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2024 Budget Changes: Real Estate, Home Taxes and Rentals

March 28, 2024 by Clay Williams, Tanvir Gill

Clay: I'm Clay Williams. I'm a partner at FH&P Lawyers and with me as per usual is my usual sidekick Tanvir Gill. Welcome Tanvier.

Tanvir: Thanks, Clay.

Clay: So this is number two of our video and we're still getting used to this. Yeah. And we've got a pretty neat topic today.

Tanvir: We do!

Clay: Our provincial government introduced their 2024 budget, and there are a couple of things that came out of that, that we think you might be interested in, as listeners of a law topic show!

What Are The Updates to the BC Land Owner Transparency Registry?

Tanvir: Yeah. And let's start with LOTR. LOTR is the Land Owner Transparency Registry. It's a registry where an indirect ownership in land gets recorded. So, whether you own land through a corporation, a trust, or through a partnership, that interest is recorded in this registry. We've been doing this for a while.

Clay: Yeah, it's not new.

Tanvir: The registry itself is not new. If you have an interest in land and you've never heard of this before, that's a red flag. But it's been around for a while now.

The change now is that it's free. So it was $5.25 to search. And it's searched in myLTSA, which is the same portal you use to search titles. It's where you go to search the Land Owner Transparency Registry, and now the searches are free. So it's a new change.

Clay: It's not free to register though, is it?

Tanvir: You mean like to record your ownership?

Clay: To actually record your ownership. So when you come to see a lawyer, a lawyer is going to ask you about the beneficial ownership of a property. Especially if you're dealing with a corporation or a trust. That still costs.

Tanvir: Yeah. So we are charging clients to register. So the registration fees are not free. Those are still in existence. But searching that registry for anyone's interest is now going to be free. So in practice, I could go onto the registry, and put in Clay's name to see if he owns an interest in land through one of those entities or not.

Clay: Yeah, that's new. So, you know, in the past, you could go and own land using a whole bunch of different nominee companies, and it'd be very difficult to find out who actually owned those companies or controlled those companies, and actually owned the land.

Now it's kind of neat. I could put in Tanvir's name, and even if she had owned land through a bunch of different companies, it would show which pieces of property she actually has a beneficial interest in.

Tanvir: Clients always ask why. Especially clients who are doing a lot of real estate transactions and who have never seen this registry before or never signed these papers previously.

Really, what it was is getting behind invisible ownership or people who owned land in a way where it wasn't clear who the interest holders were. You know, lifting the curtain on ownership as well as money laundering schemes. Making sure that the government knows who owns what and it's not a way where people are funneling cash.

Clay: So how do they do it? What do they do? What do they sign up? What website do they go to?

Tanvir: To search? Yeah. ltsa.ca is where you search. But the easier thing is always to ask us if it's something you need to know about. If it's a search you want to do or if it's something you want to be exempt from. You don't want to be publicly searchable. There's all this information that we can help you with. If it's something that you want to know more about, get in touch with us.

First Time Home Buyers and Property Transfer Taxes

Clay: So the budget came out, and we've got a couple of neat things that, you know again people that might be interested in a law show would be interested in. So let's start with the new PTT (Property Transfer Tax). This is not a new exemption but there are new limits on first-time homeowners.

Tanvir: So the budget has quite a number of things, we're not going to look at all of them, we'll focus on the ones that we're mostly interested in. So PTT is a big one. There was a first-time home buyer exemption that was always in place. It's always been in place since I've been a lawyer. I don't know about you…

Clay: It's a long-standing exemption.

Tanvir: So there's been a change in that, which I think is great because currently as a first-time home buyer, you are going to save on Property Transfer Tax if you're buying a property that's going to be your principal residence, and you have to meet a couple of other requirements but you will save the tax if you're something at around $500,000. Anything over $525,000, you don't save the tax. So, to me, this was impossible. I think in the last year just with where prices were and how things were going; I think I had one client ever who actually got the exemption. So it was kind of impossible.

Clay: Yeah, unless you're buying a condo. It really needed to be updated. Why even have this first-time home buyer exemption if there are no properties that are qualified? So what's the new limit? Before it was $500,000 and kind of reduced to $525,000.

Tanvir: Yeah so it was so $500,000. You get no tax, and then there's a scale up to $525,000 you were getting a bit of an exemption, and after $525,000 you're getting zero. So now it is a fair market value of $825,000.

Clay: That’s a significant increase, and it really reflects the market. And $825,000; That's a pretty good property. And you still get a limited exemption up to $860,000. So hey that's that's great!

