In the real estate industry, the new year is bringing with it some important new regulations to monitor. So, for those with questions about the Federal Foreign Buyer Ban and the Toronto’s Vacant Home Tax, I’d like to offer insight:
Let’s begin with the Foreign Buyer Ban. If you are a non-resident, as of January 1, 2023, you can no longer buy a home, duplex, or triplex anywhere in Canada. The ban also extends to vacant land that’s zoned residential or mixed-use in defined Metropolitan Areas. Currently, this policy is set to last for two years. It does not apply to commercial property or multi-unit residential property with four or more units.
There are no exemptions for foreign companies, and companies with even a small degree of foreign ownership will likely be prohibited from purchasing.
It is important to note that, should a transaction occur, the contract is still valid…but the penalties may be significant. Anyone assisting in the transaction can be fined $10,000 and the government can force the foreign purchaser to resell the property at the same purchase price.
Personally, I believe it’s too early to be commenting on the foreign buyer ban, in terms of predicting the effect it will have on sales volume and prices. We are only just beginning to learn the ins and outs of this new legislation. But, certainly there will be an impact as the buyer pool shrinks and Canada becomes less desirable for immigrants looking to start a new life within our urban communities. At this time, we will continue to closely monitor the situation, study the industry reports, and speak with our team to ensure that each of our clients get the best advice and support.
Now, let’s review the Vacant Property Tax. If you own a home in Toronto, you are required to file a declaration by February 2, 2023 that relates to the entire 2022 year. There is a penalty of approximately $250 for filing late, and if you don’t file, you can be hit with a tax that is equivalent to 1% of the last municipal assessment of the property value.
The online filing system is quite straightforward and takes little time to complete. Essentially, you must declare that you have either lived in the property for at least 6 months out of the last 12, or that you have rented it for at least 6 months of the last 12.
Of course, an essential consideration for buyers will be to ensure their Agreement of Purchase and Sale addresses the vacant home tax, that the seller has filed a declaration, and that they will be protected against any unanticipated penalties or taxes, in the event the seller has not filed or left the property vacant for more than 6 months in the previous year. At the moment, title insurance should cover this, but that may change, so be sure to protect yourself in the Purchase Agreement.