Should Canada follow New Zealand’s lead and ban home sales to foreigners?

New Zealand’s new, 37 year old Prime Minister elect, Jacinda Ardern has just introduced legislation to ban home sales to foreigners.

“Foreign ownership and a housing shortage in New Zealand’s larger cities were prominent issues in the lead-up to the September 23 election, which brought an end to nine years of rule by the conservative National Party.”

Sound familiar?

Partnering with the NZF (New Zealand First) party to form a majority government, she announced that, “We also have plans around farmland and other critical infrastructure. New Zealand is no longer for sale.”

Whether this will work to drive down the cost of housing in NZ remains to be seen, but it is one government’s attempt to allow New Zealanders an opportunity to get into their own housing market.

By comparison, efforts to adopt a “locals first” approach in Canada have been slim to none, as both the provincial and federal governments have inexplicably in my opinion, considered off-shore purchases of Canadian real estate foreign investment, and hence, encouraged it every step of the way.

The recent introduction of a foreign buyers tax by the BC and Ontario governments in Metro Vancouver and the GTA respectively has produced modest results at best.

Certainly, banning or sharply reducing foreign buying of Canadian homes (particularly in Vancouver and Toronto) will have a significant effect on pricing (how many locals have $2.5M for a tear down on the west side?), so one would have to both expect and be prepared for an erosion of the current equity position of existing home owners.

Those who bought recently would be most affected, while those who purchased ten or twenty years ago have made windfall gains in home equity which could not have been reasonably expected based on any historical data available –so they could weather a correction of 25-50% and still make a tidy profit.

As the housing market in Canada represents directly and indirectly almost 20% of the GDP, the governments are in a quandary. If they deflate the housing market too much they risk the significant possibility of mass foreclosures and a severe backlash from existing home owners.

On the other hand, if they do little to nothing as they have done for decades, more and more young Canadians will not be able to participate in the dream of home ownership, which represents both a secure place to live and an investment for retirement.

The government’s inaction for too long tends to precipitate drastic measures –which are likely to destabilize the market in a negative way.

Instead, perhaps a more gradual approach would be in order such as:

  • Extending the foreign ownership tax to the whole province (and ultimately the entire COUNTRY which would of course require cooperation from other provinces), including commercial property and farmland;
  • Increasing said tax by 1% per year until the desired effects are realized;
  • Taking away the 50% capital gains exemption for foreigners disposing of Canadian real estate or other assets;
  • Requiring foreign buyers to actually disclose by documentary evidence, the source of purchase funds;

The latter two suggestions would require cooperation of the federal government as the Income Tax Act and the FINTRAC legislation are both federal laws.

These measures would not eradicate foreign ownership in Canada, but they would certainly “tighten the noose,” so to speak on the foreign property speculators, money launderers and those who just want to park some funds in this country for safe keeping.

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2018 Pazder Law Corporation 

Another Useless Tax

Pursuant to the “Empty Homes Tax,” Vancouver homeowners are now required to declare whether or not their properties are rented. This new vacancy tax is just another unwarranted by government on private property owners’ rights.

The supposed “justification” for the tax according to the city of Vancouver’s website, is to:

  • Return empty or under-utilized properties to use as long-term rental homes for people who live and work in Vancouver
  • Help relieve pressure on Vancouver’s rental housing market, as our city has one of the lowest rental vacancy rates and the highest rental costs in Canada

With all due respect, this rationale is laughable.

First, there is a substantial list of exemptions to the tax and plenty of loopholes.

Second, as the property need only be rented for 6 months a year, I am not sure how this encourages “long term” rental accommodation. How many people want to rent for just 6 months or less and then have to move?

Third, the tax creates yet another level of bureaucracy on Vancouverites who already have to put up with a plethora of municipal, provincial and federal laws and regulations. To pay for this nonsense significant fines and penalties could be levied on top of the 1% tax on the assessed value of the empty property.

Fourth, the ingenuity of government to invent new taxes never ceases to amaze. Income tax, capital gains tax, property tax, GVRD tax, Property Transfer Tax, payroll tax, carbon tax, GST, provincial sales tax, probate tax (yes it’s a tax not a user fee) and now an Empty Homes Tax!!! If politicians could govern half as well as they can come up with new ways to pick taxpayers’ pockets we would have few problems in society.

