Buying Real Estate in Whistler

Information Provided Courtesy of Steve Turner, Ardaugh, Hunter, Turner.

Property Transfer Tax (PTT)

A Provincial Government Tax which applies on all transfers of Real Estate and is payable on the completion date. The rate of tax is one percent (1%) on the first $200,000.00 of the purchase price and two percent (2%) on the balance of the purchase price over $200,000.00.

Legal Fees and Disbursements

These are the closing costs paid to a lawyer or notary to complete the transaction on your behalf. Fees are paid for completing the conveyance and preparing and registering the mortgage. Disbursements are the costs for out-of-pocket expenses such as government registration charges, property and tax information searches, courier costs, long-distance calls plus PST and GST. The exact amount of these charges will vary depending on the transaction but they generally range from approximately $600.00 to $1,000.00. Most lawyers and notaries will provide quotes as to charges, it is important to ask whether the quote includes all expenses to complete the transaction.

What is HST and how does it affect the purchase of your home?

How does HST work?
The Harmonized Sales Tax is a 12% federal tax which in many countries is a "hidden" tax paid for by the manufacturer of goods and the provider of services and then added on to the cost of the goods or services by the seller, so that the end price would be the same: in one case, as a "hidden" tax, the tax is added in before the final sale, and in the case of a value added tax such as the HST, the tax is added at the point of sale. In Canada, it is no longer "hidden" but is a value added tax and in the case of real estate, it applies to the purchase of new construction and on the resale of accommodations that have been rented out for short term/nightly rentals.

The payment of HST can be deferred if the new purchaser is going to continue to offer the property for short term or nightly rental for 90% of the time and becomes a HST registrant. Becoming a HST registrant is a straightforward procedure of completing four forms. Once you are a HST registrant, you are entitled to claim credits for the HST that you pay, for example on legal fees, property management fees, and utilities such as electricity, gas, cable and telephone. You are then required to charge, collect and remit HST on the nightly rentals, which in some cases may be done through your property manager. You will be required to file an annual HST return as well.

HST on New Homes
When you buy a newly constructed home, condominium or townhouse, the entire purchase price including land is taxable. If the home is going to be your primary place of residence, it may qualify for a partial HST rebate, depending upon the sale price. If the property is to be rented to tenants, the full 12% HST is charged on the purchase price. The HST rebate is only available on homes lower than approx. $450,000 and even then a sliding scale is applicable to homes over $350,000.

HST on Resale Homes
There is no HST on the purchase price of a used residential property that has been occupied as a residence before you bought it. Used residential property includes an owner occupied house, condominium, apartment, summer cottage, vacation property or non-commercial hobby farm.
Used property can also mean a recently built house that is substantially complete and has been sold at least once before you buy it.

HST and Real Estate Deals
HST applies to most of the services provided in completing a real estate transaction. For example, 12% HST is applied to the real estate commission. The person responsible for paying the commission - usually the vendor, pays the tax. HST applies to many other services involved in real estate transactions.

Whistler Association Fees

These are quarterly fees payable to the Whistler Resort Association and are calculated based on the number of bed units (one bedroom equals two bed units) present in the accommodations, and is dependent on the use of the property. Should you be using the property for only personal use and not have it available for rental more than 14 days per year, you may file a Declaration with the Whistler Resort Association to pay a lower rate of fees. The lower rate of fees is not available to fractional interest (quarter interest) or properties that are subject to a phase one covenant in the town center. For more detailed information about bed units contact Whistler Resort Association at (604) 932-3928.

Insurance

Purchasers will be required to arrange insurance on single-family residential accommodations. With respect to strata-titled properties, Purchasers should maintain liability and contents insurance.

Condominiums

Purchasers will be responsible for paying monthly maintenance charges. The Strata Corporation is also entitled to levy special assessments for extraordinary expenses, should there not be sufficient money in the contingency reserve fund. Purchasers should determine what rights they have to use the common areas such as parking stalls and lockers, if applicable.

Phase One and Phase Two Covenants

Properties covered by the phase one covenant require that when the property is not being utilized for personal use it be available for a rental through a bonafide property management. Phase two covenant restrict the owners personal use of the property to 28 days in the summer 28 days in the winter and requires that the property is available for rentals through a property manager for the remaining days of the year.

Should I Buy in My Name or in the Name of the Company?

