Real Estate Transfers with a Burnaby Notary
In British Columbia, all transfers of real estate are taxable unless deemed exempt in the Property Transfer Tax Act (the “Act”). The fair market value of your home, which is determined by BC Assessment, is the price that a buyer is willing to pay for your home. Taxes payable are as follows: 1% on the first $200,000.00; 2% on the value over $200,00.00 up to $2,000,000.00; 3% on the value over $2 million up to $3 million; and 5%, if a residential property, on the value over $3 million. Fortunately, the Act provides exemptions for the following situations: family transfers, first-time home buyers, newly built homes, and others. Your notary can help you to determine if you qualify for an exemption.
Family Transfer Exemption
The Act provides an exemption for three sets of related individuals: first, your spouse, child, grandchild, great-grandchild, parent, grandparent or great-grandparent; second, the spouse of your child, grandchild or great-grandchild; or third, your spouse’s child, parent, grandparent or great-grandparent. This means that transfers outside this scope, for example, to your brother, sister, cousin or nephew are taxable.
To qualify for an exemption on family transfer, either you (the “transferor”) or the person receiving the interest (the “transferee”) must have lived on the property for a minimum of 6 months immediately before the transfer occurs. Therefore, if you have not lived there for at least 6 months, property transfer taxes are payable. In addition, the person making the transfer must be a Canadian citizen or permanent resident of Canada.
First-Time Home Buyer’s Exemption
If you are buying your first home in B.C, you may be eligible for an exemption on property transfer taxes. The first-time buyer’s exemption hinges on three characteristics: the buyer, property and its use.
To be eligible for the exemption, the buyer must be a Canadian citizen (or permanent resident). She or he must have lived in B.C. for 12 consecutive months immediately before the date that the transfer is registered, o has filed two income tax returns as a resident of B.C. during the 6 years before the date of registering the transfer. The buyer must have never owned an interest in a principal residence anywhere in the world. He or she should never have received the exemption before. Foreign entities and taxable trustees are not eligible for the first-time home buyer’s exemption.
A property that qualifies for the full exemption has the following qualities: it will only be used as the buyer’s principal residence; it has a fair market value of less than $525,000.00; and the land is 1.24 acres or less. Consequently, if the property is an investment or rental property, property taxes may be payable.
Use of the Property
To keep the exemption, the buyer must occupy the property as his or her principal residence within 92 days of registering the transfer. To gain the full exemption, the buyer must use the property as a principal residence for at least 1 year following the registration date. A buyer may be eligible for a partial exemption if he or she has to leave the property before living there for at least 1 year (or the anniversary date). A first-time buyer may be eligible for a full exemption if the use of the property has ended due to a court order or separation agreement under the Family Law Act.
Newly Built Homes Exemptions
You may qualify for an exemption for newly built homes if you meet the following requirements: you are a Canadian citizen or permanent resident; you live in the home as your principal residence within 92 days of the transfer of registration; and, you must continue to use the property as your principal residence for at least 1 year following the transfer’s registration.
Several properties qualify for this exemption: a house that will be affixed to a parcel of vacant land; a manufactured home that will be affixed to vacant land; a house that has been moved from parcel of land to a parcel of vacant land; the house that occurs following the subdivision of a parcel of land; an unused improvement that has been converted for residential use; and, a new apartment in a newly built condo. To gain the full exemption, the property’s value must be not more than $750,000.00 and the land must be 1.24 acres or less. You may meet with your notary to discuss the details related to your qualifying for an exemption. In any event, a quick call to Property Transfer Tax can also help.
This article provides an overview of issues related to the property transfer tax. It is not exhaustive of the options available to you. For example, the following property transfer tax exemptions were not discussed: family farm, pre-sold strata units, agreement for sale, tenant in common to joint tenants; transfers to the survivor of a joint tenancy; bankrupt exemptions; marriage breakdowns; transfers to veterans under the Veterans Land Act; recreational residence exemptions; and transfers through estates or trusts under Wills. Other considerations not addressed in this overview include capital gains taxes that may be payable, federally. This document is not to be read as legal advice. You should meet with a legal professional before making decisions regarding any real estate that you may own. Real estate agents do not provide legal advice, though they may point you in the right direction.
Paul Anthony Williams is a notary public practicing in Burnaby, British Columbia. He offers assistance with real estate transfers for persons living in Burnaby, Coquitlam, Port Moody and New Westminster. You can make an appointment with him by calling 604-245-2244 or by booking online.