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RACE & COMPANY’S BUYERS’ GUIDE FOR THE SEA TO SKY CORRIDOR
& AREA
REAL ESTATE
It is our intention with this guide to provide purchasers
of real estate in our area a resource to assist them in
making an informed decision about purchasing.
THE PROPERTY
British Columbia has a Torrens land title system. This
is fundamentally different than many other jurisdictions
where title insurance companies handle land transactions
and insure the title to the property. In those
jurisdictions, insurance is necessary to pay a purchaser
compensation in the event someone successfully asserts
owner-ship of the property by either claiming that they
once owned it and never sold it or claiming they own it
by virtue of a period of uncontested occupation of the
property. In B.C. this cannot happen. Once title is
registered in a purchaser’s name, historical claimants’
right to the property are extinguished. A purchaser in
B.C. can be conf-dent that when they purchase a property
in B.C., they own that property.
Properties come in many shapes and sizes and can be subject
to a variety of restrictions.
LEASEHOLD, FEE SIMPLE, CONDOMINIUM, OTHER
Typically, most properties in the Whistler region are “fee
simple” properties. “Fee simple” means holding direct title
absolutely. A Leasehold property, on the other hand, is a
lease from the fee simple owner. Many properties in Whistler
are owned by the Resort Municipality of Whistler, directly
or indirectly, and leased for 60, 80, or more years. The
Municipality created these leases to restrict occupancy of
the units to employees and retirees. Consequently some early
employee housing is leasehold.
Condominiums are usually portions of the fee simple called
strata lots. However, they can also be leasehold.
Condominium owners typically own the space inside their
unit. The building itself and the grounds are owned in
common with all the other owners. Portions of the common
area may be restricted for the exclusive use by individual
strata lot owners. These portions are typically parking
stalls, storage areas and balconies, but may also include
portions of yards in duplex condominiums. Because the
building and grounds are owned in common, the repair and
maintenance must be managed. Some complexes are managed by
the owners, while others are man-aged by professional,
licensed property management companies. Condominium
properties set budgets each year and then collect monthly,
quarterly or annual assessments from each owner. Special
costs, such as new roofs, are usually collected by a special
assessment.
It is important to review the records of a condominium’s
operations to determine whether or not a large special
assessment is pending or contemplated.
There are a few properties in Whistler and some outlying
areas that have a different form of title. Certain
properties are owned by companies, and ownership of a unit
within that property is evidenced by holding a share in the
company and entering a shareholder agreement to match the
unit to a share. Other properties are held by a Trust
Company and portions of the property are held with trust
certificates and subject to a trust agreement which matches
the trust certificate to a certain area of property.
Some properties in Whistler are part of “bare land strata”
developments. In these developments, individual owners hold
title to a certain strata lot and the house on it, and also
own, in common with the other strata lot owners, the common
lands and roads in that development. Each owner is
responsible for the repair and maintenance of their own
buildings, and are collectively responsible for such
expenses as landscaping and snow clearing of common
property.
SURVEY ISSUES
Banks lending purchase funds often require a survey of the
property. The banks want to make sure that the buildings are
entirely within the lot’s boundaries so neighbours or
statutory authorities cannot force removal of the building.
As an alternative to commissioning a survey, a purchaser can
obtain a title insurance policy that provides insurance on
the issue of encroachment, often at an expense significantly
less than the cost of the survey. Purchasers should consider
obtaining surveys that go beyond simply placing the
buildings on the lot. A driveway that unlawfully crosses a
neighbour’s lot can be very expensive to rectify. Banks do
not require surveys of condominium units where the strata
plan prepared by a surveyor is on file at the Land Title
Office.
USE OF PROPERTY RESTRICTIONS
Banks lending purchase funds often require a survey of the
property. The banks want to make sure that the buildings are
entirely within the lot’s boundaries so neighbours or
statutory authorities cannot force removal of the building.
As an alternative to commissioning a survey, a purchaser can
obtain a title insurance policy that provides insurance on
the issue of encroachment, often at an expense significantly
less than the cost of the survey. Purchasers should consider
obtaining surveys that go beyond simply placing the
buildings on the lot. A driveway that unlawfully crosses a
neighbour’s lot can be very expensive to rectify. Banks do
not require surveys of condominium units where the strata
plan prepared by a surveyor is on file at the Land Title
Office.
USE OF PROPERTY RESTRICTIONS
“Buyer Beware” still reflects the basic state of law in B.C.
Accordingly, it is prudent to have any property inspected by
a qualified inspector prior to committing to the purchase.
Home information about the property will be found in a
Property Condition Disclosure Statement, but this remains
fairly limited, and in the case of condominiums, very
limited. With condominiums, it is prudent to consider having
the entire complex inspected. Condominiums owners are
collectively responsible for the buildings. The minutes and
records of the management of any condominium complex may be
a source of disclosure of problems and should be reviewed
closely before committing to the purchase.
