[BUYING AND SELLING REAL ESTATE IN CANADA - QUÉBEC]
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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. If the purchase is financed, either by a seller take-back or a bank financing, the notary must prepare and publish a deed of immovable hypothec against the property in the Index of Immovables to protect the lender’s security in the immovable property, which include any movable (personal) property on the premises, as well as any rents in the case of a commercial property. 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 the rest ( 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. If the seller is not a Canadian resident, the buyer must withhold 25% of the gross proceeds in trust (typically with the officiating notary) until the Canada Revenue Agency confirms the amount to be paid and issues a certificate of compliance (“tax clearance certificate”) when the tax has been fully paid, at which time any excess funds may be released to the seller. A buyer who fails to withhold and remit the required tax could be held liable for the entire amount, plus penalties and interest. VII. RECORDING REAL ESTATE DOCUMENTS The Québec land register traces all real estate transactions carried out in Québec since its creation in 1830. The overall system is known as the Cadastre du Québec, and the province is divided into various registration divisions, each one of which has its own registry office. Title can be searched electronically via the Index of Immovables, using the lot number. The municipal evaluation is also generally accessible on-line, depending on the municipality, using the civic address, which will also yield the lot number(s). Copies of the registered deeds may also be ordered on-line. Leases under Québec law are a personal, rather than a real, right. However, notice of the lease may be published against title. This protects the tenant by ensuring that if the property is sold, the new owner must respect the balance of the term of the lease, including any renewal options. If the lease was not published before the sale, the new owner is only obliged to continue it for the shorter of the balance of the term (not
ILN Real Estate Group – Buying and Selling Real Estate Series
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