The answer to this question is usually tax driven and therefore you should obtain some accounting advice. There can be some draw backs to purchasing in the name of a company including the following:

A. Corporations may pay tax on income received from the property at significantly higher rates than individuals (depending on the individuals marginal tax rates);

B. Corporations can pay higher capital gains tax as well;

C. Should you incorporate a company specifically for the purposes of acquiring a property you will have additional legal cost of incorporating the company for approximately a $1,000.00 plus additional costs associated in maintaining the company annually such as filing annual reports, registered and records office charges and accounting charges;

D. If the company is from a jurisdiction outside of British Columbia, your mortgage lender may require that the company be registered within British Columbia prior to agreeing to lend money (the cost associated with doing so would be roughly as outlined in the proceeding paragraph);

E. In the event that the company was not required to register within British Columbia prior to completing the transaction, a Certificate of Good Standing would be required from the incorporating jurisdiction and an Opinion Letter from a solicitor from the incorporating jurisdiction would be required in conjunction with any mortgage financing;

F. Prior to any sale of the property a further certificate of Good Standing would be required from the incorporating jurisdiction and it will be necessary to maintain the company in the incorporating jurisdiction as long as the property is owned;

G. Personal guarantees of the principals of the company will usually be required by the mortgage lender even though the property is owned by a limited company.

The advantages of having the property held by an incorporated entity would include the following:

A. In the event of the death of the principals of the company there would be no change of ownership of the property in the British Columbia Land Title system, and if the shares are held outside of British Columbia there would not be any probate fees payable in conjunction with the shares;

B. If the only asset that the company owns is the property, it may be possible to sell to a Purchaser the shares in the Company thereby avoiding the payment of Property Transfer Tax and GST on a sale of the property (Purchasers may be reluctant to purchase shares as they would inherit any liabilities in the company including any monies owing to Revenue Canada).

Of A Particular Note to Non-Residents of Canada

Withholding Tax on Rental Income

Revenue Canada Taxation requires nonresidents to pay twenty-five percent (25%) of the gross rental income from the property to Revenue Canada. You may obtain exemption from such withholding tax if you complete a government form called an NR6 setting out that the projected income is less than the anticipated expenses associated with the property. Most property managers will assist in the completion of the NR6 return. Upon having filed an NR6 return, you are obligated to file an annual tax return with respect to the property with Revenue Canada. Revenue Canada will only allow expenses to be claimed if the returns are filed and will disallow any expenses incurred more than two years prior to the time of filing the return, it is therefore important that the returns are kept current to avoid expenses being disallowed and tax being paid on the gross rental income.

Mortgages

Mortgages in British Columbia differ from those available in the United States in several significant ways, including the following:

(A) The Mortgage is for a fixed term, typically between six months and five years. At the end of the fixed term, the interest rate is renegotiated.

(B) During the fixed term, there are limited rights to repayment, typically ranging from 10 to 20 percent.

(C) In the event that you wish to prepay more than the permitted amount, and in the event of a sale of the property, penalties would apply and typically are the greater of three (3) months' interest or the interest rate differential.

Execution of Mortgage Documents

Once the borrower has signed a commitment letter with the lender, the lender will instruct a lawyer or notary to draw the mortgage security. These documents must then be couriered to the borrower for their execution in the presence of a notary public. The Land Title Office does not accept faxed documents; therefore sufficient time must be allowed for the documents to be couriered, executed originally, couriered back and filed in the Land Title Office prior to the completion date.

Methods of Payment

The balance of the purchase price must be paid by certified cheque or bank draft in Canadian funds. Exchange rates may fluctuate and lending institutions in Canada and the United States may give different rates of exchange or quote different rates of exchange for both buying and selling Canadian dollars and will offer different rates of exchange depending on the dollar amounts involved.This is an issue that should be addressed in advance of the actual completion date.

It is possible to wire funds directly to the solicitor's trust account; however, because of the routing of funds, it can sometimes take several working days before funds wired will actually appear in the solicitor's trust account for the closing.

It is recommended that the Buyer open a bank account with a bank in Whistler to facilitate the payment in Canadian funds of ongoing expenses and the receipt of revenues from the property.

Our firm has Swift numbers which can be of assistance ensuring a speedy transmittal of funds.

Time is of the Essence

Completing transactions on the designated completion date in British Columbia is critical. The Vendor has the option of canceling the contract of Purchase and Sale should the funds not be paid on the stipulated completion date and is entitled to retain the deposit. It is not uncommon for Vendors who wish to continue with the transaction to demand interest or additional charges for extensions for late completion.