[BUYING AND SELLING REAL ESTATE IN CANADA - QUÉBEC]
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house unit, residential condominium unit, or similar premises that is intended to be owned apart from any other unit in the building; and (iii) vacant land zoned for residential or mixed uses in a Census Metropolitan Area or Census Agglomeration, but excludes recreational properties outside of Census Metropolitan Areas or Census Agglomeration. Prohibited purchasers include individuals who are not Canadian citizens or permanent residents of Canada, corporations that are not incorporated in Canada, and corporations controlled by foreign corporations or individuals who are not Canadian citizens or permanent residents of Canada. While the Regulations are not yet finalized, the threshold will probably be either direct or indirect ownership of 3% or more of the value of equity or voting rights of a corporation, or control in fact. It is anticipated that this prohibition will not apply to (i) binding contracts signed by December 31, 2022; (ii) a non-resident spouse or common-law partner of a Canadian resident where they buy the property together; (iii) refugees; and (iv) temporary residents who meet certain criteria to be set out in the forthcoming Regulations (which may include students and certain foreign workers). Adjustments The buyer and seller generally adjust for taxes, utilities, and other prepaid expenses as at the date of transfer of ownership. In addition, in the case of commercial property, adjustments are also made for rents, third party operating expenses and common area maintenance expenses. Typically, the offer and deed will provide that the buyer chooses the notary and pays the notarial fees, including the cost of publication and the provision of notarial copies to both parties. If the purchase is financed, the lender
will choose the notary to receive the deed of hypothec (mortgage), who will ideally also handle the sale, and the buyer will assume those costs. If there are existing encumbrances on the property ( e.g. , the balance of a hypothecary loan) to be paid out at closing, the notary will obtain a payout letter from the lender, arrange for payment from the sale proceeds and have the prior lender’s security radiated, all at the seller’s expense. Sales Tax The sale of a new residential property, or of an existing property that has undergone major renovations, from the builder / developer is subject to the GST and QST, with a partial rebate available for individuals only. If the purchase price is between $350,000 and $450,000, then up to 36% of the amount of GST not exceeding $6300 is refundable. If the purchase price is between $200,000 and $300,000, then 50% of the amount of QST not exceeding $19,950 is refundable. The sale of an existing residential property which is occupied by its owner and not rented property is not subject to GST or QST; however, if the owner of the property resides in part of it and rents part ( e.g. , a duplex or triplex), the portion not used by the owner as a residence, determined on a prorated basis, will be taxed in the same manner as the sale of a commercial property. The sale of a commercial property is subject to both GST and QST, unless both parties declare in the deed that they are registered for both taxes, provide their respective tax numbers and file an election to have the transaction be treated as non-taxable. It is the buyer’s obligation to collect and remit the GST and QST, so the seller’s tax numbers should be verified; if they are invalid, the buyer will be liable to pay these amounts to the tax authorities.
ILN Real Estate Group – Buying and Selling Real Estate Series
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