Effective January 1, 2017, Vancouver home owners are subject to an empty home tax of 1% of the property’s assessed value (the “Tax”), pursuant to Vacancy Tax By-law No. 11674 (the “By-law”). In accordance with the By-law, all owners of Class 1, Residential properties, which include amongst other properties, single and multi family residences, duplexes, apartments, condominiums and seasonal dwellings (“Residential Property”), will be required to submit a property status declaration (the “Declaration”) to the City of Vancouver (the “City”), for the City to assess whether the Residential Property is subject to the Tax.
Residential Property that will be subject to the Tax includes non-principal residences vacant for more than 180 days of a calendar year (“Taxable Property”).
Certain Taxable Properties will be exempt from paying the tax, including a Taxable Property that: (i) forms part of the estate of a deceased person; (ii) is under redevelopment or major renovation; (iii) the owner of which is in a care facility; (iv) there is a rental restriction upon; (v) title to the property was transferred within the calendar year; (vi) is not the principal residence of the registered owner but is occupied by same for at least 180 days of the calendar year due to full-time work in the City; (vii) is vacant due to court order; or (viii) for which there is a limited use to the property.
Property Status Declarations
In November 2017, the City mailed out a Declaration to all owners of Residential Property, which must be completed and returned to the City by February 2, 2018. If you do not return the Declaration by this date or misrepresent the status of your Residential Property, your Residential Property will be deemed vacant and subject to the Tax, in addition to a fine ranging from $250.00 to $10,000.00.
The City will mail a vacancy tax notice setting out the Tax payable, to each registered owner of Residential Property by the 10th business day of March of each year. If your Residential Property is determined or deemed by the City to be a Taxable Property, you must pay the City the Tax by the 10th business day of April of that year, or you will be subject to a 5% penalty.
If you receive a vacancy tax notice that you believe contains an error or omission by either the City or yourself that led to the determination that the Residential Property is a Taxable Property, you may submit a complaint to the tax review officer.
Purchasers of Residential Property
Although a Residential Property for which title has been transferred in a calendar year is exempt from the Tax, the registered owner of the Residential Property is still responsible to submit a Declaration, and will be subject to the tax plus a penalty if they fail to do so or submit incorrect information. In this regard, both the Declaration filing obligation and Tax payment obligation by the “registered owner” begs the question as to who is responsible for same when title transfers in the time period from when the Declaration or tax notice is issued by the City, to the “registered owner” to when each become due by the “registered owner” to the City. Registered owner is defined in the By-law as “person or persons registered in the land title office as entitled to the fee simple” (or registered strata leasehold tenant), which would be different at each time.
The By-law states that the Tax and any penalties for failure to pay the Tax in accordance with the By-law, may be collected as real property taxes. As real property taxes run with a property and not the registered owner thereof, any unpaid tax or penalties which otherwise may be the responsibility of the seller become payable by the purchaser.
In this regard, further issues could arise for the purchaser in the case where a seller files a Declaration prior to the sale of the Residential Property, and that declaration is incorrect, the City re-assesses their determination, or the City requests further information, which they are permitted to do for a period of two years after the taxable year.
In light of the above issues, it would be beneficial for purchasers and sellers of Residential Property to ensure that there are express provisions in the contract of purchase and sale in regard to several issues surrounding the Declaration and the status of the Residential Property. Further, it is advisable for purchasers to obtain a statutory declaration from the seller, setting out the property status for the year of the sale and the year prior. Other measures to reduce potential liability for unpaid Tax, may also be advisable.
For more information about your reporting responsibilities, submitting a complaint to the review board, or potential Tax liability in purchasing a home, please contact our firm at (604) 688-4900, or email one of our lawyers at email@example.com or firstname.lastname@example.org.