The provincial government's new 15 per cent tax on foreign
purchasers of residential property is the talk of the town in Metro
Vancouver. While many local residents have spent the last
several days debating about the likely effect of the tax, others
are already facing the consequences as buyers respond to the tax by
failing to complete on binding agreements of purchase and sale.
As mentioned in a Vancouver Sun article published August 3,
2016, there are various ways in which the new tax can impact buyers
and sellers of local real estate, even if the buyer does not meet
the definition of a 'foreign entity' in the new legislation
(see link at the end of this article). For example, in
addition to foreign buyers failing to complete in order to avoid
payment of the tax, binding real estate deals can also collapse as
a result of:
foreign buyers failing to have sufficient funds to pay the
purchase price and the additional 15 per cent tax on closing;
local buyers being unable to sell their previous property at
the price required to raise the necessary funds to close on the
purchase of a new home; and
a domino effect of any sale cancelled for the reasons above and
affecting another sale that depended on it.
Sellers need to be on guard to protect their legal rights in
these circumstances. If the buyer has removed the subject
conditions for the purchase of the sale of a property, the seller
has a legal right to enforce the contract which is unaffected by
the imposition of the new tax. If the seller has any reason
to believe that the buyer will not complete the transaction, the
seller should advise their conveyancing lawyer, who can assist the
seller to ensure that the contract remains valid and binding on the
closing date. If the buyer fails to complete on the closing
date, the seller then has the option of re-listing the property and
pursuing the buyer in Court to claim compensation for the
difference between the purchase price in the original contract and
the eventual sale price obtained from a new buyer. When
bringing such a claim, sellers can seek to have the deposit paid
into Court pending a resolution of the proceedings, which will be
of particular assistance to ensure recovery of damages against a
foreign buyer who does not have assets in BC.
Realtors and sellers should be aware that the Collapse Release
Form, which is provided by the Real Estate Board of Vancouver, is
not appropriate in circumstances where the seller seeks to recover
compensation from the buyer for their failure to complete the
transaction. If the seller is asked to sign this form or any
other forms or documents in relation to the collapsed sale, they
should consult with a lawyer before signing it.
More information about the application and calculation of the
new tax is available on the
Real Estate Law Blog, also published by Lawson Lundell LLP.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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