First-time home buyers received welcome news in the February 15, 2005 BC Budget.
    Now, under the Property Transfer Tax (PTT) First-Time Home Buyers’ Exemption program, qualifying first-time buyers can purchase a home worth up to $325,000 in the Greater Vancouver, Fraser Valley and Capital Regional Districts.
    In all other regions, the threshold increased to $265,000 from $225,000. Changes took effect February 16, 2005.
    “The Real Estate Board actively lobbied the BC government for the increase,” says Government Relations Committee Chair, JanetCunningham.
“Increases in residential home prices meant the previous threshold of $275,000 was too low to exempt most first-time buyers’ from paying the PTT and impacted affordability.”
    In all regions there is also a proportional exemption for buyers of homes with a fair market value up to $25,000 above the new thresholds. This means in the Greater Vancouver area, homes valued up to $350,000 ($325,000 threshold + $25,000 proportional exemption) will be charged a pro-rated PTT .
    The Budget also increases the mortgage pay down limit in the first year of ownership to $13,000 from $11,000 in the Greater Vancouver, Fraser Valley and Capital Regional Districts.
    The pay down limit is the maximum that a mortgage can be paid down in the first year without losing eligibility for the first-time buyers’ exemption.
Realtors, your clients who qualify for the First-Time Home Buyers’ program will receive a letter from the government specifying the maximum mortgage pay down limit for the first year. The amount is calculated based on the property value and the amount of financing. At a minimum, financing has to be 70 per cent (down payment 30 per cent.)
    “I’d like to congratulate the government,” explained Cunningham. “Changes to the PTT mean an increase in affordable home ownership.”
To qualify for the PTT First-Time Home Buyers’ Exemption program, buyers must:

• be a Canadian citizen or permanent resident;
• have resided in BC for 12 consecutive months immediately prior to the date of registration of the transfer, or must have filed two income tax returns as a BC resident within the last six years;
• never at any time have held a registered interest in a principal residence; and
• not have previously obtained a first-time home buyers’ exemption or refund.

The PTT is calculated at a rate of one per cent on the first $200,000 and two per cent on the remaining value of the purchase price.
    For more information on PTT, go to: www.rev.gov.bc.ca/rpt/ptt/ptt.htm. For the government bulletin with instructions to calculate the PTT, visit the Vancouver home page on realtorlink.ca. Under News and Notes, see First-Time Home Buyers’ program PTT changes.

For more information, please contact Harriet Permut, Government Relations Manager at 604-730-3029 or [email protected]

CREDIT: Peter Battistoni, Vancouver Sun David Delusignan at the Aqua condo site. Current laws mean his transfer tax could soar by the time he moves in next year.

Finance Minister Gary Collins is offering a reprieve to buyers of pre-sold condos facing soaring property transfer tax bills.

Collins announced Tuesday legislation to apply transfer tax to the original purchase price of such strata units, rather than the market value when the units are registered with the Land Titles Office and ready for occupancy.

That’s welcome news to thousands of pre-sale buyers like David Delusignan, who bought “a hole in the ground” at Pacific and Seymour in Vancouver in June 2002 for $252,000.

His one-bedroom and den condo at Aqua at The Park is already valued around $350,000. If price trends hold his transfer tax could double under current rules by the time the home is ready in June, 2005.

“This announcement is great news,” said Delusignan, a sales manager. “I had the taxes all budgeted out when I bought, and I had no idea it could change by the time I moved in. I called my MLA and told him it was crazy and unfair.”

Collins acknowledged existing tax rules had “unintended consequences,” with many homebuyers required to pay significantly more property transfer tax than they expected when making their downpayment.

“This is especially hard on first-time homebuyers who, after saving enough of their hard-earned income to get into one of Canada‘s hottest real estate markets, receive a much bigger tax bill than anticipated.”

Extra property transfer tax bills of $4,000 and more were first reported in The Vancouver Sun in April.

“The way the system is now, people don’t know how much tax they will have to pay when they actually purchase their homes,” Collins said Tuesday. “This doesn’t make sense, it is not fair, and that is why we want to fix it.”

Buyers who have already paid the extra tax may be eligible for a refund under the new rules, Collins said.

That was welcomed as “thrilling news” by buyers like Sam and Randi Winter, who paid an an initial $11,600 in transfer tax, then were charged an extra $4,700 on their 1,500-sq.-ft. apartment at The Concord on False Creek.

“It is especially good news for the retired people who are on fixed incomes,” said Sam Winter, a dentist.

He said his luxury building also houses many “significant contributors” to the provincial Liberal party, “and they all said that they would deduct this property transfer tax increase from their contributions.

“The government also received a lot of letters from lawyers telling them they couldn’t get away with this.”

