Strata Property

Most people think of condos when they think of strata property, however in British Columbia, strata property can include detached and semi-detached homes, apartments, and even bare land. The Strata Property Act imposes rules on the home owner which regulates the home owners use of the lands. The rules can include pet restrictions, tenancy restriction (ie; no rentals), and age restrictions. Buyers should very carefully review the rules, known as Strata Bylaws, prior to the entering into a binding contract of purchase and sale for strata property. Some key questions to ask:

1) If I have a pet, does the strata corporation allow pets?

2) If there is an age restriction, how does the effect my ability to pass on my unit or have my grandkids stay with me?

3) If I am an investor, are rentals allowed or are they capped at a certain maximum?

4) How old is the building, will there be major repairs upcoming?

5) Does the style of building management mesh with my personality (ie; are you a stickler for the rules or are you lenient)?

6) What do the minutes of the strata meeting disclose about the personality of my neighbours?

At the end of the day, in strata property, “You’re All in This Together”, which means you are signing up for a community living, to varying degrees depending on how the strata is managed. Prior to buying, introduce yourself to the strata council members and find out more about them to see if this strata is right for you.

Affordable Housing Covenants

Affordable Housing Covenants are generally registered on your land title as s.905 LGA notices and s.219 LTA Covenants. These covenants limit a) WHO can live in the property and b) HOW MUCH the property can be sold for.

The OWNER (meaning all persons on title) must:
a) RESIDE in the Property;
b)Be part of a HOUSEHOLD whose gross annual income does not exceed the Affordable Ownership Income level. This includes everyone over 15 years old living in the residence;
c)Total Household income cannot exceed: $63,737 ( in 2009, City of Kelowna)
d)File a statutory declaration (evidence under oath) that the Owner continues to meet the criteria while remaining an owner (1-4 times each year).

A Seller of an affordable housing unit is responsible for vetting Buyer to ensure they meet the above criteria.

Freehold vs. Leasehold

At common law, in British Columbia, land tenures can be generally divided into two large catagories, fee simple land and leasehold lands.

Fee simple lands (also called freehold lands) are lands where the owner owns all the property rights associated with thoses lands, except the rights which are reserved for the Crown (for example oil and gas rights). The restrictions on use on freehold land are imposed by the Province and the local municipality.

Leasehold lands are lands where the rights of the owner are limited by the another party, usually a landlord. Long term leases (49 - 99 ys) are commonly found in the Province of British Columbia when land is sold on Native Reserves as the inalienability of native lands, under the Canada Constitution, prohibits Native Reserve being "sold" to anyone except to the Crown. Additional restrictions on the use of leasehold land are found in a LEASE or HEADLEASE document which creates contractual obligations between the Landlord and Tenant.

Discharging your Mortgage

For sellers the essential bargain in a real estate transaction is "I give you my house, free an clear, and you give me money"...

The "free and clear" part is key, it means that the Seller is giving the Buyer title free and clear of all financial encumbrances on title. A financial encumbrance includes things like your mortgage or a secured line of credit. When the mortgage is held by the bank the discharge is relatively straight forward: your lawyer requests a payout statement from the bank and on the closing date pays the money to the bank on their promise to discharge the mortgage.

When the mortgage is not held by the bank, things get a little more complicated. For example, if Uncle Buck loaned you 200k for your home and registered a mortgage, your lawyer would have to have a registered discharge "in hand" on closing and this creates a "catch-22" with the Buyer (who won't part with the cash until he gets assurance of title). This problem is usually solved in British Columbia by the exchange of lawyers undertakings (court enforceable promises) with the lawyer holding all documents in "escrow" until everything is ready to go.

Property Transfer Tax - First Time Home Buyer Exemption

This exemption is more limited than most first time home buyers realize, its not enough that this is your first home in British Columbia, to qualify you must meet all of the following criteria:

1) Be a Canadian Citizen or Permanent Resident.
2) Must have resided in BC for the last 12 months, and at least 2 of the last 6 tax years.
3) Must never held title to property any where in the world
4) Must not have previously applied for the exemption.

Usually, #2 causes the most problems. For example, if you are a college student in Ontario and you are moving out to British Columbia to start your first job. Upon buying your first home you would not qualify for the FTHB exemption as you have not resided in British Columbia for a sufficient time.

Property Transfer Tax - Related Induvidual Exemption

One of the limited exemptions to paying property transfer tax occurs where the Seller is related to the Buyer. However, for this exemption to apply, the Seller and Buyer must be "vertically related" and the property must be a principal residence.

So, consider the situation where husband is on title and wishes to add his wife to title to their family home for estate planning purposes. Normally, this transfer would be taxed by Property Transfer Tax, however, the exemption applies and no tax is applicable.

If however, an uncle wishes to sell his property to his neice, since they are not vertically related the exemption does not apply, and Property Transfer Tax is payable on a direct transfer from the uncle to the niece.

Similarly, if the property is a rental property, no exemption is available as it is not a principal residence.

Property Transfer Tax

For most out of province buyers, finding out about Property Transfer Tax often comes as an unpleasant shock. Property Transfer Tax is charged on every transfer of freehold title in the Province of British Columbia as is calculated as 1% of the first $200k and 2% of the remainder of the Purchase Price

This means a $300,000 home buyer will pay $4,000.00 in Property Transfer Tax on closing. Similarly, a $600,000 home buyer will pay $10,000.00 in Property Transfer Tax on closing. This tax hit is made even more difficult as banks will not finance this payment.

The tax can be avoided if you qualify for a limited set of exemptions, the two most common are:
a) the first time home buyer exemption; and,
b) the related induvidual exemption.
I will discuss this exemptions in more detail in later posts.

Welcome to the B.C. Real Estate Blog

This blog will attempt to be a valuable resource for Realtors, Buyers, and Sellers of real estate in the Province of British Columbia.