BC Real Estate Law Blog

Distressed Sales: Options for Sellers of Distressed Property

Peter Borszcz — Sat, 12 May 2012 17:44:19 +0000

Unfortunately, and often due to a series of unfortunate events, some owners find themselves unable to afford their home and in some cases being forced to sell at a loss. There are a number of different ways for this to occur:

A. Short Sale with Seller Bringing in Cash to Complete

This type of transaction occurs when the proceeds of sale are insufficient to pay the mortgage, commission and fees associated with the property and the Seller is able to access other financial resources to complete the transaction by depositing the shortfall in trust with their lawyer to complete the transaction.

Of all the options for a distressed sale, this options makes the best of a bad situation, there is no foreclosure proceeding and no judgements registered against title or the seller.

B. Short Sale with the Bank Accepting Shortfall of Net Proceeds

Where the Seller is unable to make up the difference on Closing between the net sale proceeds and the mortgage payout and the Seller is in default of their obligations to the Lender, most Lenders will grant of discharge of the mortgage registered on title in exchange for net sale proceeds (less agreed adjustments) in exchange for a consent to personal judgement against the Seller and a reasonable payment plan for the balance.

The option avoids a formal foreclosure proceeding (and it is the Seller that accepts a Buyers offer “subject to being able to clear title”), but Seller agrees to a debt judgement against them and they will continue to have to pay the balance remaining after the sale to the Lender. Often when a mortgage default has proceed to this stage, there is a certificate of pending litigation on title.

C. Court Ordered Sale

As the Bank has proceeded with the foreclosure, at this stage the ability to sell the property is now subject to Court Approval. A Buyer’s offer will be subject to Court Approval and other buyers may appear in Court to bid on the property. The Seller is not involved in this transaction and registration in the Land Title Office takes place by filing of a certified copy of the court order granting the property to the Buyer (on payment of the purchase price) [Important: ensure Buyers names are correct on the Court Order!].

D. Lender Owned Property

If the property has proceeded through the entire foreclosure without an offer, the Lender may seek an “Order Absolute” and the Lender will assume ownership of the Property. In this case the Lender is the Seller (as they are the Seller on title) and the transaction proceeds very similarly to a normal real estate transaction (except that Lenders are often very reluctant to provide Property Disclosure Statements).

Peter Borszcz is a Business and Real Estate Lawyer practising in Kelowna, British Columbia and a shareholder of Pihl Law Corporation.

First Time Home Buyers: New Property Transfer Tax Declarations

Peter Borszcz — Sat, 12 May 2012 17:43:52 +0000

When the province announced the new First Time New Home Buyers Rebate associated with the HST rebates, they tightened the definition of “First Time Home Buyer” (see my post here for more information on the rebates). This tighter definition indicates that the government is looking more closely at (ie; auditing) who is a “first time” home buyer. This higher degree of oversight is also supported by recent changes to the Property Transfer Tax Form which required a Buyer to DECLARE the following:

Have you owned an interest in a principal residence (where you lived) anywhere in the world?
Have you ever recieved a British Columbia (BC) first time home buyer’s exemption or refund?
On the date of registration, are you a Canadian citizen or a permanent resident as defined in the Immigration and Refugeee Protection Act (Canada)?
Have you continuously resided in BC for at least one year immediately prior to the date of registration or filed income tax returns as a BC resident during the six year before the date of registration?

See the new form here:

If the Buyer makes a FALSE DECLARATION, the Minister of Finance may charge a penalty equal to DOUBLE THE TAX.

Also, the Buyer MUST qualify as a first time home buyer (above) and the they must purchase a “Qualifying Property”:

Fair Market Value is less than $425,000 (for full exemption)
Land is less than 0.5 hectares in size
Property used as Principal Residence

And, the Buyer MUST actually occupy the home:

Must move into the home within 92 days of the date of registration (unless vacant land, then must move in within 1 year)
Must continually occupy as principal residence for one year from the date of registration.