Other means of protection against defects include getting
specific warranties from the vendor in the contract. U-less
the vendor is the builder, it is unlikely that the vendor
will agree to such warranties. These are not usually as good
as hiring an inspector, because an unsatisfied purchaser
would likely need to undertake an expensive a vendor
for damages suffered from a breach of a warranty.
CLOSING COSTS
There are many things that will affect the final purchase
price of a property. These include:
a. Property Transfer Tax – This tax equals 1% of the first
$200,000.00 of the purchase price and 2% of the balance.
Some first time home buyers may be exempt from this tax, as
discussed below under First Time Home Buyer Considerations;
b. Harmonized Sales Tax (HST) – This tax equals 12% of the
purchase price. First purchasers of new property may be
eligible for a rebate of a portion of the HST. Some
purchases of older property may be exempt from it. Some
purchasers may defer it. HST is discussed in greater detail
under its own heading;
c. Surveyor fees;
d. Building
Inspector fees;
e. Mortgage broker fees;
f. Appraisal
fees;
g. Mortgage Commitment fees;
h. Insurance fees;
i. Legal fees – discussed further below;
j. Adjustments
for Operating Costs - These are prorated and divided between
the purchaser and the vendor according to whether they are
outstanding or have been prepaid.
k. Extras - usually
special construction finishing costs or furniture packages
associated with new projects; and
l. Transfer fees- These
may be charged to transfer golf memberships, tennis
membership, extra parking entitlements and the like.
Closing funds must be in the form of certified cheque or
equivalent form not requiring clearing
OPERATIONAL COSTS
These are costs associated with ownership that reoccur.
Common operating costs associated with Whistler and area
real estate are:
a. Property Taxes - These are annual taxes due to the
municipality or region. They cover calendar years but are
typically paid in early July. Homeowners that reside in
their property may be eligible for a homeowner’s grant if
the value of their property is less than $1,164,000.00;
b. Sewer and Water Utility Charges - These are annual
charges for water and sewer. Water is not charged on the
basis of consumption. Some properties further from the
village centre will not have municipal sewer hook-up. Some
properties in more rural areas will not have either sewer or
water hook-ups. Purchasers of these properties will have to
factor in septic and/or well maintenance costs;
c. Dyking
Taxes - These are annual taxes used to maintain dykes. They
are common to areas protected by dykes such as Pemberton;
d. Strata Maintenance Fees - These can be monthly, quarterly
or annual, depending on the strata management. They are for
the maintenance of the building and grounds of condominium
properties or just the grounds for bare land strata
developments;
e. Whistler Resort Association Assessments
- These are fees that go to pay for Tourism Whistler’s
marketing of the resort. They are assessed on a quarterly
basis on properties designated as “resort land”;
f.
Insurance – Building insurance is included in Strata
Maintenance Fees, but not contents insurance. Properties in
rental arrangements may have specific insurance requirements
in their rental management agreements and may wish to
consider loss of revenue insurance;
g. Accounting Fees -
If the property is a revenue property, then non-residents
will have to file tax returns each year in Canada, and again
upon disposition of the property;
h. Rental Management
Fees - These are commonly a percentage of rental revenue,
but there may be other arrangements; and
i. Telephone,
hydro, gas, propane, oil, cable, security;
NEW CONSTRUCTION CONSIDERATIONS
This section applies to purchasers of new or recently renovated
property. Generally, there are two scenarios involving new
construction. The first is purchasing a single-family
residence. The other is the purchase of a unit in a
condominium development.
SINGLE FAMILY
In this situation, purchasers have a good deal of control over
the terms of the contract of purchase and sale. The
purchaser can set the closing date; provide for a deficiency
holdback procedure; inspection procedure and determine the
scope of what is included in the construction.
CONDOMINIUM DEVELOPMENT
In this situation the purchaser should expect to have to accept
the developer’s standard form of purchase con-tract. These
contracts typically reserve the right to make small changes
to the size and design of the units. These contracts also
usually exclude any right to request a deficiency holdback.
Inspection and completion happen very quickly on fairly
short notice given by the developer that the units will be
ready. There is usually no pre-set completion date, though
the developer may predict a non-binding, anticipated
completion date.
BUILDERS’ LIENS
Purchasers do have statutory rights to have funds held back
from the vendor as security against liens. This fund cannot
also secure the completion of deficiencies. The parties
cannot contract out of these rights. The purchaser still
must pay the entire purchase price at closing. The lien
holdback is held in a trust account during the statutory
lien period.
HARMONIZED SALES TAX (“HST”)
HST is a consumer tax. It is payable on most goods, including
real estate. Purchasers will have to pay it unless the real
estate is exempt or the purchaser’s use of the property will
entitle them to defer it. Purchasers of commercially-used
property should seek tax advice from a professional
accountant.
