With the new 15 per cent additional Property Transfer Tax for overseas buyers of Metro Vancouver homes taking effect today (August 2), local agents are starting to report collapsing deals, according to the Fraser Valley Real Estate Board (FVREB).
The new tax, passed July 28 under Bill 28, which applies to current and future home purchases closing from today onwards, has caused much concern in the real estate industry over its retroactive nature and lack of exemptions.
The FVREB announced Tuesday morning that it is receiving numerous complaints from local REALTORS® whose overseas buyers are backing out of signed deals, choosing to walk away from their deposits over having to pay an unexpected tax bill of potentially hundreds of thousands of dollars. This is leaving local home sellers, often in purchase agreements themselves, without a buyer – potentially being forced to walk away from their own purchases and deposits if their buyer cannot be immediately replaced.
Charles Wiebe, president of the Fraser Valley Real Estate Board, stated August 2, “Consider the local seller who has proceeded with a deal involving a foreign buyer, turning down other offers and putting the work in, now being left out to dry after their arranged buyer backs out due to the tax. This impacts their next home purchase, and those buyers and sellers along the line.”
He added, “It is unfortunate that, in the wake of the most complex and volatile market we’ve seen, our government has chosen a path that, at this time, will bring significant distress to consumers both local and abroad rather than nuanced solutions.”
The FVREB said that it has written to BC finance minister Mike de Jong to express the board's and its members’ concerns about the hasty implementation of Bill 28.
Dan Morrison, president of the Real Estate Board of Greater Vancouver, stated July 29, “The Premier’s decision not to exempt transactions where home sellers have an accepted contract in place, with a non-Canadian buyer, that will not close before August 2 is needlessly causing real harm to real people. Our members are scrambling to try and help people understand how their personal and financial situations have been impacted.
"While it’s the government’s prerogative to implement taxes, people deserve to be treated fairly. They have a right to understand the cost they’re expected to pay when they enter into a legal agreement.”
Real estate commentators have suggested the retroactive implementation of the tax, or even the new tax in itself, might be open to legal challenges. Suggestions have included that the tax might breach the North American Free Trade Agreement (NAFTA), which requires participating countries to treat investors from all of those countries equally, and that it might violate section 15 of the Charter of Rights and Freedoms, which prohibits discrimination on the basis of national origin.
Neil Chrystal, president and CEO of Polygon Homes, told REW.ca July 28 that he thought the tax was "morally and ethically wrong" and added, "I wouldn't be surprised if it was challenged legally."