Speculation Tax Update

Happy Cyber Monday,

Thanks for taking a few moments away from your Amazon shopping today!

 

  1. SPECULATION TAX INFO –

The BC government has updated their speculation tax information page (here). The tax amount will be 0.5% of the property’s assessed value in 2018 (this year!) and rise to 2% for foreign families in 2019.  Every person in a taxable area (GVRD, Victoria, Nanaimo, Kelowna and West Kelowna) will need to make a declaration in FEBRUARY 2019 (which must be received back by the Province by MARCH 31, 2019).  There is a large list of exemptions (complete list here) but most homes will be exempted under a) PRINCIPAL RESIDENCE EXEMPTION or c) RENTAL EXEMPTION.  Note for the PRINCIPAL RESIDENCE EXEMPTION you must “reside for a longer period in a calendar year than any other place” and “Couples are generally deemed to have one principal residence for the purposes of the tax”…. Note for many of our Oil patch families there is a Spousal separation for work exemption meaning Spouses who live apart for work reasons may be able to claim a principal residence exemption on an additional home.

 

  1. SPECULATION TAX – What should a Realtor do?

Generally speaking a Realtor needs to keep her client’s informed and point then in a direction to get further advice if required.   Importantly the Speculation and Vacancy Tax Act makes EVERY OWNER who owns a property during a tax year JOINTLY AND SEVERALLY liable to pay the tax!

 

!!NEW CLAUSE RECOMMENDATION!! – For ALL 2018 Closings between JAN and AUGUST:

 

Speculation Tax Exempt (Buyers Agents start your offers with this one)

This property is located in an designated taxable region under the Speculation and Vacancy Tax. The Seller represents and warrants to the Buyer that the property is eligible for an exemption in the prior tax year and the Seller shall provide a declaration on closing that the property is EXEMPT. The parties are advised to seek independent legal advice on the application of the Speculation Tax.

 

OR:

 

Speculation Tax Holdback (Sellers Agents counter with this if Spec Tax payable)

This property is located in an designated taxable region under the Speculation and Vacancy Tax. The Seller represents and warrants to the Buyer that the property is NOT eligible for an exemption in the prior tax year and the Seller solicitor shall undertake to holdback the amount of the tax from the proceeds of sale at closing and pay such amount to Province when due. The parties are advised to seek independent legal advice on the application of the Speculation Tax.

 

 

  1. IN THE NEWS – REAL ESTATE AND MONEY LAUDERING

Global recently published a news story about the prevalence of real estate and money laundering in the Vancouver market (here). This is a great reminder for Realtors on the requirements of the PCMLTFA and the Regulations on brokerages to:  set up a compliance program, keep good records, appropriately identify clients; and report where there is suspicious activity or a large cash transaction (see pg 45 from LU 2017).

 

REFERRALS TO PETER

The best way to make a referral is a telephone call or a joint email attaching the offer between the realtor, the client and myself (peter.borszcz@pihl.ca), these emails get a return call or email as soon as possible in all cases.

 

We do some interesting stuff around here, in addition to residential real estate within OMREB, we work on complex commercial, land assembly, development, native land, and industrial deals all over the Province. If you are outside of board area and are working on something unique, chances are we have done it, please feel free to give us a call (250-762-5434).

 

Have a great week,

Peter.

Peter’s Weekly – A Realtor’s Ethics Matter

With Remembrance Day long weekend behind us, Black Friday and Christmas are firmly ahead. Like all married men, I struggle at this time of year sky rockets trying to find the perfect gift for my wife… any great ideas?

 

In the News

  • Don’t Lie to your Regulator – A realtor in Vancouver was suspended when he forged a fake medical excuse note for one of his unlicensed assistants after he had handed in a licensing assignment late (CBC story here).  His assistant had texted him “I need a note somehow saying I was in the hospital.”… and the Realtor offers “We will make it work,” he wrote. “My (family member) said he could do letter np.”… the BCREA administrator discovered and reported the forgery. The assistant will have to undergo a conduct hearing prior to continuing to be a licensee and the Realtor (who was complicit in the forgery) was fined, suspended and ordered to take an ethics course…. Remember your conduct as a regulated professional extends to all that you do.

 

Christmas Closings

  • Christmas break is NEVER a good time to close a real estate deal. Many banking, legal and accounting professionals are away (our office is closed during the Christmas week). Unless there is a good corporate year end reason WHY a deal needs to close on December 31, you should be recommending to your clients to schedule their closings for earlier (DEC 20th) or later (JAN 4th). Note in both cases I have picked these dates to allow some time for requesting of mortgage funds from banks or administrative delays in receipt of funds.  Remember CLOSING DATE and POSSESSION DATE are often different days (and should be at least a day apart)… at Christmas time it is VERY common to see CLOSING DATE of DEC 20th and a POSSESSION DATE of DEC 28th (for example)… as this is a much “safer” transaction than hoping all your deal closes between Christmas and New Years.