Whether or not a property is exempt from HST depends on the
vendor’s use of the property. If the vendor is using it for
residential purposes, then it will be exempt. If it is
vacant land held for the purpose of building a residential
building for use by the vendor, and not as inventory, then
it may also be exempt.
Property that the vendor is using commercially will attract
HST. “Commercially” includes being rented or avail-able for
rent for periods of less than 28 days, new construction, and
lands or premises being held as inventory in a business of
land speculating.
The important point to understand is that the HST status is
determined by the vendor, so the purchaser should obtain a
warranty concerning the HST status of a particular piece of
real estate in the contract of purchase and sale.
If a property is subject to HST, the purchaser may defer the
tax if they register for HST and continue a commercial use
of the property. This is commonly done in respect of nightly
rental properties. However, if such a property is taken out
of the rental pool and kept for personal use, HST will be
payable at that time on the market value at that time. More
complex rules apply if Phase 1 property is rented nightly
and is occasionally occupied by its owner.
Rebates are available to the first purchasers of newly
constructed residences if they use it as their principal
residence. The rebate is 71.43% of the provincial portion of
the tax to a maximum of $26,250.00. A rebate is also
available for first purchasers that rent out the residence
to a long-term renter, although this rebate must be applied
for after completion.
FIRST TIME HOME BUYER CONSIDERATIONS
First time homebuyers may be eligible for exemptions in respect
of Property Transfer Tax. They must meet the following
criteria:
a. Be Canadian citizens or landed immigrants;
b. Have lived
in B.C. for the immediately preceding year or filed B.C.
income tax return two years of the past six ;
c. Have
never owned an interest in a principal residence anywhere;
d. The purchase price must be less than $425,000.00; and
e. Property must be less than 1.24 acres in size; and
f.
They must move in within 92 days of purchase and reside for
at least one year in the property. Moving out during the
first year may trigger assessment of a portion of the tax
Partial exemptions are available for purchase prices between
$425,000.00 and $450,000.00. If the property is new, first
time purchasers may be entitled to a HS rebate discussed
above in the section on HST. Developer vendors usually will
be willing to credit the first time purchaser with an amount
equal to the r-bate in exchange for an assignment of the
rebate. This saves the first time homebuyer from having to
pay the full HST at closing and then waiting for the rebate.
Mortgages of greater than 80% of the purchase price usually
need to be insured by the federal government mort-gage
insurance program. These fees can usually be added to the
amount of the mortgage. The buyer must ask the bank to do
this or be prepared to pay the insurance fees.
HOW TO HOLD TITLE
The title indicates who legally owns the property and how they
own it. Purchasers must decide whether to hold title in one
name, more than one name, or in a corporation. If property
is held in more than one name, a decision between “joint”
ownership or “tenants in common” must be made. Joint
ownership implies a right of survivor-ship, so that the
property vests in the surviving joint owner in the event of
a death. The ownership of a deceased tenant in common is
determined by the deceased’s will. Some purchasers will
place title only in a spouse’s name if they earn their
living at a business that might expose them to judgments.
Corporations may be used as part of a risk management plan
too, but are generally reserved for consideration in the
purchase of commercial property or as part of an estate
plan.
Title may not be registered directly in the name of a revocable
trust. However, these entities may hold title indirectly,
usually by having a corporation hold title under an
unregistered trust agreement in favour of the trust.
It should be noted that individuals, corporations, and trusts
may attract different levels of taxation on revenue.
ESTATE PLANNING & OWNING PROPERTY
For residents of B.C., the estate planning considerations are
limited to choosing who will be on title and whether they
will be joint tenants or tenants in common. The right of
survivorship associated with joint tenancy may be used as an
estate planning tool to avoid probate fees. The passing of
joint property circumvents the deceased’s estate and is not
subject to probate. Accordingly, some elderly purchasers may
choose to register property jointly with their children.
Couples would also usually register title jointly. However,
joint ownership is not conclusive evidence of true joint
ownership with the right of survivorship.
For non-residents of B.C., the same theory of joint tenancy
applies. In addition, however, the non-resident should plan
for succession of their B.C. property, either by
incorporating a company to hold title to the property, or by
having their B.C. lawyer draft a B.C.-assets-only will in
order to simplify the B.C. probate process.
For non-residents other than residents of the United States,
this is the common planning tool. Many United States
residents have estate planning trusts. As title may not be
held directly in such entities, the solution is to hold the
title in the name of a corporation or individual and have an
unregistered trust agreement in favour of the beneficial
owner.
Any estate planning decisions should be made with the
assistance of the purchaser’s professional advisors in their
home jurisdiction.