The form changes and the recent legislative attention to this issue likely will result in greater audit attention to this area. First Time Home Buyers should ensure they meet all the criteria: as a Buyer, with a Qualifying Property, and they plan to Occupy the home for the first year.

Peter Borszcz is a Business and Real Estate Lawyer practising in Kelowna, British Columbia and a shareholder of Pihl Law Corporation.

Real Estate Development: Preliminary Layout Review Letters

Peter Borszcz — Sat, 12 May 2012 17:43:29 +0000

The filing of a subdivision plan in the Land Title Office cannot occur without the approval of an Approving Officer appointed by the local municipal authority (s.88 Land Title Act). It is common practice for most municipalities to issue a Preliminary Layout Review letter (PLR Letter) which sets out what the approving officer will “likely” require to grant approval to the subdivision.

Although the PLR Letter is not binding on the municipality, administratively it forms a very important checklist for developers. Careful and early review of the PLR letter with your real estate lawyer can be very helpful to streamline the real estate development process.

Some of key items discussed may include:

Park Area Dedication and No Build Areas
Performance Bonds
Development Cost Charges
MOTI (Highways) referrals and Traffic Impact Assessment requirements
Geotechnical and Engineering Considerations
Retaining Wall Requirements
Zoning and Setback Requirements
Utility and Servicing Right of Way Requirements
Restrictive Covenant Requirements (ie; Wildfire Interface Covenants in the Okanagan)

Most, and often all, of these requirements will require the involvement of a real estate lawyer. Real Estate Development Lawyers can assist clients with the negotiation, drafting and registration throughout the process.

The time it takes for a Developer to go from “conception to subdivision to building” will vary greatly from project to project and will often depend on the unique third party requirements (ie; geotechnical, engineering, or provincial approvals). Most PLR Letters have a “sunset” clause and expire (usually within 1 year) from the date of issuance but can be often be extended.

Peter Borszcz is a Business and Real Estate Lawyer practising in Kelowna, British Columbia and a shareholder of Pihl Law Corporation.

Agricultural and Farm Property: Special Considerations

Peter Borszcz — Fri, 13 Apr 2012 23:07:33 +0000

Agricultural and Farm property occupy an interesting segment of the real estate market, as they are often a mix of commercial and residential uses. This means that many of the rules that apply purely to a residential home purchase have limited applicability to agricultural lands.

A. THE 0.5 HECTARE RULE:

There are a number of tax exemptions which do not apply (or have limited applicability) where a property exceeds 0.5 hectares (1.24 acres) in size:

Principal Residence Exemption - this Income Tax Act exception allows exempts capital gains of a primary residence from income, however the total area of a “principal residence” must not exceed 0.5 hectares (1.24 acres) hectares.
Property Transfer Tax (Related Individual) – a transfer of a principal residence from a parent to child, or to a spouse is an exempt transfer for property transfer tax, however (similar to above) the total area of a “principal residence” must not exceed 0.5 hectares (1.24 acres) hectares.
Property Transfer Tax (First Time Home Buyer) - a transfer of a principal residence to a first time home buyer is an exempt transfer for property transfer tax, however (similar to above) the total area of a “principal residence” must not exceed 0.5 hectares (1.24 acres) hectares.

B. Rural Area Tax Incentives

Agricultural Land Reserve (“ALR”) Tax Exemption - 50% of the assessed value of ALR land is exempt from school tax if the land is classified as a farm or is in the ALR and is vacant, used as a farm or for residential purposes.
Rural B.C. Home Owner Grant - B.C. has a property tax assistance program which reduces the amount of taxes paid on a home. You can claim the additional rural grant of $200 (for a total regular home owner grant of $770) on your principal residence if you live in rural areas of British Columbia and you file your income tax in British Columbia.(Kelowna is considered a rural area)

C. GST/ HST on Agricultural and Farmlands

The applicability of HST on farmland is complicated by the “mixed” use of most farmland as both residential and commercial use. Generally sales of farm property attract GST/ HST unless there is a specific exemption.