Fifth, after doing literally nothing for the past 15 years to deal with housing and rental affordability in metro Vancouver (even denying that foreign money was driving up real estate prices –which of course forced more people to rent), as usual the government is trying to close the barn door years after the horses have left.

Lastly, even if all 21,000 supposedly empty homes in Vancouver were rented out because of this tax, there are some 40,000 new arrivals in the metro-Vancouver area EVERY YEAR – 9 or 10 who arrive from outside the country, so even putting the best possible spin on this vacant homes tax, it’s a band aid solution at best.


Much larger urban centers like New York and London have proven that cities cannot simply build their way to affordability no matter how many towers they put up. The end result is an over-crowded, congested, less livable mega-city which is still unaffordable to most.

Heretical as it may seem to some, perhaps it’s time to actually listen to the residents of Vancouver who mostly think that there are PLENTY OF PEOPLE LIVING HERE ALREADY! 9 out of 10 people think we have enough!

However, the “democratic deficit” (to borrow a phrase from Noam Chomsky), is alive and well in BC, so what the majority of people may want is often of no concern to those who govern.

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2018 Pazder Law Corporation 

Enough is enough! Pre-sale condo buyers seek justice

Fed up with the one-sided nature of pre-sale contracts, a group of disgruntled Langara West pre-sale buyers are challenging the status quo. This is yet another cautionary tale about the risks involved in buying a pre-sale condo.

In this instance the developer did not complete the project and sought to return the buyers’ deposits (plus 50%) in lieu of damages.

The case involves a novel legal argument put forth by the buyers’ lawyer. The typical custom-drafted, one-sided pre-sale contract usually contains an egregious clause which says the if the seller defaults the buyer’s sole remedy is to get his deposit back (usually with no interest). On the other hand, if the buyer defaults, he loses his deposit (Tang v. Zhang, BCCA, 2013) and he’s legally responsible for any further losses the seller incurs.

The buyers’ lawyer is arguing that this clause is not operational because the seller/developer allegedly committed a “fundamental breach” of the contract (i.e. did not deliver any manner of condo).

We tried this argument on a mortgage company that failed to advance funds (for no legitimate reason) on a commercial mortgage twenty years ago (mortgages usually have clauses that say that the lender has “no obligation to advance funds” -which is the main purpose of a mortgage). That would also seem to be a fundamental breach of contract , but the Alberta Court of Appeal didn’t see it that way.

Unfortunately buyers are stuck with these grossly unfair contracts as there is no legislatively mandated form of pre-sale contract under the Real Estate and Development Marketing Act.

Perhaps the new NDP government will change that, not being as beholden to the development industry as the former Liberals.

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2018 Pazder Law Corporation 

Walking away from a real estate purchase just cost the buyer $360,340.35

Most people who buy real estate assume that only their deposit is at risk if they fail to complete the purchase.

For sure their deposit is at risk.

This has been unequivocally established by the British Columbia Court of Appeal in Tang v. Zhang 2013 BCAA 52 which states that the defaulting buyer’s deposit is forfeited whether the seller suffers a loss or not (i.e. re-sells the property to someone else at a higher price).*

In BC’s seemingly ever-increasing real estate market, the seller can usually re-sell the property to another buyer at the same or a higher price and hence, the loss of the buyer’s deposit is usually the end of the matter.

A couple who I recently acted for bought and sold at the same time and were stuck in this very dilemma namely, the buyer defaulted on their sale which caused my clients to default on their purchase. My clients’ deposit was $100K. Fortunately, we were able to negotiate a reduction of $40K in the amount of deposit that my clients forfeited (so only $60K went down the drain so to speak), as the seller was able to re-sell the property within a week for an additional $100K. My personal view was that the seller should not have kept any of the deposit as he actually benefited as a result of my clients’ (forced) default. His counsel didn’t see it that way and reminded me that Tang v Zhang would have allowed his clients to keep the whole deposit had they chosen to do so. He was right of course. Now my clients are suing their buyer to recoup their losses.

However, in a declining market, (yes, there actually is such a thing), losing one’s deposit is not always the end of the matter.

