New Rules re: Assignments of Pre-Sale Condominium Contracts of Purchase and Sale

The Province of British Columbia is taking steps to ensure that the applicable taxes are paid on assignments of pre-sale condominiums with the introduction of Bill 25 Real Estate Development Marketing Amendment Act, 2018. The goal of the legislation is to collect the applicable tax on such assignments and to generally discourage the assignment of such contracts and reduce what the government perceives to be speculation in the pre-sale condominium market.

The assignment of a pre-sale condominium may, depending on the factual background, be subject to Goods and Services Tax (“GST”).  To date there has not been an efficient way for government to learn of any assignment and determine if GST is payable, and then collect the GST payable.

If approved by the legislature, the proposed changes to the Real Estate Development Marketing Act (“REDMA”) on such transactions will require real estate developers to collect and report information on the assignment of pre-sale condominiums.  This will allow the federal government to more effectively determine if GST is payable and ensure people are paying the applicable GST when these contracts are assigned.

Once the legislation is adopted, developers will have to include terms in their contracts of purchase and sale that: (a) restrict the assignment of such contracts without the developer’s consent; and (b) inform buyers of the new reporting requirements. When processing the request for consent, the developer will be required to collect specific information about the assignee and the assignor, including names of the assignee and assignor, social insurance numbers, contact details and the amount paid by the assignee to the assignor. The information will be reported by the developer to the Administrator designated under the Property Transfer Tax Act.

Bill 25, like much recent legislation, provides that most of its provisions will be set out in the regulations that are not yet publicly available. Details such as what information is to be collected, how quickly and frequently it is to be passed on the Administrator of PTT Branch, how it applies to existing contracts, and the developer’s liability for incorrect information, have not yet been addressed.

Bill 25 also provides a substantial increase in administrative monetary penalties and fines. This increase applies to all offences under REDMA, not just with respect to the collection of assignment information. The government has decided that it needs the ability to levy higher penalties and fines should the appropriate circumstances arise.

There are no penalties for assignors and assignees who provide false or inaccurate information to developers, which then gets shared with the government. Presumably the government will recognize that developers are not in a position to verify the information that is provided by third parties and should not be held liable when the developer has made a reasonable attempt to collect the information.

Share

About Us

Our Real Estate Law Blog provides brief commentary on current legal trends and developments affecting your business. The topics addressed in Lawson Lundell’s Real Estate Law Blog are of interest to commercial real estate developers, real estate and strata agents, investors, landlords and tenants, as well as a variety of industry groups. 

Legal Disclaimer: The information made available on this webpage is for information purposes only. It does not constitute legal advice, and should not be relied on as such. Please contact our firm if you need legal advice or have questions about the content of this webpage. 

Editors

Authors

Topics

Recent Posts

Archives

Blogs

Jump to Page