If selling the farm as a business as a going concern to a unrelated third party – GST/HST applies, but GST Election 44 can be applied to have no GST/ HST applied on sale
If selling a hobby farm not used as a business – GST/HST would not apply as you are selling your home and there is no reasonable expectation of a profit from the hobby farming activities.
If selling a personal residence with farm property- that portion of the property that is necessary for the use and enjoyment of the house is exempt from HST.

For Purchasers of farm property, it is important to ensure that:

the Purchaser receives tax advice prior to subject removal; and
the Purchaser is registered for GST/HST prior to closing

D. Agricultural Land Reserve

The Agricultural Land Reserve in British Columbia limits the non-farm uses of designated property. These restrictions may include what kind of buildings can be erected and whether the lot can be subdivided (including the addition of home site). If you are purchasing a property that has been designated in the ALR, please ensure that your future use of the property is within the uses permitted by the Agricultural Land Commission Act.

Peter Borszcz is a Business and Real Estate Lawyer practising in Kelowna, British Columbia and a shareholder of Pihl Law Corporation.

First Time Home Buyers: Special Programs

Peter Borszcz — Wed, 11 Apr 2012 00:24:11 +0000

I must admit, I love watching the HGTV show “Property Virgins“, and seeing the excitement of first time home buyers fulfil their dreams of home ownership is one of the best things about my job.

In British Columbia, real estate prices (compared with much of Canada) are high relative to average income, which increases barriers to first time home owners. In the Okanagan, local professionals like to call this the “sunshine tax” (although “four season paradise tax” would be more appropriate). Thankfully there are some very helpful programs that First Time Home Buyers can use to assist them with their first home purchase.

A. Property Transfer Tax Exemption for First Time Home Buyers

This program exempts First Time Home Buyers from paying BC Property Transfer Tax.

To Qualify for the PTT Exemption a First Time Home Buyer must:

Be a Canadian Citizen or Permanent Resident
Have lived in BC for 12 consecutive months OR filed income tax returns for at least 2 of the last 6 years in BC
Never have owed an interest in a principal residence anywhere in the world; and
Never have previously received a First Time Home Buyers Exemption

If you qualify, on homes valued up to $425,000, a First Time Home Buyer will be exempt from paying Property Transfer Tax (a savings of $6,500 in PTT). The tax exemption diminishes on higher priced homes and is not available on any homes priced over $450,000.

You apply for the exemption at the time of conveyance, and often your lawyer will complete the PTT Return and Exemption application as part of the closing documentation. There are severe penalties for a false declaration.

B. RRSP First Time Home Buyers Plan

This program allows First Time Home Buyers to “loan themselves” previously claimed RRSP contributions tax free to assist in the purchase of a home.

To Qualify for the RRSP First Time Home Buyers Plan:

You must have entered into a binding agreement to build or buy a home
You intend to occupy your home as a principal residence and be a resident of Canada
You are a first time home buyer
You must not have a “repayable Home Buyers Plan” balance on your tax return

This program will allow you to withdraw up to $25,000 from your RRSP to assist in your home purchase. This is withdrawn at your financial institution immediately prior to closing and you complete form T1036.

C. First Time Buyers New Home Bonus

This is a time limited rebate (introduced with the enhanced HST rebates) for First Time Home Buyers buying new homes (until March 31, 2013 only), to qualify:

You must be eligible for an HST rebate on a new home purchased after April 1, 2012 and Completion must occur before Mar 31, 2013 (ie; transition tax does not apply)
You (and the if a couple, both persons) must be a First Time Home Buyers and BC Residents
The home must be the Buyers Primary Residence
Your Family Income must be less than $150,000 for full rebate (note : the rebate phases out to $0 for income over $200,000)

After closing you will apply to the BC Government which will grant a rebate of 5% of the purchase price of the home (if under 200k) or $10,000 (whichever is greater). The rebate will be a cheque mailed directly out to claimants after the application has been approved.

The best place for First Time Home Buyers to start their new home search is by getting a clear idea of the process, check out my BUYERS PAGE.