The standard BCREA/CBA contract of purchase and sale (as well as every custom pre-sale contract for new condominium purchases) requires the forfeiture of the defaulting buyer’s deposit on account of damages and without prejudice to the seller’s other legal remedies.

In other words, if the deposit doesn’t fully cover the seller’s loss, the buyer is on the legal hook for the rest of it.

It is wise to remember Sir Isaac Newton’s maxim, “what goes up must come down” (even in BC’s real estate market).

In the BC Supreme Court case of Albrechtsen v Panaich (2017 BSCC 1361) last summer the buyer walked away from the purchase of a property in Surrey, BC with a purchase price of $1,260,000 and forfeited his deposit of $60,000.

This story was well covered in the CBC news article of August 3, 2017 “Buyer who walked away…”

In the frenzied market of 2016 the buyer (foolishly, in hindsight) made the offer with no “subject conditions” and without any realtor representing him.

Unfortunately for him, the BC government had just imposed the 15% Foreign Buyer’s Tax and that negatively affected home prices shortly before the sale was to complete.

Despite numerous efforts over the next six months -even with an experienced realtor, the sellers were only to re-sell the property for $910,000, leaving them $350,000 short of what they would have received from the original buyer.

The sellers sued and the BC Supreme Court ordered the buyer to pay damages in the amount of $300,340.35 (in addition to the forfeiture of his $60,000 deposit).**

When you breach a contract you are legally responsible for ALL of the damages incurred by the other party -which this buyer found out the hard way.

So unlike the fanciful video by Craig David “Walking Away”, it’s not so easy to walk away from a real estate deal in a declining market without losing your shirt in the process!

* Tang v Zhang clarified a conflicting series of BC Supreme Court decisions which were split as to whether a seller should be able to keep the buyer’s deposit if he didn’t suffer any real loss (i.e. he re-sold the property at the same or a higher price). The Court of Appeal held that the deposit (unless unconscionably high) amounted to “earnest money” (a term commonly used in real estate transactions in the USA) and should be forfeited whether the seller was out of pocket or not.

**The buyer is attempting to set aside the sellers’ (default) judgment next month. After speaking to the seller’s legal counsel, I’d have to say that he’s definitely got an uphill battle.

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2017 Pazder Law Corporation 

THINK TWICE before “just adding a name” to your title

1. What does it legally mean to add someone’s name to your title?

In BC you have to file an electronic FORM A land transfer at the Land Titles Office to add someone’s name to your property title.

However by doing so, you are doing more than just adding a name. You (“the transferor”) are legally transferring an interest in the property to the other person (“the transferee”). He or she will then be a co-owner of your property.

The transfer of interest could be anything from the whole fee simple to a half interest, quarter interest or something much smaller like a one per cent interest.

2. Does money have to change hands?

No. The land titles office will accept a $1.00 and other good and valuable consideration entry.

3. What are the ramifications of transferring an interest to someone else?

Apart from another person now owning part of your property there could also be tax consequences.


In BC, there may be Property Transfer Tax (“PTT”) consequences. PTT is provincial tax payable on the fair market value of the interest in the property being transferred.

It is 1% on the first $200,000 and 2% on values over that amount and 3% on amounts over $2,000,000. If the transferee is a foreign national or a foreign corporation the PTT can jump by a further 15% in certain circumstances.

Unless there is an exemption (like the transfer of an interest in a principal residence)* PTT is payable regardless of whether any money changes hands.

So let’s say that you add your wife to the title of a rental property that is worth $600,000. If she acquires a half interest that will trigger PTT of $4,000 regardless of whether she paid full market value or $1.00.

*see s.14 Property Transfer Tax Act for a list of exemptions from this tax


Capital gains tax is a federal tax which is triggered when a property is transferred and a capital gain is made.

Generally, a capital gain is an increase in the value of capital (i.e. your property) from its original price (the adjusted cost base (“ACB”)).

Capital gains are taxable on 50% of the capital gain at the transferor’s marginal tax rate

Let’s assume in the previous example that the rental property was originally purchased for $300,000 and now has appreciated to $600,000. Transferring a half interest to the owner’s wife would trigger a $300,000 capital gain, half of which is taxable. If the transferor’s marginal tax rate was 50%, he would end up paying approximately $75,000 in tax for the privilege of adding his wife to the title.

