Foreign buyers tax to impact Canadian sellers; lawyer

VANCOUVER (NEWS 1130) – As non-Canadian home buyers scramble to close their sales ahead of the B.C. government’s new foreign tax start date, Vancouver real estate lawyers says the province has potentially put Canadian sellers with deals on the go in a financial nightmare.

On Monday the province introduced a 15 per cent tax on foreign home buyers which takes effect Aug 2. Premier Christy Clark says no property transfer will be exempt, even pending sales and pre-sales on yet-to-be-finished condominiums.

The goal is to stop foreign investors from driving up prices, but Richard Bell with Bell Alliance says it puts Canadian sellers in a bind because the closure of their current deal could affect their ability to buy another home.

“When that first (foreign) buyer can’t close, and they may be buying from a Canadian citizen, that seller may have entered into a contract to buy based on their first deal closing,” he says.
“They no longer have the funds to close their purchase on their new place so you can see the chaos that’s created by a failure by the government to provide a grandfathering.”

Aneez Devji with Richards Buell Sutton LLP says their office has seen a spike in calls from clients who want to push their contract’s completion date ahead, sometimes by months, in order to avoid the tax.

“I have a client who is purchasing property in town, the family is from Austria. Completion date wasn’t scheduled until later this month, but with the new tax they decided they wanted to come into town and speak with me and a seller directly,” he says.

Early closures have also come at a cost where they are offset by a late possession date where homeowners get to stay in their property for extra time at no extra cost.

Not all buyers have been lucky enough to move up their deals, according to Bell, who says one of his American clients is moving to Vancouver while he works on a large infrastructure project, but the home they are buying is part of an estate and it’s unlikely the mandatory probate will be done before Tuesday.

“So this person has an extra $150,000 bill.” he says.

Clark says people who bought homes even just a year ago have already seen a 15 per cent increase in value, which should cover the tax they will pay, and the quick start date was to prevent a run on the market from driving up prices even further, however they could have kept the Aug. 2 start and also had a grandfather clause.

The new tax will also impede Vancouver’s ability to attract skilled foreign workers who want a home, not an investment, according to Bell.

Clark believes the province is in a solid legal position should buyers and sellers sue the government for damages, while Bell and Devji says it’s likely too early to say whether or not the province has a leg to stand on.

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