All purchasers of property in B.C., other than corporations,
should consider granting their spouse or some other
trustworthy individual a Power of Attorney in B.C. Land
Title format. This would allow for a sale or mortgage of the
property in the event of a loss of mental capacity, or just
if the title holder is unavailable to sign documents.
Without a Power of Attorney in place, it takes an expensive
court application for someone to be appointed to represent
the incapacitated individual. Joint tenancy of property is
not like a joint bank account; both parties must sign
transfer documentation.
NON-RESIDENT CONSIDERATIONS
Canadian income tax legislation requires non-residents to pay
25% of gross rental income to Canadian taxation authorities
as security for actual taxes due. Purchasers can frequently
obtain an exemption from this requirement by formally filing
a budget. Property rental managers usually assist with this.
It then becomes important to file annual income tax returns
to retain the exemption.
Non-resident corporations need to provide extra documentation
to satisfy land registration requirements. If the
corporation is going to carry on commercial activity (rent
property on a nightly basis), then the corporation will have
to be extra-provincially registered in B.C.. If the purchase
is a one time purchase and the corporation does not do
business in B.C., the corporation will only have to file a
certificate of incorporation, certificate of go standing and
affidavit of no commercial activities. Extra-provincial
registration is more involved. Both procedures take time and
completion dates should reflect this. Original documentation
is required from the corporate registrar, or whatever
statutory authority regulates corporations in the
corporation’s home jurisdiction.
Non-residents should note that they will have to obtain
clearance certificates at the time of the sale of their
property. As much as 50% of the gross value of the property
will be held back on sale pending receipt of clearance as
security for unpaid income tax and capital gains tax.
MORTGAGES
Mortgages in B.C. may be “open” or “closed”, with “fixed” or
“variable” interest rates. An open mortgage is one that can
be paid down, in full, or in part, without an early
prepayment penalty being assessed. A closed mortgage is one
that will have limited rights of prepayment and prepayment
in excess of this limit will trigger a penalty of typically
3 to 6 months interest or an interest rate differential.
Mortgages in B.C. usually have terms of 6 months to 5 years. A
fixed interest rate mortgage will have the same interest
rate during the term. Closed mortgages may be paid off
without penalty at the end of the term. Mort-gages are
usually renewed, with new interest rates, by letter
agreement with the financial institution near the end of
each term.
In B.C., one lawyer may represent both the lender and the
borrower in a mortgage transaction if the parties con-sent,
the lender is a financial institution and the mortgage is
simple. The advantage to the purchaser is a saving in legal
fees and disbursements. Some financial institutions will not
consent to one lawyer representing both pa-ties. Mortgages
where title is held in a complicated manner, such as a
company holding in trust, will prevent one lawyer from
representing both parties.
Mortgage documentation must be original and executed before a
Notary Public. In many jurisdictions, lawyers are also
Notaries Public, but this is not true of all jurisdictions.
Non-resident purchasers may wish to consider making a
limited power of attorney before leaving the area to deal
with this issue. Improperly completed mort-gage
documentation from non-residents is a frequent problem
requiring postponements of completion dates. Purchasers
requesting extensions of completion risk being sued by the
vendor and losing the property.
BUYING PROPERTY IN FORECLOSURE
Purchasers of property in foreclosure must make offers free of
subject conditions, except the condition of being subject to
court approval. Purchasers should be watchful of the seller’s
attempts at transferring risk of damage/change in the property
prior to completing to the purchaser. (Individuals losing their
home in foreclosure often want to take some of it with them).
LEGAL FEES & DISBURSEMENTS
The amount of legal fees and disbursements (expenses) will
depend on the tasks performed by the lawyer. Taxes on
lawyers’ fees are 12%. The amount of expense will also
depend on the tasks involved. For a straight-forward
purchase/mortgage file, these expenses usually amount to
approximately $450.00.
Package fees rates are provided where one lawyer represents
both the borrower and lender. If the financial institution
is represented separately, the borrower will typically have
to pay the institution’s lawyers in addition to their own.
New identification verification rules add a complication to the
signing of purchase and sale documents in any place other
than the office of the lawyer representing you. If you are
considering purchasing or selling property and will not be
signing the closing documents at the office of the lawyer
representing you in the transaction, please have your
identity and identification documents verified by your real
estate agent and lawyer prior to your departure.
Most lawyers or notaries public will provide fee quotes upon
request. It is important to note that notary publics cannot
legally do all the tasks set out in this guide, nor can they
legally provide advice if the transaction collapses. When
obtaining quotes, be sure of what the quote includes,
specifically, whether or not it includes expenses and taxes.
It is hoped that you and your clients will find this guide
useful. If we can ever be of assistance in answering your
questions, do not hesitate to contact us.
Yours truly,
RACE & COMPANY
Ian T. Davis, Sholto Shaw,
and Kathleen van der Ree
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