Ontario has introduced the Fair Housing Plan which includes some measures that will have an immediate effect such as a rent control expansion, a new standardized lease and a new 15 percent Non-Resident Speculation Tax should the legislation be passed.
Ontario’s Fair Housing Plan will expand rent control to all private rental units in Ontario including those built after 1991. Rental increases will rise at an annual rate stipulated by the Ontario government and is capped at the rate of inflation or at a maximum 2.5 percent if the rate of inflation is higher. This change will be effective April 20, 2017 once the legislation is passed.
The government has developed a new standard lease to tighten the provisions around “landlord’s own use” evictions. This new lease will be available in multiple languages and will provide for compensation to tenants who are asked to vacate.
Technical changes to the Landlord Tenant Board would also implemented to make the process fairer and easier for landlords and tenants.
Non-Resident Speculation Tax
By implementing a Non-Resident Speculation Tax (“NRST”) effective April 21, 2017, Ontario is following the footsteps of British Columbia. The NRST is a 15 percent tax on non-Canadian citizens, non-permanent residents, non-Canadian corporations and taxable trustees purchasing residential properties in the Greater Golden Horseshoe (“GGH”).
Applicable Property Types
Under this measure residential properties are defined as properties which contain a maximum of six individual units. This includes condominium units, detached and semi-detached houses, townhomes, duplexes, triplexes, fourplexes, fiveplexes and sixplexes. Consistent with the intention of the tax, it does not apply to multi-residential rental apartment buildings with more than six units or agricultural, commercial or industrial land. The tax is only applicable to the residential value allocated to the purchase price if a transaction includes commercial land.
The NRST will apply to 100 percent of the purchase price where a foreign entity has any interest.
For example, should any Canadian citizen and any foreign entity purchase a residential property through a joint venture, the NRST will apply to the entire purchase price. Each transferee will be subjected to pay the appropriate tax collectively and should the foreign entity decline to do so, the remaining transferees will be required to pay on its behalf.
Exemptions and Rebates
A foreign national at the time of purchase who has received confirmation under the Ontario Immigrant Nominee Program or who has status of a “convention refugee” or “person in need for protection” under the Immigration and Refugee Protection Act may be exempt from the NRST. Similarly, a foreign national who has a spouse who is a Canadian citizen or permanent resident of Canada may also be exempt.
Rebates may occur where a foreign national: becomes a Canadian citizen or a permanent resident within four years of the date of purchase, is a full time student for at least two years following the date of purchase or has legally worked on a continuous full time basis for a year in Ontario.
It remains to be seen how these new measures may impact lenders, borrowers, developers, commercial investors and other players in the real estate industry going forward, which we will be closely monitoring.