An American Vancouver resident is calling on Vancouverites to help him persuade the BC government to amend the new foreign buyer tax so that existing purchase contracts are grandfathered under the previous system.
US citizen Nic Benner is one of many Vancouver residents who have been adversely affected by the retroactive nature of the new tax, which requires that from August 2, foreign buyers of Vancouver real estate must pay additional Property Transfer Tax of 15 per cent. This applies even to those living and working in Vancouver, if they are not citizens or permanent residents. It also applies to all contracts that close after August 2 – even those where the sale contract was already in place before the new tax was introduced, and the non-refundable deposit put down.
Benner moved to Vancouver with his wife and four daughters, aged from four to 14 years old, earlier this summer. He was given a job as a consultant for Telus on a temporary work permit, and took it with the hope of buying a home in Langley and settling permanently in the area. He decided to put down a deposit of more than $25,000 on a $519,000 pre-sale townhome in Langley, with the hope of moving his family in on completion November 1.
As the purchase doesn’t close until construction is complete, the Benners are now on the hook for an additional nearly $80,000 in Property Transfer Tax – money that Benner says he simply does not have.
“Between a Rock and a Hard Place”
Benner wrote to REW.ca, “The BC legislature approved a law recently that forces my family to either come up with almost $80,000 or forfeit more than $25,000 just because I, an American, agreed to buy a house here when I was offered a job to live in this great place but don't have permanent residency.
“I recently moved my family, with four great kids, to the Vancouver area and we are in temporary housing for a few months, having signed a contract on a modest townhome back in May. At that time there was no extra tax in place that would lead me to believe that my binding contract would be in any danger of being able to be fulfilled. The townhouse is being built and won't be finished for a few months still, but at this time, we are between a rock and a hard place.”
He told REW.ca over the phone, “I can’t pull $80,000 out of thin air. I simply don’t have the money. If the BC government doesn’t agree to grandfather existing contracts, I will be unable to honour the contract I made, which will result in losing the $25,000 deposit I have put down. And I probably won’t be able to buy a home. And yet rents in Vancouver are really high too – I thought I made the intelligent decision when I signed that purchase agreement. I would have made a different decision if I had known about the tax.”
Benner added, “I know something needs to be done about the cost of housing here, but I see a very big disconnect in the reported 90 per cent [of people who support the foreign buyer tax] and the percentage of people with whom I speak who believe that this law should affect my family the way it currently does. Of those with whom I have spoken who are locals, I have had 0% tell me that they agree with the law affecting me and my family who lives here, while I am working here to help a Canadian company succeed.”
An Equitable Solution
Benner has written to both housing minister Rich Coleman and housing critic David Eby with his proposal for what he believes is a fair solution.
His proposal to Coleman and Eby suggests, “Allow purchasers who had a pre-existing contract who were the first assignee for the property and can present themselves in person here in Canada to pay a fee (up to $100-$200 maybe, so it would cover the cost of the workload to process the paperwork and resolve the concern of funding such extra work) to get an exception to the Foreign Transfer Tax based on the fact that they had a pre-existing contract AND are physically present AND will be purchasing the property with the intention to use it as a primary residence for their own personal use. It might be wise to also only allow this for residential properties that are less expensive than the median price of homes, which was $1.4 million, I think, at the time of the law."
He told REW.ca, “I understand why the BC government decided not to grandfather contracts signed before August 2 – they didn’t want a massive influx of contracts to be signed between the time they made the announcement and the August 2 deadline. But now that they have achieved that goal, it would be easy for them to exempt from the additional tax any existing contracts signed before August 2, so that we can fulfill the commitment we made.”
Benner is hoping that his situation, which is mirrored by many others, will spark compassion in his fellow Vancouverites.
In an email to REW.ca, he asks Vancouver residents, “Would you be willing to help me out by writing ONE letter so I don't have to explain to my wife and my four daughters why we cannot move into our home that is being built? Would you please take a few minutes to let your MLA know that you don't want the law to hurt families like mine? You can find your MLA’s contact details here: https://www.leg.bc.ca/learn-about-us/members”
“We Didn’t Do Anything Wrong”
European-born, US citizen Sabine Bosklopper is equally devastated by the new tax. She and her husband moved from the States more than a year ago to a rented apartment in the Olympic Village, where they now have a seven-month-old baby. They put down a deposit of $50,000 on a $1 million home near Granville Island in July. The family rushed back from vacation at the end of July when they found out about the new foreign buyer tax, which suddenly added $150,000 to the purchase price, to see if the deal could be closed before August 2, but it was not possible.
She wrote to REW.ca, “I still can't believe the government hasn't made some revisions to allow those grandfathered in their contracts to bypass the 15 per cent tax. We basically got ourselves in big trouble without doing anything wrong, and it's very unfair.
“Had we known about the additional foreign tax, we wouldn't have put an offer in. We're not the stereotype wealthy foreign buyer: we don't drive around Ferraris and Lamborghinis. We're from the States, originally from Europe, and on a work visa here in Canada. We pay our taxes, and have rented for the last 16 months, until the owner decided to sell the condo.
“Our young son still needs to go to college.”
Speaking to REW.ca August 31, Bosklopper said that her family was in negotiations with the seller to "split" the tax and allow them to pay $925,000 for the home instead. She said that the family could pull a maximum of an extra $75,000 out of their US pension. However, if the negoiations fail, they will have to walk away from the home, and from their $50,000 deposit.
After that, she and her husband will have to continue to rent until they become permanent residents, and therefore exempt from the tax.
She added, "This is not the kind of thing that should happen in Canada. This is the kind of thing that happens in developing countries, where the economy and political systems are unstable, and they change the laws at the last minute.
"I'm an athlete, and to me, this is like training for a half-marathon for months, turning up and being told it's a full marathon, and you can't get out of it."
"The Taxation Version of Trump's Wall"
Keith Roy, Vancouver REALTOR® and real estate media commentator, said, “If we want to be an international city, we need to stop acting like a small town that has built a wall that keeps people out. This is the taxation version of Donald Trump’s wall.
“It’s so poorly thought out… If I’m a New Zealander, for example, with $5 million to invest in the mining sector in British Columbia, but I find out that the province changes the law, and applies them retroactively, I’m probably going to take my money to Alberta. That’s $5 million dollars, that’s eight jobs or so, that will go to Alberta.
When asked if there was any hope that Benner’s fight to have the tax law amended, Roy replied, “Nic’s response to this is rational, and reasonable, and sensible. And unfortunately, Nic is out of luck. This government has proven tone-deaf on this issue. Because you have to understand that 90 per cent of people support this policy, but they don’t understand the impact of it, and the collateral damage it has caused.”
Tune in to hear REW.ca editor Joannah Connolly and local agent Keith Roy discussing this topic and more on the Real Estate Therapist show, Saturday August 3, 9-10am on Roundhouse Radio 98.3FM or streaming on roundhouseradio.com