Peter Borszcz is a Business and Real Estate Lawyer practising in Kelowna, British Columbia and a shareholder of Pihl Law Corporation.

First Time New Home Buyers Bonus

Peter Borszcz — Thu, 23 Feb 2012 01:49:44 +0000

Together with the budget announcement on February 20, 2012, the BC Government introduced a new First Time Home Buyers Bonus which is payable as an income tax credit. This is especially good news for condo developers who have inventory below $450,000.

Who Qualifies? To be eligible a BUYER must meet all of the following:

Contract signed AFTER Feb 21, 2012
Completion BEFORE Mar 31, 2013
HST is payable on the New Home (WFN lands do not qualify)
First Time Home Buyers
BC Residents
Home is Buyer’s Primary Residence
Family Income Less than $150,000 for full rebate (phase out to $0 at 200k)

How Much?

5% of the purchase price of the home (if under 200k) or $10,000 (whichever is greater)

How to Apply?

Apply for Bonus through BC Government (see info here) by submitting this FORM.

Proviso: This information here has not yet become law and is based on the discussion papers published by the Government of British Columbia. These rules may change as the legislation progresses through the BC legislature.

Peter Borszcz is a Real Estate Lawyer and Business Lawyer practicing in Kelowna, BC and a shareholder in the law firm of PIHL Law Corporation.

Comparing HST and Transition Tax for New Housing

Peter Borszcz — Tue, 21 Feb 2012 02:56:58 +0000

The Province announced the HST Transition rules on February 17, 2012 as the Province transitions back to the PST/ GST system on April 1, 2013. For an overview see my post here.

If completion of New Residential Housing occurs prior April 1, 2013, the HST system with the new enhanced rebate will apply:

For Primary Residences (with federal rebate):

Purchase Price	Gross HST (12%)	Rebate Available	Purchase Price (incl HST)
$100,000.00	$12,000.00	$6,800.00	$105,200.00
$150,000.00	$18,000.00	$10,200.00	$157,800.00
$200,000.00	$24,000.00	$13,600.00	$210,400.00
$250,000.00	$30,000.00	$17,000.00	$263,000.00
$300,000.00	$36,000.00	$20,400.00	$315,600.00
$350,000.00	$42,000.00	$23,800.00	$368,200.00
$400,000.00	$48,000.00	$23,150.00	$424,850.00
$450,000.00	$54,000.00	$22,500.00	$481,500.00
$500,000.00	$60,000.00	$25,000.00	$535,000.00
$550,000.00	$66,000.00	$27,500.00	$588,500.00
$600,000.00	$72,000.00	$30,000.00	$642,000.00
$650,000.00	$78,000.00	$32,500.00	$695,500.00
$700,000.00	$84,000.00	$35,000.00	$749,000.00
$750,000.00	$90,000.00	$37,500.00	$802,500.00
$800,000.00	$96,000.00	$40,000.00	$856,000.00
$850,000.00	$102,000.00	$42,500.00	$909,500.00
$900,000.00	$108,000.00	$42,500.00	$965,500.00
$950,000.00	$114,000.00	$42,500.00	$1,021,500.00
$1,000,000.00	$120,000.00	$42,500.00	$1,077,500.00

For Secondary Residences (with no federal rebate):

Purchase Price	Gross HST (12%)	Rebate Available	Purchase Price (incl HST)
$100,000.00	$12,000.00	$5,000.00	$107,000.00
$150,000.00	$18,000.00	$7,500.00	$160,500.00
$200,000.00	$24,000.00	$10,000.00	$214,000.00
$250,000.00	$30,000.00	$12,500.00	$267,500.00
$300,000.00	$36,000.00	$15,000.00	$321,000.00
$350,000.00	$42,000.00	$17,500.00	$374,500.00
$400,000.00	$48,000.00	$20,000.00	$428,000.00
$450,000.00	$54,000.00	$22,500.00	$481,500.00
$500,000.00	$60,000.00	$25,000.00	$535,000.00
$550,000.00	$66,000.00	$27,500.00	$588,500.00
$600,000.00	$72,000.00	$30,000.00	$642,000.00
$650,000.00	$78,000.00	$32,500.00	$695,500.00
$700,000.00	$84,000.00	$35,000.00	$749,000.00
$750,000.00	$90,000.00	$37,500.00	$802,500.00
$800,000.00	$96,000.00	$40,000.00	$856,000.00
$850,000.00	$102,000.00	$42,500.00	$909,500.00
$900,000.00	$108,000.00	$42,500.00	$965,500.00
$950,000.00	$114,000.00	$42,500.00	$1,021,500.00
$1,000,000.00	$120,000.00	$42,500.00	$1,077,500.00