For buyers who have recently received an assessment notice, but have not yet paid the extra tax, Collins said the government will not pursue collection until the legislature has had a chance to consider the proposed changes in the fall.

“If the changes are passed, the assessment will be reconsidered under the new rules,” Collins said.

Houtan Rafii bought a two-bedroom unit at the Domus building on Homer about two-and-a-half years ago for $300,000 and moved in last November. His property transfer tax reassessment is pending on a value today that is more than $400,000.

Rafii, who works in real estate development, said the reprieve will not only help him as a homeowner but also “help to keep the market happy and healthy. We have gotten a lot of feedback from our purchasers saying this is an unfair law.”

Collins said the proposed legislation will be retroactive to Dec. 31, 2002, which the government believes will capture every buyer hit with significant tax increases. It will not apply to single-family dwellings, which generally are not sold on a sufficiently long pre-sale basis to generate a tax reassessment.

“We haven’t found a problem with single-family dwellings,” Collins said. “If it arises, we will review it in the same light.”

Nor will the legislation raise property transfer tax exemption thresholds for first-time buyers that have failed to keep pace with rising property values, resulting in a revenue windfall for the government.

The tax, which is charged at one per cent of the first $200,000 of property value and two per cent on the balance, generated about $520 million in the last fiscal year. That compares with $242 million in 1999-2000.

Subject to several conditions, first-time buyers can escape the tax if their unit is worth $275,000 or less in the Lower Mainland and Victoria, and $225,000 elsewhere in B.C.

© The Vancouver Sun 2004

B.C. professionals and other entrepreneurs can form new business partnerships without having their personal assets put at risk under legislation introduced Tuesday by the provincial government.

The proposed amendments to the Partnership Act would allow for the creation of a new type of business entity in B.C. called a “limited liability partnership,” or LLP, Finance Minister Gary Collins said.

“Unlike other provinces, where only professionals such as lawyers and accountants may register as LLPs, there will be no restrictions on what types of businesses are able to register an LLP under the new Partnership Act,” Collins said.

Currently, the active members of a partnership — such as law firms, accounting firms, or engineering firms — are personally responsible for the liabilities of all the other partners and of the partnership itself, the minister explained.

An LLP is an arrangement in which each partner is responsible only for his or her own liabilities, similar to protection afforded an incorporated limited liability company (Ltd.), in which a company’s liabilities are restricted to the assets of that firm.

Collins said the new legislation is designed to make partners more fully accountable to their clients or customers, and ensures that all partners can engage in their business without fearing their personal assets could be put at risk, unless negligence or wrongdoing is involved.

“These amendments will contribute to making B.C. a more attractive place for investors to establish new partnerships that they might not have otherwise, which in turn, will stimulate new investments and help create jobs across the province,” Collins said.

To obtain and maintain LLP status, a partnership must register with the B.C. corporate registry, notify clients of their change in status, include the letters “LLP” in their business name, make an up-to-date list of partners available to the public at all times, and remain in compliance with all relevant laws and requirements, he said.

© The Vancouver Sun 2004

The major change is with respect to the maximum fair market value of the
property, which was set at $275,000.00 for properties in the Greater
Vancouver Regional District. Effective February 19, 2003 (yesterday), a
property with a fair market value of up to $25,000.00 more will be eligible
for a proportionate amount of the exemption.

For complete details, go to: www.rev.gov.bc.ca and pick Property
Taxation Branch from the listing on the right hand side. From here select
Property Transfer Tax from the listings in the center. You will now see the
page with the heading “Changes Introduced in 2003 Provincial Budget”. In
this article you will notice a reference to “Bulletin 04”. If you click on
Bulletin 04 (Adobe Format), you should be able to view the 13 pages of
detailed information on the First Time Home Buyers’ Program.

We are preparing a detailed memorandum summarizing all the changes which
will be added to our website next week. We will let you know when that page
is ready.

Should you have any further questions, please feel free to contact me by
phone or email.

Tony Spagnuolo
Direct Phone: 604-949-7306
Email: [email protected]

BELL SPAGNUOLO LEGAL OFFICES
“the leaders in residential real estate”

Office Phone: 604-461-2024
Office Fax: 604-461-8976
Office Email: [email protected]
Website: www.bellspag.com

Changes to Property Transfer Tax First Time Homebuyers Exemption

Effective February 19, 2003 the
PPT Exemption rules have been amended.

In order for your clients to obtain the FULL exemption the purchase price must not exceed

$275,000

in the GVRD, Fraser Valley and Capital Region Districts.

A PARTIAL exemption is now available for homes between $275,000 and $300,000.

Example:

Purchase Price of $285,000
PTT previously would have been $3,700 is now reduced to $1,480

Please review the bulletin from the
Ministry of Provincial Revenue at
www.gov.bc.ca/rev

or for further information please call

George Sandor
604.780.0321

Relax: Daryl Simpson of Bosa Ventures puts buyers’ minds at rest.

