Canada

Buying real estate in Canada is very easy.

I can assist you with:

• Finding a Realtor in the Province you are looking for.
• Assisting you with all the information you need to help you purchase the home.
  

From a residency point of view, if you plan to stay in Canada for 6 months or less each year, the government considers you a non-resident, which means that you can still open a bank account and buy property, etc. If you plan to live in Canada for more than 6 months per year, you must apply for immigrant status.

It is important to note, however, that while the majority of Provinces (British Columbia, Ontario, Quebec, Nova Scotia, Newfoundland, New Brunswick) have no restrictions on foreign ownership of real estate in Canada, some do limit the amount of property/land that a non-resident can purchase. On Prince Edward Island, non-resident buyers must apply to the Island Regulatory and Appeals Commission for land over 5 acres in size, or land with a shore frontage greater than 165 feet. In Manitoba, non-residents are prevented from owning farmland unless they actually plan to move there within 2 years.
Non-residents may not own land over 10 acres in size in Saskatchewan, whilst in Alberta they may only own up to 2 plots of land not exceeding 20 acres in total.

Once you have found your property, an offer is made and once accepted, a deposit is payable. When buying a house in Canada, an offer must be made in writing so that all aspects of the transaction are clearly outlined within the offer. Once you (the buyer) have signed the document, it becomes legally binding. If you withdraw from the offer at this stage, you may lose your deposit and may also be sued. Make sure that every item staying in the property, eg. carpets, fixtures and appliances, is written on the offer as 'chattels included'. Your realtor should also insert two clauses stating that the offer will only proceed subject to building inspection and that you as the buyer are able to meet your financial obligations. Once your offer is complete it will be presented to the seller and negotiations are made. This may include changes in price, completion date and chattels. The changes are initialled by the seller and returned to you (the buyer) for your initials. The resulting Agreement of Purchase and Sale will state the purchase price and the deposit. The deposit is placed in a trust account and is credited towards the purchase price once the offer has been accepted by both the seller and the buyer and the transaction is complete.

Most realtors are self-employed and are on negotiable rather than fixed commission (payable by the seller). A purchaser can buy property using a ny realtor, regardless of whether that realtor ori ginally listed the property. There are usually 2 realtors involved in a sale - the seller 's agent and the buyer's agent. The commission received upon the sale of the property is divided between the 2 realtors. Some agents can also be dual agents but must declare this to buyers and sellers alike.

Mortgage

As a Canadian resident, financing is typically available at 80% of the purchase price for a primary residence over a 25-year term. For a non-resident, the ratio is generally 65% mortgage and 35% as a down payment. Qualifying for the mortgage financing is the same as in other countries - interviews via phone, fax, e-mail to gather personal information which includes assets/liabilities, employment and/or income information. Each borrower's application will be considered on a case-by-case basis. Your realtor will be able to advise you on suitable mortgage brokers.

The mortgage approval may take approximately 24-48 hours after application and documentation has been submitted to the lender. The documentation generally required is income verification, tax returns, credit bureau or bank's report (letter from borrower's own bank stating that all accounts are in good standing to date), down payment confirmation via bank statements, copy of 2 pieces of ID and real estate appraisal. Foreign banks cannot register mortgages in Canada, so any mortgage would have to be raised via a Canadian mortgage broker.

The borrower will require the services of a Canadian lawyer or notary public to prepare the mortgage documents and registration at the Land Titles office. Documents can be couriered outside Canada for signing - this will need to be arranged with the lawyer and lender well in advance of the completion date.

Selling Property in Canada

When a non-resident sells Canadian real estate, he/she is required to pay the appropriate amount of taxes on any capital gain. The normal Canadian tax rates will be applied to 50% of the gain. However, a non-resident is required to pay an estimate of the tax before the sale, an amount equal to 25% of the gain. This amount is to be retained by the seller's lawyer until such time as a clearance certificate is received from the Canada Revenue Agency (CRA) in connection with the sale of the property. Upon payment, the CRA will issue a clearance certificate to the seller, but not until there has been a contract of purchase and sale with all subjects (conditions) removed. The wait for the certificate is usually 6-8 weeks. If the certificate is not obtained, the purchaser is required to withhold from the sale proceeds, a percentage of the selling price (usually 25-50%). On or before the closing date, the mortgage money is transferred to the seller's lawyer and then to the seller and the title is transferred to the buyer's name.

The non-resident seller should file a Canadian income tax return for the year in which the sale occurs and should expect to receive a refund of a portion of the taxes paid. The taxation of Canadian real estate depends on whether the use of the property is for a principal residence, an active business or as a rental property. If it is used as a rental property, a 25% non-resident tax must be paid on the gross rent a tenant pays.

However, if you use a professional property manager, the manager will, by law, withhold 25% of the gross rental revenue at source to be remitted to the Canada Revenue Agency. Then on or before March 31 of the following year, the property manager issues an NR4 form and you then have the right to file a Canadian tax return. The tax return is due before June 30 and enables you to claim expenses against that income and potentially request a refund.

Many countries, such as the U.S., have tax treaties with Canada that prevent you from being taxed in both Canada and your home country. It is advisable to contact a tax accountant in your country for more information.

Additional Costs when Buying and Selling Property

The following represents many of the additional costs and fees incorporated when buying property. Your realtor will be able to let you know which are applicable in your Province.

Taxes Non-residents of Canada pay tax on income received from sources in Canada. The type of tax paid, and the requirement to file income tax returns, depends on the type of income received.
Canada has tax treaties with many countries, including the United States and the UK. A tax treaty is designed to avoid double taxation for people who would otherwise pay tax on the same income in two countries.

Property Transfer (or Purchase) Tax / Land Transfer Fees are calculated between 0.5-2% of the property's total value (not applicable in Alberta, rural Nova Scotia or Saskatchewan). They are generally 1% of the first $200,000 of the value and 2% of the remainder.

Clearance Certificate The typical fees associated with preparing and filing a clearance certificate, paid by the seller, range from $300-$1000, depending on the complexity of the transaction.

Capital Gains Tax is not applicable on your principal residence.

Goods and Services Tax (GST) of 5% is only payable on newly constructed homes and is often included in the quoted sales price. There is no GST on resale housing unless the home has been substantially renovated, and then the tax is applied as if it were a new home.

Provincial Sales Tax (PST) ranges from 0-10% and again, is normally included in the quoted sale price.

 

Disclaimer: Please note that the comments contained in this page are for information purposes only and do not constitute legal or financial advice.Martin Eyles accepts no responsibility for any errors or omissions. Contact your accountant and lawyer for up-to-date and accurate advice.