Again, unless there is an exemption, capital gains tax is payable whether money changes hands or not based on the increase in value of the property.

4. Can’t you just remove the person’s name from title?

No. The transferee becomes the legal owner of the interest. He or she must agree to transfer it back to you and similarly execute an electronic FORM A land transfer.

That person will then incur the same tax ramifications as noted above.

5. Insurance

Unless you notify your insurance company of the change of title, your home insurance policy will likely become void (as the insurer will consider that title transfer as a change in the insurable risk). This is only something you will find out about when you make a large claim on your policy.

6. Avoiding Probate Fees

By adding your adult children to your title as joint tenants (meaning that all parties have equal interests and a right of survivorship), the owner can avoid BC probate taxes (which are euphemistically referred to as “fees”) of approximately 1.4% on the estate.

Assuming that the property is a principal residence (valued at $1M) and therefore not subject to capital gains or PTT, your estate would save $14,000 in probate fees upon your death by having the kids as joint tenants (plus legal fees to probate the estate).

However in the meantime, the kids are co-owners of the property who must consent to any sale or mortgage (and in fact, they will have to sign any new mortgage or mortgage renewal as well).

If your child gets married (or lives with someone continuously for 2 years in a marriage-like relationship) their spouse will acquire a 50% interest in (any increase) in the value of their share of the property under the Family Law Act (unless exempted by a marriage agreement). Thus, you could end up having to buy out an ex-spouse’s interest in your property if you wanted it back.

Lastly, if your child gets into financial hot water by virtue of a failed business venture, MVA (where he is underinsured), gambling debt or other, his share of the property can be encumbered by a judgment -again making it problematic to re-transfer if your plans change.


Just “adding a name” to your title has real legal, tax and other consequences.

Even transferring an interest in a “principal residence” (which can seem like a safe bet at least from a tax perspective) can result in PTT, capital gains and even business tax consequences in certain unusual circumstances.

That is why it is essential to obtain professional advice from your lawyer and accountant to ensure that transferring a part of your title makes both good business and legal sense AND that there are no unpleasant surprises after the fact.

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2017 Pazder Law Corporation 

Whose city is it anyway?

Vancouver rejects Keefer St. proposal in Chinatown

Chinatown decision: Vancouver council rejects controversial 105 Keefer St. proposal

This recent Vancouver Sun article describes one small victory for community residents over a large property developer (in this instance the Beedie group).

This is a perfect example of community involvement working to resist ever-increasing population density, which is the mantra of both municipal governments and the provincial government. in this province.

The government’s rationale goes something like this.

There is too much demand and not enough supply so the housing prices are becoming unaffordable for most residents.

In their view the solution is to build more units in the same space (hence, increasing density).

With all due respect, that rationale is flawed.

Firstly as the authors below point out, it is not possible to build enough units to satisfy the world-wide demand for housing in Vancouver (and the Lower Mainland).

Other so-called “world class” cities like New York, San Francisco, London and others have hundreds of more high rise apartments than Vancouver could ever dream of building and they are still way out of reach for the average buyer.

Adding more towers is like adding more lanes to the highway and expecting to solve the traffic problems (ask LA residents how well that has worked out for them).

Secondly, it is patently unfair to pay attention ONLY to the demand side (everybody and their dog wants to live in Vancouver), while not giving equal consideration to the neighborhood residents (me and my dog already live here).

The proliferation of unlimited high rise apartments has a definite negative impact on the quality of life of the neighboring residents and the city at large (i.e. congestion, pollution, overcrowding, traffic problems, lack of parking, etc.)

Unfortunately our governments at every level have an insatiable appetite for tax dollars, so the prospect of collecting property taxes, GST and PTT from six hundred owners in a high rise apartment block, versus a hand full of single family residents invariably wins the day –at the expense of the people who live in the neighborhood.

It’s high time that the citizens of Vancouver and surrounding cities take a page out of Chinatown and TAKE BACK control of development from the developers and the government shills who accept their political donations.

Ever increasing DENSITY is NOT GREEN (as the current mayor of Vancouver would have you believe), nor is it sustainable.

At the end of the day, too much density is a LOSE-LOSE proposition –housing still remains unaffordable AND the quality of life of the city’s population diminishes for all residents!