Where construction starts prior to April 1, 2013 but completion occurs after April 1, 2013, a Transition Tax will apply in addition to the federal GST component (with principal residence rebate):

Purchase Price	GST (5%)	Transition Tax (2%)	Purchase Price (incl GST/TT)
$100,000.00	$3,200.00	$2,000.00	$105,200.00
$150,000.00	$4,800.00	$3,000.00	$157,800.00
$200,000.00	$6,400.00	$4,000.00	$210,400.00
$250,000.00	$8,000.00	$5,000.00	$263,000.00
$300,000.00	$9,600.00	$6,000.00	$315,600.00
$350,000.00	$11,200.00	$7,000.00	$368,200.00
$400,000.00	$16,850.00	$8,000.00	$424,850.00
$450,000.00	$22,500.00	$9,000.00	$481,500.00
$500,000.00	$25,000.00	$10,000.00	$535,000.00
$550,000.00	$27,500.00	$11,000.00	$588,500.00
$600,000.00	$30,000.00	$12,000.00	$642,000.00
$650,000.00	$32,500.00	$13,000.00	$695,500.00
$700,000.00	$35,000.00	$14,000.00	$749,000.00
$750,000.00	$37,500.00	$15,000.00	$802,500.00
$800,000.00	$40,000.00	$16,000.00	$856,000.00
$850,000.00	$42,500.00	$17,000.00	$909,500.00
$900,000.00	$45,000.00	$18,000.00	$963,000.00
$950,000.00	$47,500.00	$19,000.00	$1,016,500.00
$1,000,000.00	$50,000.00	$20,000.00	$1,070,000.00

If construction (on a principal residence) starts after April 1, 2013 (GST only applies, but assumed the Purchase Price is increased by 2% due to embedded PST):

Purchase Price	GST (5%)	PST	Purchase Price (incl GST)
$100,000.00	$3,200.00	$0.00	$103,200.00
$150,000.00	$4,800.00	$0.00	$154,800.00
$200,000.00	$6,400.00	$0.00	$206,400.00
$250,000.00	$8,000.00	$0.00	$258,000.00
$300,000.00	$9,600.00	$0.00	$309,600.00
$350,000.00	$11,200.00	$0.00	$361,200.00
$400,000.00	$16,850.00	$0.00	$416,850.00
$450,000.00	$22,500.00	$0.00	$472,500.00
$500,000.00	$25,000.00	$0.00	$525,000.00
$550,000.00	$27,500.00	$0.00	$577,500.00
$600,000.00	$30,000.00	$0.00	$630,000.00
$650,000.00	$32,500.00	$0.00	$682,500.00
$700,000.00	$35,000.00	$0.00	$735,000.00
$750,000.00	$37,500.00	$0.00	$787,500.00
$800,000.00	$40,000.00	$0.00	$840,000.00
$850,000.00	$42,500.00	$0.00	$892,500.00
$900,000.00	$45,000.00	$0.00	$945,000.00
$950,000.00	$47,500.00	$0.00	$997,500.00
$1,000,000.00	$50,000.00	$0.00	$1,050,000.00

Peter Borszcz is a Real Estate Lawyer and Business Lawyer practicing in Kelowna, BC and a shareholder in the law firm of PIHL Law Corporation.

Writing New Home Contracts under the HST Transition Rules

Peter Borszcz — Tue, 21 Feb 2012 02:29:05 +0000

Together, but unheralded with the recent HST Transition Rules are the new contract disclosure requirements in Contracts of Purchase and Sale for real estate.