By STEVE WHYSALL

So you’re keen to buy a new condo instead of paying rent, but you’re not sure you can afford it.

Perhaps you’re a first-time buyer and nervous about taking the leap and eager to know more about the financial complexities of buying a new home.

Daryl Simpson, sales and mar­keting executive at Bosa Ventures, one of B.C. s biggest new homebuilders, knows plenty about condo financing.

“First-time buyers have a lot of important questions they need to get answered,” he says. “They want to know exactly how much mortgage they qualify for, what happens to the money they put down as a down payment, and they want to make sure they are aware of any hidden costs.”

Developers have different down payment requirements, says Simpson. Some ask for five per cent of the total purchase price when you buy and then a further series of five per cent payments to make a total 25 per cent by the time the new home is complete.

This is good in one respect because it means buyers have a sizeable equity by the time they move in, but it also tends to keep some first-time buyers from get­ting into the market.

Other developers require a $1,000 deposit at the time of purchase and then another payment to bring the total to five per cent of the purchase price when all subjects are removed and the contract becomes firm and binding. In most cases, this takes less than a week.

“The down-payment money doesn’t go into the developer’s pocket. That’s a popular miscon­ception,” says Simpson. “The deposit is designed to shift some of the risk to the purchaser. What the developer is looking for is a show of commitment from buyers that they are going to see the project through.”

Other provinces allow developers to post a bond and insure deposited funds so they can withdraw them and put them to use. “But in B.C. you can’t touch these funds. Provided the necessary safeguards were in place for consumers, I don’t think it would be a bad things, but most developers don’t find it necessary anyway.”

Deposited down payments do allow a developer to get financ­ing, so in a sense they are used to advance a project, he says.

“For instance, a lending institution will look at the trust account and see all the people who have purchased. This trans­lates into confidence in the project. It is an indication that there is sufficient equity.”

Another misconception is that if you take out a mortgage on a condo that hasn’t been built yet, you start making mortgage pay­ments before you move in.

“This scares a lot of people off. But the fact is that when you get pre-approved for a mortgage, you don’t start making your monthly mortgage payments until the building is complete and you actually move in to your new home.”

As for how much mortgage a person qualifies for, Simpson says the formula for calculating

the amount is straightforward. “What a mortgage broker will do is take a person’s gross annu­al income and multiply it by.32 (the gross debt service ratio) and divide the result by 12 to get the monthly payments. That gives the lender an idea of how much mortgage a buyer can afford.”

Simpson recommends that all buyers should visit their bank or credit union before going condo shopping. This is simply to avoid disappointment, but many developers have representatives of a lending institution at their presentation centre to provide immediate assistance and advice.

Some developers offer a mort­gage buy-down or a mortgage cap. This means the developer and the lending institutions have got together and worked out a financial package where the developer either agrees to pay the difference to “buy down” mortgage payments to a more affordable monthly payment or the financial institution agrees to freeze a certain interest rate for a number of years in exchange for the opportunity to represent buyers.

This arrangement gives buyers confidence that once they get into their new home, they will be able to afford the payments for the next two or three years. With a buy-down, mortgage interest rates can be cut as low as 2.9 or 3.9 per cent.

One of the most creative ideas in condo financing at the moment is a product called Equity Edge; says Simpson.

“‘this is sold by London Guar­antee, the leading warranty insurance provider in B.C. It allows a buyer to purchase a bond to the value of the down

payment instead of coming up with cash.”

The price is 2.5 per cent of the value of the bond plus $100 appli­cation. Which for $10,000 would be $350.

Not all developers will accept the bond as part of a down pay­ment, but it is worth asking about, Simpson says.

As for closing costs, there is GST, which is reduced from seven per cent to 4.8 per cent on a new home priced through a government rebate and the proper­ty transfer tax (PTT) which is one per cent of the price of homes under $250,000.

“Lawyers fees are usually about $600 but a lot of banks and credit unions will take care of these if you take a mortgage out with them,” Simpson says.

Simpson says buyers have 72 hours to change their mind from the moment all subjects are removed and the contract is signed and becomes firm and binding.

Finally, buyers could be responsible for a share of property taxes and water levy. “If the seller has prepaid the property taxes, the statement of adjustments will make you assume the balance of the property taxes for the year.”

When do realtors get paid? Not a big concern for buyers, but commissions are something paid in full at the time of purchase and sometimes half is paid at time of purchase and the rest when the buyer takes occupancy.

Regardless, the fee for a real­tor’s services is always paid by the seller, never by the buyer, Simpson points out.

West Coast Homes Editor

swhysall(ti)pacpress.southam.ca