Unfortunately, that’s pretty much the normal result we can expect from our politicians.

With BC’s newly elected government will we see more “locals last” policy or will things change? (don’t hold your breath)

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2017 Pazder Law Corporation 

Is our FOOD SECURITY for sale?

Farm land is EXEMPT from the 15% foreign buyer’s tax in British Columbia.

B.C. government’s decision to exempt farmland from the 15-per-cent foreign buyers tax is fuelling runaway speculation on property in the Agricultural Land Reserve.

Comment: Is our FOOD SECURITY for sale?

The Sun’s article illustrates that one result of the farm land exemption is that foreign buyers are snapping up acreages and building mega homes on them, thus driving up the cost of acreage from $750,000 to $1,500,000 per acre.

Just as aggravating is the fact that many foreign buyers then construct mega homes on the acreages (and take advantage of extremely low property taxes by planting the minimum amount of crops to qualify the property as “farm class.”)

It is hardly a news flash (except to the current provincial government) that foreign buyers are acquiring real estate in British Columbia for their own benefit and not to make the province a better or more prosperous place.

Of equal or greater concern however is the fact that we are allowing foreign buyers to buy BC farm land in the first place.

The issue of FOOD SECURITY has been raised in the US, China and many other major countries, but it seems to have gone unnoticed in Canada.

Do we want foreigners owning Canadian farm land?

Given the low prices of prime agricultural land in Canada compared to other countries (together with the fact that most foreigners are buying with USD, giving them a 35% price reduction right off the bat), it is possible that foreign buyers (which could include corporations and governments) could easily snap up most if not all of the prime farmland in this country.

At the risk of sounding like the late, Canadian nationalist, Mel Hurtig (1932-2016), I believe that the time is long overdue for Canadians to have a conversation about what resources in this country should be for sale to foreign buyers.

In our view farmland should be off the table from the get go.

And MINIMALLY, the foreign buyer’s tax should be extended to every piece of real estate in the province.

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2017 Pazder Law Corporation 

Foreclosure disclosure [podcast]

Last week, I had the pleasure of speaking with the Vancouver Real Estate Podcast team about the foreclosure process in British Columbia.

Listen here: VREP Episode #70


Here, we delve into questions like:

What is a foreclosure?

How does it happen?

How can one buy a property under a court-ordered sale?

Is this an opportunity for buyers?

What are the advantages of making the first offer?

What are the risks of buying a foreclosed property?

Are there ways to mitigate the risks?

Do we have an effective model for dealing with court-ordered sales in BC?

Find the full podcast episode here: VREP Episode #70

We hope you Enjoy!

Whether you’re buying, selling, refinancing (or simply want to know more), the Vancouver Real Estate Podcast is an excellent source of timely and relevant information about our sizzling (and controversial) property market. We listen to their material regularly and encourage you to check out their other podcasts.

On the topic of foreclosures, did we miss any burning questions?

If you have ANY additional questions, are currently going through a foreclosure (sale) process….. or are looking to purchase a property through a court-ordered sale, we help you ‘get your ducks straight’. Simply call us for an obligation-free phone consultation today, our priority is YOUR HOME.


Tel: 604-682-1509

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2017 Pazder Law Corporation 

The BIG SIX: How to draft a good BC Real Estate Purchase Contract (Six Mistakes to Avoid)

Writing a good contract of purchase and sale:

The contract of purchase and sale governs the transaction between the buyer and the seller. As you are representing the buyer or seller, you must ensure that the agreement properly reflects the intentions of your clients and fully protects their interests.

Most real estate contracts for residential transactions use the CREA/CBA standard “Contract of Purchase and Sale.”

Note that paragraph 18 of the standard form Contract of Purchase and Sale (the “Purchase Contract”) in use in BC presently states:

18. REPRESENTATIONS AND WARRANTIES: There are no representations, warranties, guarantees, promises or agreements other than those set out in this Contract and the representations contained in the Property Disclosure Statement if incorporated into and forming part of this Contract, all of which will survive the completion of the sale.

This means that if you fail to include the necessary clauses to protect your client’s interests, often they cannot be enforced pursuant to this clause.