Generally the new tax regime can be briefly described as follows:

HST: (12% less rebates) will apply where construction AND possession is transferred PRIOR to April 1, 2013

Transition Tax: (GST (5%) less federal rebate plus 2% Provincial Transition Tax) will apply where construction starts prior to April 1, 2012, but completion occurs after April 1, 2013.

GST/PST: (GST (5%) less federal rebates) will apply after April 1, 2013 [until the next tax change ], PST will not apply to homes on land [note: mobile homes without land attract both GST and PST]

[see government info site here]

Builders of New (or substantially renovated) Housing MUST disclose the following:

the total consideration (the Purchase Price, include all cash and trades)
the amount of transition tax charged
the degree of completion of the home as at April 1, 2013
the amount of the BC transitional rebate to be claimed by the Builder.

Contracts cannot be inclusive of the Transition Tax (which applies where possession transfers after April 1, 2013) and must disclose that Transition Tax is in addition to the Purchase Price. Contracts can be inclusive or exclusive of HST however the Builder must disclose either way.

Contractual Language For Transition Tax Transactions

(note: this has been reworded from the governments suggested language to work with the Standard Contract of Purchase and Sale)

The Possession Date of this Property may transfer on or after April 1, 2013: therefore, the 7% provincial component of the HST and the new housing rebate for primary residences will generally no longer apply (the federal GST component will continue to apply); and, a B.C. transition tax of 2% may become payable and is NOT included in the Purchase Price; and, the builder may become eligible for an associated B.C. transition rebate.

On the Closing Date, the Builder shall provide a statutory declaration to the Purchaser certifying that the following information:

the date that construction commenced.
the total Purchase Price (including all cash and trades)
the amount of transition tax charged to the Purchaser
the degree of completion of the home as at April 1, 2013
the amount of the BC transitional rebate to be claimed by the Builder.

[note: there are special rules that apply to "double straddling transactions" where a contract of purchase and sale was entered into prior to November 18, 2009, these are not discussed here]

Peter Borszcz is a Real Estate Lawyer and Business Lawyer practicing in Kelowna, BC and a shareholder in the law firm of PIHL Law Corporation.

HST Transition Rules for Housing

Peter Borszcz — Fri, 17 Feb 2012 21:31:55 +0000

The Province announced the HST Transition rules on February 17, 2012 as the Province transitions back to the PST/ GST system on April 1, 2013.

Used Residential Homes (most resales) are, and remain, exempt from HST.

1. Under the current system, there is no additional rebate for new homes greater than $525,000 – Effective April 1, 2012, for homes completing prior to April 1, 2013, this rebate threshold has been increased to $850,000, meaning that the maximum rebate available (for homes worth 850k) is $42,500. This provincial portion HST rebate will also be available to secondary or vacation residences located outside the lower mainland.

Effective HST on Homes (Primary Residence) - April 1 2012 to April 1 2013

Purchase Price	Gross HST (12%)	Rebate Available	NET Purchase Price
$100,000.00	$12,000.00	$6,800.00	$105,200.00
$150,000.00	$18,000.00	$10,200.00	$157,800.00
$200,000.00	$24,000.00	$13,600.00	$210,400.00
$250,000.00	$30,000.00	$17,000.00	$263,000.00
$300,000.00	$36,000.00	$20,400.00	$315,600.00
$350,000.00	$42,000.00	$23,800.00	$368,200.00
$400,000.00	$48,000.00	$23,150.00	$424,850.00
$450,000.00	$54,000.00	$22,500.00	$481,500.00
$500,000.00	$60,000.00	$25,000.00	$535,000.00
$550,000.00	$66,000.00	$27,500.00	$588,500.00
$600,000.00	$72,000.00	$30,000.00	$642,000.00
$650,000.00	$78,000.00	$32,500.00	$695,500.00
$700,000.00	$84,000.00	$35,000.00	$749,000.00
$750,000.00	$90,000.00	$37,500.00	$802,500.00
$800,000.00	$96,000.00	$40,000.00	$856,000.00
$850,000.00	$102,000.00	$42,500.00	$909,500.00
$900,000.00	$108,000.00	$42,500.00	$965,500.00
$950,000.00	$114,000.00	$42,500.00	$1,021,500.00
$1,000,000.00	$120,000.00	$42,500.00	$1,077,500.00

