June Kelowna Real Estate Closings: Municipal Property Tax Adjusments

The end of June is “high season” for residential real estate closing. As the school year comes to the close and the weather turns warmer, people want to get the “business of moving” done prior to enjoying summer holidays.

There are a couple of unique considerations for Kelowna Real Estate at this time of year, all of which revolve around the July 2 Municipal Property Tax payment deadline.

Usually:

  1. For closings before June – the municipal property tax payment is the responsibility of the new Buyer and the Seller receives a debit at closing based on the estimated bill to be paid (or the assessment if available).
  2. For closing after early July  – the municipal property tax payment is the responsibility of the Seller (prior to vacating) and Buyer will receive a debit at closing for the amount already paid.

For closings in June and early July, a couple of key points for Sellers:

  1. When you pay your property taxes (at a bank or at the city), ensure that you keep your receipt.
  2. For your principal residence, make sure that you claim your Home Owners Grant on your principal residence when you pay your taxes (more info on eligibility here)
  3. Depending on the municipality and the timing of the payment, Sellers closing at the end of June may be legally required to holdback an amount of closing to ensure that property taxes have been paid (ensure you have budgeted for this extra temporary cost).

Your Kelowna Real Estate Lawyer will make adjustments such that the Buyer and Seller each “pay” for those expenses which accrue to the property during that time of the year (a per diem adjustment) that each party owns the property being transferred.

The Home Owners Grant that is actually claimed is the amount adjusted for. This can result in some “inequity” in some cases. For example where the Buyer is a Senior buys a property from an Investor and the Seller has already paid the property tax the difference in Home Owner Grant amounts means the Senior may pay an extra $500 in property tax.

These situations may not be entirely avoided but in some cases they can be minimized by talking to your Kelowna Real Estate Lawyer early. For instance (in the example above), we would try to have the Senior Buyer pay the taxes and claim the grant (and debit the Investor Seller) if this was legally possible prior to the municipal tax deadline.

For more information on property taxes, see the local municipal property tax information pages here:

  1. For information on Kelowna Property Taxes – click here.
  2. For information on West Kelowna Property Taxes – click here.
  3. For information on Lake Country Property Taxes – click here.

Written by Kelowna Real Estate Lawyer Peter Borszcz.

canadian-house1

 

Land Tax Deferment Act Agreements

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:

  1. Be 55 years or older, a person with a disability (or a surviving spouse of one of these persons)
  2. Be a Canadian citizen or landed immigrant and British Columbia resident
  3. 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:

  1. Be supporting a dependent child
  2. Be a Canadian citizen or landed immigrant and British Columbia resident
  3. 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:

  1. Homes owned by a corporation
  2. Homes on first nations lands (for example: Westbank First Nations)
  3. Second residences or vacation residences
  4. 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.