NOTE that most of the following issues are NOT addressed in the Purchase Contract, so it’s up to you to make sure that they are added in to the contract (when applicable).



The Purchase Contract is silent on this matter. The listing agreement usually indicates the square footage of a house and lot size and also the square footage of a condominium or townhouse (it also carries disclaimers about the information being believed to be accurate but not so warranted).

Have the home professionally measured and surveyed or review the current strata plan to verify the home size by way of a subject condition unless your buyer instructs you explicitly not to have this done.

Rarely will the seller make a representation concerning the size of his property.

When size discrepancies are discovered, they invariably show a smaller size home, lot or unit than the buyer expected. That means you have an unhappy buyer on your hands.

GOLDEN RULE: Never rely on the facts contained in the Listing Agreement.

2. GST

The Purchase Contract makes no mention of Goods and Services Tax (“GST”). The vast majority of realtors do not add any clauses dealing with this tax. They leave it to the conveyancing lawyers to try to paper over an “after the fact” representation by the seller that the property is GST exempt because it is “used, residential, not substantially renovated property.”

However, the seller is not contractually or legally bound to provide such a representation after the contract is signed and subject conditions are removed (and most non-conveyancing firms will advise their sellers not to make such a representation, as it can’t help them and may indeed hurt their position if GST is later found to be payable).

The applicability of GST to the transaction depends on what the Seller was doing with the property NOT what the Purchaser plans to do with it.

For example, if the property was used for commercial purposes or has a commercial element (i.e. live/work studio) or has been rented out for short term rentals (i.e. “Air B & B”), GST may be payable, despite the property not being new. This will be an unpleasant surprise to the purchaser.

If your guess about the applicability of GST is wrong, you (or your errors and omissions insurance carrier) will be paying the tax after closing on the buyer’s behalf. 5% on a two million dollar property is a lot of money.

Golden Rule: If acting for a buyer, put a clause into the offer stating that the purchase price is inclusive of Goods & Services Tax if applicable. If the Seller balks at it, you know there is something to investigate further. If the Seller leaves it in, then GST becomes his problem.


Some jurisdictions (i.e. Alberta) don’t have this tax. Purchasers (who only buy or sell every five to ten years), don’t necessarily know about this tax even if they live here. Make sure that they do BEFORE they make the offer and how much that tax will be (its 1% on the first $200,000 and 2% up to $2,000,000 and 3% over that. Add 15% on to that if the buyer is not a Canadian citizen or permanent resident of Canada.*

First time buyer exemptions are subject to MANY conditions.

Keep in mind that TAX rules and conditions are constantly changing.

Golden Rule: Don’t guess whether there is tax or not unless you are absolutely sure. If you are wrong, you (or your insurance carrier) will be paying the tax for the purchaser. Refer the person to your conveyancing lawyer or the PTT branch to assess whether he will qualify for the FTB exemption.


Many non-residents own Canadian properties. The high price of real estate in the Lower Mainland has prompted many to sell. When a non-resident sells, the buyer is entitled to require a holdback of a portion of the sale price of the property under s.116 of the Income Tax Act (generally 25% of the gross sale price, but if the property is held as inventory or is depreciable property, the holdback is 50% on the building value). This holdback is available to the purchaser whether it is a term of the Purchase Contract or not.

The Purchase Contract attempts to deal with this with a check-off box on the top left hand side of page one or on the bottom of the last page (depending on which version you are using). Many realtors don’t know why it matters so they leave it blank.

If you are acting for a seller find out at the outset whether he is a non-resident and advise the buyer’s realtor.

If the seller has a large mortgage on the property, the required holdback can scuttle the sale (unless the seller has money to come up with out of his own pocket to allow his lawyer to pay off the mortgage and holdback the required amount). Alternatively, the seller can apply for a clearance certificate before closing if he knows the sale price and has sufficient time prior to closing. CRA has been known to expedite clearance letters in these circumstances (their normal turnaround time is three to four months).

If the sale is court-ordered (i.e. foreclosure or Court Order Enforcement Act) more searches and investigations MUST be performed before making the offer. A recent BC Supreme Court decision (Mao v. Liu (2017) BCSC 226) resulted in the buyer being assessed with $600,000 of unpaid capital gains taxes owed by the registered owner.