2. For new homes where construction begins before April 1, 2013, BUT where possession transfers after April 1, 2013, neither HST nor PST will be payable, but rather purchasers will pay a temporary, transitional provincial tax of 2% per cent on the full house price in addition to the GST payable.

3. Special Transition Tax Rebates will be available to real estate developers and home builders who commence a home prior to April 1, 2013 but where it is sold after April 1, 2013 to prevent double taxation based on the extent of completion on April 1, 2013.

% complete April 1, 2013	Transition Tax Rebate to Builder	Rebate (Ex: 500k Home)	TTax Paid by Home Buyer (500k home)
<10%	N/A	$0	10000
10-25%	1.50%	7500	10000
25%-50%	1.00%	5000	10000
50%-75%	0.50%	2500	10000
75%-90%	0.20%	1000	10000
>90%	0.00%	0	10000

For a complete breakdown under 3 different tax systems, check out my post here.

Realtors and Developers: please be advised there are special contract rules with respect to the enhanced HST Rebate and Transition Tax, find more info at my post here.

Peter Borszcz is a Real Estate Lawyer and Business Lawyer practicing in Kelowna, BC and a shareholder in the law firm of PIHL Law Corporation.

The provincial government press release can be found here. The federal government rules can be found here.

Land Tax Deferment Act Agreements

Peter Borszcz — Thu, 16 Feb 2012 01:32:39 +0000

Certain qualifying property owners can enter into an agreement with the Province of British Columbia to defer the payment of property taxes on the owner’s primary residence. The program is primarily directed toward seniors and parents of dependent children who are facing financial hardship to assist them to stay in their family homes.

The general criteria are as follows:

Be 55 years or older, a person with a disability (or a surviving spouse of one of these persons)
Be a Canadian citizen or landed immigrant and British Columbia resident
Equity of at least 25% in your home (note: based on Assessment Value) and have a current property insurance policy

A second category, for families with children, was introduced in 2010, and you must:

Be supporting a dependent child
Be a Canadian citizen or landed immigrant and British Columbia resident
Equity of at least 15% in your home (note: based on Assessment Value) and have a current property insurance policy

The following properties are examples of residences that are ineligible:

Homes owned by a corporation
Homes on first nations lands (for example: Westbank First Nations)
Second residences or vacation residences
Homes owned “in trust” by Executors or Trustees (for example after the home owner has died)

Where there are two or more joint owners, only one owner needs to meet all the qualification criteria.

After receipt of your current tax notice, apply by filling out the government form.

Upon accepting your application, the government places a Land Tax Deferment Act Charge on title and the property owner’s property taxes (but not utility charges) are deferred and no dealings (including sales or refinances) can happen until the property owner removes the Land Tax Deferment Charge (and repays the property tax plus interest and fees owing).

Importantly, while the charge is on title, re-mortgaging or re-financing the property (where a new registration is required on title) with a Land Tax Deferment Act Charge cannot occur (as the Government will not grant priority to the bank mortgage). Property owners are well advised to do any refinancing prior to entering into a Land Tax Deferment agreement. If you are re-financing after placement of a Land Tax Deferment Act Charge, please ensure that you have sufficient proceeds on hand to payout the all deferred property taxes, interest, and application and renewal fees.

You can payback all deferred property taxes, interest, and application and renewal fees at any time without penalty. When you sell your home, it must be paid back in full and this is one of the charges that your lawyer will arrange to payout on conveyance.

Peter Borszcz is a Real Estate Lawyer and Business Lawyer practicing in Kelowna, BC and a shareholder in the law firm of PIHL Law Corporation.