Monday, August 1, 2016

Foreign buyers rush to beat B.C. implementation of new tax

Foreign buyers rush to beat B.C. implementation of new tax
One young couple went to extraordinary measures to speed up a townhouse purchase that was to close in November to beat the Aug. 2 start of a new land transfer tax on foreigners buying in Metro Vancouver. Gerry Kahrmann / Vancouver Sun
In January, Shinna Zhang and her husband moved to Metro Vancouver from London, England. They entered Canada on her husband’s work permit.
Zhang, who didn’t want her husband’s name to be used because he works in Vancouver’s growing tech sector, said they decided to buy a home in Richmond in May, in part because she became pregnant.
They found a townhouse being offered for sale for $850,000 by a woman whose family split their time between Richmond and China.
The two parties agreed the deal would conclude on Nov. 1, largely to give the former owner time to find another home elsewhere in Metro. Part of the complication was that the former owner had two children who were moving back and forth between Richmond and China.
Now, with the new foreign owners property purchase tax set to go into effect Aug. 2, Zhang and her husband face an additional $130,000 bill to the government.
“We have no way to change the contract and no money to pay that significant amount,” Zhang said. “When we decided to buy, we did it according to what our mortgage would allow us to buy. The original transfer tax was two per cent, which we planned for.”
Zhang said she and her husband now face the prospect of losing their $40,000 down payment if they have to walk away from the deal. More importantly, they were warned by their real estate agent that they could also face a lawsuit from the current owner for the difference if she has to put the property back up for sale and can’t get the original sale price.
Zhang said she and her husband are young professionals who recently graduated and don’t have a lot of money. Like many, they are trying to save for the young family they are about to have.
As an alternative, Zhang and her husband went to the extraordinary effort of trying to fly the owner, a Canadian, back from China this week in order to expedite the sales contract before the August 2 deadline.
Neil Zhu, the couple’s real estate agent, helped them arrange the unusual Hail Mary effort.
“Do you know how difficult it is to get a flight from Beijing on such short notice?” he asked. “We’re not even sure this could work, since this is a long weekend and the Land Titles office isn’t open until Tuesday.” (However, the Land Titles online system is to be available through the long weekend, the province said.)
Zhu, a Realtor with Metro Edge Realty, said later Friday that the seller had arrived in Vancouver and the last-minute deal was in the process of being put together.
Zhu said he doesn’t have a problem with a new property tax applying to foreign owners, but it seemed patently unfair to make it apply to deals that were already done but with closing dates after Aug. 2’s deadline.
“Basically, the plan is to get the seller to agree to a new closing date.” Zhang said. “We spent two days trying to convince the seller.”
Zhang said their lawyers quit because of the complications and they had a hard time finding someone who would agree to take on revising the sale on such a short deadline.
Zhu said he approached more than 20 lawyers to help close the deal quickly before he found someone who could do the job.
Zhang said she found it particularly hard to understand why they’re being forced to pay a new tax, especially when they chose to move to Canada to work in the growing tech sector. They could have moved to the U.S., where similar jobs are available, but wanted to live in Canada.
“We moved here in January and my husband is working in IT. We contribute to Canadian society and we pay taxes here. We didn’t have to choose Vancouver. We could have chosen other places around the world or in America. We assumed Canada was a very nice place for immigrants and minorities and that is why we would like to be here and raise our family here.”
Zhu said he feels bad for his clients, and he believes there are many others with solid sales agreements who are caught because of the tight deadline.
“Personally, I feel so bad for them, a young couple trying to make a living here with a baby on the way. They are from overseas, yet they are paying their income tax and they are not some rich luxury home buyers,” he said.
“I am pretty sure there are similar buyers out there just like them. I am very disappointed with the provincial government for making a decision in the manner like this.”