 

Encroachments

  • Use GIS Mapping as part of your due diligence to flag for potential encroachments (RDCO GIS). Everyone probably remembers the case of the swimming pool encroachment in the Upper Mission where the court ordered the swimming pool removed (see my blog post here)…  In a similar case, I had a meeting today with clients of a great Royal Lepage Realtor that had looked at the GIS mapping of a property and after looking at the City file discovered a large potential encroachment of the neighboring property.  The client, a first time home buyer, had a meeting with myself, their Realtor and Andrew Prior (the real estate litigator at the office) to discus the options for proceeding here, including both transactional, negotiated and court option. It was a great team approach to getting these clients to advice they needed.

 

Getting  Pihl Law Corp involved is good risk management.

If your client does not know a real estate lawyer…. I really appreciate talking with these  clients EARLY in their real estate journeys, have them call (250-762-5435) or email (peter.borszcz@pihl.ca) and I am happy to talk with them personally to get them on the right track…

Our valued referring Realtors always get the inside track here… our firm works to ensure that your clients get connected and get the advice they need to make their real estate decisions.

Before you List…

  1. Contact Your Bank– find out how much you will owe the bank to discharge your mortgage. Some important questions for your banker include:
    1. How much do I currently owe?
    2. Is there a payout penalty, if so, how much?
    3. Are there other fees (ie; a discharge fee) which is also payable?
    4. Do you owe more than your home is worth (more info on Distressed Sales here)?

It is a term of every real estate contract that all financial charges be discharged. In the event that the net proceeds of sale (after commission) are not sufficient to pay the mortgage, you will have to bring in money to complete the deal.

  1. Clean up your Land Title
    1. Has your name changed since you last bought your home?
    2. Has a contractor or CRA filed a lien against your property?
    3. Are there certificates of pending litigation or other charges on title that will be required to discharged prior to closing,

Contact your lawyer early and get these dealt with asap before listing. If these items are on title during the selling process they will weaken your bargaining position with potential Buyers.

  1. Do you have the Legal Capacity to Sell?
    1. Are you going to be present during the selling process or are you planning a vacation in the near future?
    2. Does the you as seller have the mental capacity to understand the sales process?
    3. If you are not the registered owner, do you have a power of attorney?
    4. If the owner has died, have you been granted probate?

If there are issues here that are expected, contact your lawyer who can assist you with strategies to deal with some of these issues.

Have questions, Call or Email Real Estate Lawyer Peter Borszcz at Pihl Law Corporation (250-762-5434).

Strata Documents and Minutes

Is strata right for me? This is a personal question and each strata is different. When you are buying into a strata you are buying into a community and you should carefully read through the Form B package, the rules, minutes, and bylaws to ensure that who your are matches the “personality” of the community. When in doubt don’t be afraid to call the strata council president.

The Strata Form B is a large stack of documents, should I get a lawyer to review? Most of these documents are strata rule and minute and are not written by lawyers, they are written by your strata council and should be easy to understand. Unfortunately legal review of these minute is not as effective as a your own personal review as it is most important that you (and not your lawyer) feel comfortable with the way the community if being run. This being said, I always encourage my clients to, after reading the minutes, give me a call when any specific items of concern they may wish to discuss.

What are some red flag in the strata Form B package and minutes? Things to watch out for include: discussion of future repairs, reoccurring problems and disputes, and dysfunctional or disinterested councils.

What is a property depreciation report and how can I tell if a strata contingency fund is “fully funded”? Each strata is required to commission a property depreciation report every three years. This report sets out models which detail how the building will require maintenance and upkeep over the next few decades and can assist in foreseeing the likelihood of special assessments. Each depreciation report sets out three funding models and by comparing the current state of the contingency reserve and the monthly CRF contribution to these models you can determine how closely the strata is following the reports recommendations.

Written by Kelowna Real Estate Lawyer Peter Borszcz.

Home Inspection Subject Conditions

 Why are Home Inspections so Important in BC?  Because the state of the law in BC is generally “buyer beware” absent fraud or negligent misrepresentation or a latent defect.

Does the Property Disclosure Statement Protect Me? Not much, it is only a statement of the Sellers Current Knowledge and is a “snapshot in time”.

All I need is a home inspection right? Not always, home inspectors are generalists and if they identify a problem a good rule of thumb is to get the specialist out there for further investigation.

 

Peter Borszcz is a Kelowna Real Estate Lawyer practicing law at Pihl Law Corporation in Kelowna, BC.