Tanvir: It's definitely more practical. I mean realistically.

Clay: If first-time homeowners borrowed from mom and dad, if you're buying a property for $835,000…

Tanvir: It's still going to be the new family that's sort of getting into their first house that maybe is finally qualifying. I could see where this is kind of difficult. I mean just look back at the real estate deals we are generally doing now, it's still not great, but it's definitely more practical I would say for first-time homeowners. 

Clay: You know I don't know if it's a detached home. In Kelowna, but I mean if it’s a pretty nice townhouse…

Tanvir: And the other change that's coming in that is well needed I would say is the increase to the newly built home exemption. So currently, if you are buying a brand new home and it's going to be your principal residence and it is $750,000, you are saving tax. But a new home for $750,000; that’s not really happening.

And now it's going to be for $1,100,000. And you're going to save tax if it's over $1,150,000. So that's definitely a well-needed increase. Same thing though, you know it's not a huge ton of properties that it's going to apply to but it's better than what it was at $750,000.

Clay: And remember we're talking to you from Kelowna which is a pretty hot market. I mean, there's a lot of the province where that's probably more applicable.

Updates to Purpose-Built Rental Buildings

Tanvir: And we have another one that will apply to some of our clients. It's not generally as well known, but (let’s talk about) Purpose-Built Rental Buildings. So if you're building something for long-term rentals and it's entirely for rental purposes and multi-unit, there are going to be exemptions you're saving there, too.

I won't get too into that one. It's pretty specific. So if you are somebody who's looking to buy and you have questions about the exemptions now or what they're going to be, come April, give us a call.

Clay: I did want to just point out with Purpose-Built Rentals. You know just to avoid a flood of calls here. It's not just building any old property for a rental there, I think you have to have four units.

Tanvir: Yeah, it has to be a minimum of four units.

Clay: There's only a certain amount of of of people that would qualify. That would yeah what it applies to.

More About The BC Home Flipping Tax

Clay: And then there's another interesting item that came out in the budget as well. And that was the Flipping Tax.

Tanvir: The flipping tax is a big one. So, now, if you are going to be selling a residential property within two years of that purchase, you are going to be incurring a tax on that flip.

Clay: Yeah, and that's a big deal and it sure worries me a little bit. You know, that all of a sudden you have to own a place for a certain period of time. Does that mean it’s the start of a capital gains tax? That worries me greatly.

Tanvir: Yeah, so this one's coming into effect January 1st, 2025, and what the budget sort of showed was that; within that first year (365 days) if that sale's happening, you're getting taxed, and then it was sort of a sliding scale for the second year of ownership.

Clay: Yeah, that's right up to almost nothing if you've owned it for almost almost two years. But it's there. And so now there are some some ways out of that Exemptions.

Tanvir: Before I get to the exemptions the type of property that this is aiming to tax is residential property. So if it's a house that you're looking to buy if it's zoned for residential; and also assignments. So if I was in a contract to buy a house and then I assigned that contract forward. You could be taxed on that as well.

Clay: Okay. And so tell us about the exemptions.

Tanvir: So there's going to be a ton. We don't know exact details but death, divorce, disability. There's a list of them that are going to be situations, and life circumstances that require you to sell where the government is not going to be looking to tax you.

Clay: I got a little list here.

Tanvir: Oh you printed it.

Clay: I did. So yeah. Divorce, Death, Disability or Illness, Relocation for work, Involuntary job loss, Change in household membership. Yeah. I'm not sure what that means. Personal safety and insolvency. Those are the ones the government has published at least. So there you go.

Tanvir: One thing that I read that's interesting is that it comes into effect in January but could also apply to property that you've acquired before the effective date. So if you've already purchased a property or you're looking to purchase a property soon that you know you were intending to sell and now you're not too sure exactly how this is going to apply. What the timeline look like for you. What the tax looks like. It's really important to reach out to an accountant if you don't already have one. Also, give us a call. 

Clay: Yep. So Sounds good.

Anything else?

Tanvir: I think that's it.

Clay: Alright, until next time. I'm Clay Williams. Tanvir, who are you?

Tanvir: Oh wait, am I supposed to say my name? 

Clay: You are.

Tanvir: Can we still cut? Yeah, right? We can, right?

Questions? We're ready to help. Please contact Clay Williams or Tanvir Gill, or any of the team at FH&P Lawyers.

Disclaimer: This material is provided for informational purposes only and should not be construed as legal advice on any subject matter. Consult with a qualified lawyer for advice on specific legal issues.