Golden Rule: Make sure that your non-resident seller knows about the holdback, that it won’t scuttle the sale and how long it will take to get the funds back from CRA (after payment of capital gains or income taxes). If it’s a court-ordered sale extra due diligence is warranted before the offer is written up.


Prior to the late 1950’s, most homes in the Lower Mainland were heated by way of underground fuel tanks containing 500 to 1000 liters of heating fuel. These were typically buried a few feet below the surface of the lot in the back or side yard. Pipes connected the tank to the home and allowed for periodic re-filling.

By the late 1950’s many home owners had switched to natural gas heating and abandoned the fuel tanks. Often tanks were simply closed up by sealing or removing the filling pipe without using up or draining the existing fuel.

As there was little or no environmental legislation back then, no one was concerned that after 40 years or so, the tanks would corrode and the fuel would leak out.

Municipal by-laws in Vancouver require the removal of any underground oil tank not in use. Thus, if there is an underground tank, it is the seller’s legal responsibility to remove it.

Removal of a tank by a qualified company usually costs about $2,000-2,500. If fuel oil has leaked out however, we have seen costs up to $100,000 and above, as the fuel oil can leak under foundations and roadways and all contaminated soil must be removed and replaced.

The PDS is of little help for this issue as it simply requires the owner to state that he is “unaware of any existing oil tank”.

GOLDEN RULE: Include a warranty by the seller that there are no underground oil or fuel tanks on the property. To be on the safe side, also include by way of subject condition, a clause permitting your buyer to carry out an inspection in this regard before closing and indicating that should a tank be found that the seller would be responsible for its removal, (including any necessary soil remediation if oil has leaked out) before completion.


Clause 20A of the standard real estate contract in use in BC now prohibits the buyer from assigning the contract of purchase to a third party without the seller’s written consent. Furthermore it allows the seller to obtain the profit from any such assignment.

This is a MAJOR change to the long standing practice of permitting assignments of residential contracts (unless otherwise prohibited).

If prices rise dramatically between the offer date and the closing date and your purchaser has the opportunity to “flip” the contract to a third party, he will be most disappointed to learn that he is prohibited from so doing.

Make sure that you explain this to your buyer BEFORE you write the contract. Like all clauses it can be DELETED before the offer is made.

GOLDEN RULE: Make sure that your buyer understands the concept of assigning his interest in the contract to someone else before you write the offer.

… The moral of the story:

Buyers and sellers hate surprises (as they are almost invariably unpleasant). The best way to eliminate surprises is to draft a proper contract of purchase and sale and to have a good real estate lawyer as part of your team.

© April 11, 2017 Pazder Law Corporation

**Materials are current as of this date and are for information purposes only. They are not intended to constitute or replace legal advice when dealing with the subject matter. Check with the author or conduct your own due diligence to update if referring to these materials in the future.

About Pazder Law Corporation

  • We have completed more than 30,000 sales and purchases
  • We are approved solicitors for all major financial institutions
  • We set up the legal program for the Home Owners Protection Office to assist the owners of leaky condos
  • We set up the first title insurance office in BC
  • We set up the first province-wide mortgage program for a major chartered bank;
  • Members of the Law Society, Canadian Bar Association, CHOA, RELAN and PETA.

We welcome referrals:

  • We are accessible 7 days a week to answer your questions (yes, even weekends)
  • We spend time with your clients (usually about an hour) making sure that they understand what they are signing (most lawyers and notaries spend about fifteen minutes and the client can’t remember their name the next day)
  • On average, eight out of ten of our existing clients are past clients of the firm
  • We care whether the clients come back as much as you do
  • Clients may come back to us with questions or concerns for as long as they own the property at no additional charge

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2017 Pazder Law Corporation 

$600,000 Mistake made in purchasing from Non-Resident

Beware when you are buying real estate in Canada from a NON-RESIDENT!

S.116 of the Income Tax Act requires a buyer to “make reasonable inquiries” to ascertain the residency status of any seller of real property.

That generally starts with the seller checking the “resident or non-resident” box contained on the first or last page of the standard BC real estate contract (depending on which version you are using).

Realtors for the Seller often overlook this VERY IMPORTANT clause either because they don’t know why it is there or they have not asked the seller that question when the Buyer’s offer is accepted.

