsels, induces, aids or abets a non-Canadian to purchase knowing the purchase is prohibited. Section 7 allows the court, on the minister’s application, to order the property sold after a conviction.
Who is covered, who is excepted, and what does not even count as a purchase
The Act does not cover every property. It defines residential property as a building containing not more than three dwelling units, which includes the semi-detached house and the condominium unit. A building of four dwellings or more is not covered. The regulations add a geographic condition: only properties located in a census metropolitan area or a census agglomeration are caught. CMHC (SCHL) posts a map so you can check the address.
The exceptions set out in the Act and the regulations:
- The work permit holder, if the permit or work authorization is still valid for at least 183 days as of the date of purchase and the holder has purchased only one residential property.
- The student enrolled at a designated learning institution, if the student filed income tax returns for the five preceding years, was physically present in Canada for at least 244 days in each of the five preceding calendar years, has purchased only one property, and pays a price that does not exceed $500,000.
- The protected person, and the refugee claimant whose claim has been found eligible and referred to the Refugee Protection Division.
- The non-Canadian spouse who purchases with a spouse or common-law partner who is a citizen, a permanent resident, or a person registered as an Indian.
- Certain diplomats and consular representatives.
The regulations also set aside what does not count as a purchase: an acquisition resulting from a death, a divorce, a separation or a gift, a lease to a tenant, the enforcement of a security interest by a creditor, and an acquisition for the purpose of development.
Down payment and mortgage financing for a foreign buyer in Quebec
This is where a lot of files stall, and not because of the prohibition. The CMHC (SCHL) Newcomers program is open to permanent and non-permanent residents. The criterion is clear: the person must hold permanent resident status or be legally authorized to work in Canada, for example with a work permit. No minimum period of residence is required. CMHC adds that only borrowers who are exempt from the prohibition may be eligible for mortgage loan insurance.
The consequence is direct: a person living abroad, with no status and no work authorization here, does not fit that program. Their financing will be conventional, and it is the lender that sets the down payment. No official source supports quoting a percentage that holds with every lender. Get yours confirmed in writing before you make an offer.
For an eligible buyer, CMHC publishes its parameters:
- Minimum down payment for an owner-occupant of 1 or 2 units: 5% of the first $500,000 of lending value, plus 10% of the remainder. For 3 or 4 units: 10%.
- Purchase price under $1,500,000 for an owner-occupied loan, maximum amortization of 25 years.
- Credit score of at least 600 for at least one borrower or guarantor.
- Maximum ratios of 39% (GDS) and 44% (TDS), calculated at the greater of the contract rate plus 2% or a 5.25% floor.
Run your own numbers through the affordability calculator before you visit anything.
At resale: the compliance certificate and the holdback the notary keeps
This part surprises almost everyone, because it is triggered not at purchase but at sale, sometimes ten years later. When a vendor who is not resident in Canada disposes of taxable Canadian property, section 116 of the Income Tax Act requires notice to the Canada Revenue Agency before the disposition, or within the following 10 days, using form T2062. For the CRA to issue a compliance certificate, there must be a payment or acceptable security, calculated at a flat rate of 25% of the excess of the proceeds of disposition over the adjusted cost base.
Without a certificate, the buyer pays. The CRA says so plainly: the buyer is required to remit 25% of the cost of the property acquired, and may deduct that amount from the purchase price. The rate rises to 50% for certain property, including real property that is not capital property. The remittance is due within 30 days after the end of the month of acquisition, and a late remittance carries a penalty of 3% to 10% depending on the number of days. The buyer escapes it only if, after a serious inquiry, they had no reason to believe the vendor was a non-resident.
That is why the notary holds a sum in trust until the certificate is issued. It is not excess caution: their liability is on the line, and so is yours.
The Revenu Québec side: the TP-1097 notice and the 12.875% payment
Quebec has its own mechanism. You have to do both.
Revenu Québec puts it this way: an individual who does not reside in Canada and who disposes of taxable Quebec property, for example an immovable located in Quebec, must notify the minister within ten days following the actual disposition. The form is the TP-1097, and the payment required to obtain the certificate is 12.875% of the capital gain. The certificate, the TPF-1098, releases the purchaser from any liability related to tax arising from the transaction.
| Federal (CRA) | Quebec (Revenu Québec) | |
|---|---|---|
| Notice | Before, or within 10 days | Within 10 days |
| Form | T2062 | TP-1097 |
| Payment for the certificate | 25% of the gain | 12.875% of the gain |
| Certificate | Compliance certificate | TPF-1098 |
| Late notice | $100, or $25 per day, max $2,500 | $25 per day, max $2,500 |
| Purchaser’s remittance | 30 days after month end | 30 days after month end |
If the non-resident vendor did not notify the minister, did not make the payment or did not provide security, the purchaser must remit an amount equal to the excess of the cost of acquisition over the amount shown on the certificate, within 30 days after the end of the month of acquisition.
An accountant is not a luxury here. The adjusted cost base is computed from the original acquisition contract, the notary’s fees, the commissions and the invoices for improvements, which Revenu Québec requires as attachments. Nobody reconstructs that the night before signing.
Selling to a non-resident buyer: what changes for you
One reassurance: section 5 states that a contravention does not affect the validity of the sale. Your deed does not become void. But section 6 also targets anyone who aids or counsels while knowing the purchase is prohibited. So the buyer’s status gets verified before the promesse d’achat (the promise to purchase), not at the notary’s office the week of signing. Ask for the document, not a verbal assurance.
Second point, financial. A buyer with no status and no work authorization has no access to mortgage loan insurance: the file goes through conventional financing. Require a written preapproval before you take your property off the market. The rest of the bill is in the real cost of selling a house in Quebec.
What a foreign buyer should gather, early
- The document that establishes status: passport, work or study permit with its expiry date, permanent resident card, protected person document.
- A Canadian tax identification number: the TP-1097 requires a social insurance number or an identification number.
- The income tax returns for the last five years, if you are relying on the student exception.
- The original acquisition contract and the invoices for improvements, kept from day one.
- A written preapproval from the lender, with the down payment required in your case.
In Quebec the notary is mandatory for the transfer of ownership, and it is the notary who manages the holdback: that role is set out step by step in the notary guide. The accountant is not imposed by any statute, but no broker and no blog post can do the gain calculation in their place. For what gets deducted once you own, see homeowner tax in Quebec.
Frequently asked questions
My work permit expires in eight months. Can I buy? The regulations require the permit to be valid for at least 183 days as of the date of purchase, and that you have purchased only one residential property. The date that counts is the purchase date, not the date of the offer. Have your own case validated by a lawyer or a notary.
My spouse is a Canadian citizen. Does that settle everything? For the prohibition, yes: section 4(2) excepts the non-Canadian who purchases with a spouse or common-law partner who is a citizen, a permanent resident, or a person registered as an Indian. For the loan, no: eligibility for CMHC insurance is assessed separately.
Is a fourplex covered? No. CMHC confirms that the purchase of a building of four dwellings or more is not prohibited. The financing rules for an income property do not change because of that, however.
Should I wait until January 1, 2027? The prohibition is to end when section 236 of the 2022 budget implementation act comes into force, and no further extension has been announced to date. An announced date is not a guarantee. And nothing above about tax at resale depends on that deadline.
To go further, read the guide for newcomers and the notary in Quebec, step by step.
A question about a buyer’s or a seller’s status in your own file? Write to me. The verification happens before the promesse d’achat, not at the notary’s office.
Georges Matar
Residential Real Estate Broker · RE/MAX DU CARTIER INC.
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