The clause serves a first step in alerting the Buyer of the residency status of the Seller. Normally, if the Seller indicates that he is a resident of Canada the Buyer’s lawyer will have this confirmed with a Statutory Declaration ( which is a document akin to an affidavit) to be signed by the Seller at his lawyer’s office before the closing date.

Obtaining a declaration of residency which is in effect, under oath generally constitutes a reasonable inquiry, unless the Buyer ought to have known otherwise.

If the Buyer fails to make reasonable inquiries and the Seller is a non-resident and does not pay the applicable capital gains taxes on the sale, then THE BUYER is assessed the entire tax by Canada Revenue Agency (“CRA”).

For this reason, the Buyer’s lawyer must INSIST on a hold back from the sale proceeds of between 25% and 33% of the gross sale price (depending on the nature of the property) -although in my experience 25% is more than sufficient to meet the Seller’s tax liability.

This holdback remains in trust until the Seller can provide the Buyer with a Certificate of Compliance from CRA confirming that the taxes with respect to the sale have been paid.

This issue however gets much trickier on a FORECLOSURE SALE or a COURT ORDER ENFORCEMENT SALE.

BC case law holds that on in a foreclosure proceeding the foreclosing party (normally the bank) is considered to be the Seller. This makes logical sense as the bank’s representative accepts the Buyer’s offer on the purchase and sale contract -despite the fact that the bank is not on title to the property as an owner.

The registered owner signs NOTHING (not the sale agreement nor any transfer of title).

Hence, as most financial institutions in Canada are resident here, one would think that there is no residency issue to consider.

However CRA takes the opposite position -namely that in a foreclosure or Court Order Enforcement Act sale the registered owner is the Seller and hence if he is a non-resident, the capital gains tax must be paid out of the sale proceeds (fi applicable).

If the required tax is not paid, CRA will assess the Buyer with the unpaid tax!

Foreclosure lawyers will typically include a three page schedule to the purchase agreement (which few realtors or their purchasers read) which states that the property is sold “as is where is” and that the bank (Seller) makes NO REPRESENTATIONS whatsoever about the property (or the registered owner).

Hence, the Buyer’s lawyer’s requested statutory declaration to confirm residency is normally crossed out and the bank claims ignorance regarding the residency status of the registered owner.

This exact scenario happened in the recent BC Supreme Court case of Mao v. Liu (2017 BCSC 226) except that the sale was a COURT ORDER ENFORCEMENT proceeding.

That means that the Plaintiff obtained a judgment against the registered owner, filed it against the property and sold the property under the Court Order Enforcement Act to a third party.

Thee process is similar to a foreclosure in that the registered owner does NOT participate in the sale as the title is transferred by a court order (often over the objections of the registered owner, who may be contesting the sale).

The BC Supreme Court judge held that neither the Buyer nor his notary made reasonable inquiries as to the residency status of the Seller.

The Seller’s counsel refused to provide any information regarding the residency status of the registered owner.

No holdback was made ant the sale closed.

CRA then assessed the Buyer with a $600,000 tax bill and the Buyer promptly sued his notary and obtained a judgment for the entire amount. As of the time of writing, it is not clear whether the notary’s insurers will appeal the decision.

In this case it was unfortunate that the registered owner AND the judgment holder (who caused the sale) were BOTH non-residents, so it would not have mattered which argument was advanced (that the registered owner was the Seller OR that the judgment holder was the Seller). In this case the hold back should have been made.

The morals of the story:

  1. Do your due diligence regarding the residency status of the Seller BEFORE the completion date;
  2. Insist that the residency/non-residency box be checked at the time the contract is signed (or if that is not possible to determine at that time, make it a subject condition in favor of the Buyer that the Seller provide evidence of residency prior to completion);
  3. If buying under a COURT ORDERED SALE (foreclosure or Court Order Enforcement Act) take extra care, as the party causing the sale (be it a bank or judgment holder) will likely balk at making any representations regarding the residency of the registered owner. That can leave you in the same boat as the notary in the case cited above. Always get competent legal advice BEFORE you write up the offer to purchase and read the schedule to the contract which the selling party’s lawyer will invariably attach.

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2017 Pazder Law Corporation