Homebuyer who balked at tax must forfeit $180,000 deposit
A judge has found that a woman who had agreed to purchase a home in North Vancouver but failed to complete the sale after the foreign buyer’s tax went into effect had breached her contract.
B.C. Supreme Court Judge Lisa Warren also ordered Kyeonga Jeong, who is from Korea but has been living in Canada for a number of years, to give up her $180,000 deposit on the home at 515 Alpine Ct.
In June 2016, Jeong entered into a $2.6-million sales contract with Sandra Wilkie, the owner of the home, and paid the deposit, which was held in trust by her real estate agent. The completion date of the sale was set for October 2016.
But about two months after the sale, in August 2016, the thenLiberal government imposed a 15 per cent tax on property purchased by foreign nationals in Metro Vancouver in a bid to cool scorching home prices.
The tax applied to purchases completing on or after the date the tax went into effect, even if the underlying contract was entered into before August. The tax increased the property transfer tax payable by Jeong by nearly $400,000, representing a 15 per cent increase in the total cost of completing the transaction.
Neither Jeong nor Wilkie were aware the tax was about to be imposed at the time of the sale. Jeong did not complete the sale in October.
Jeong, who lives at another residence in North Vancouver, claimed that it was impossible for her to complete the sale because she didn’t have the resources. She also claimed at one point that the levy is a “targeted, discriminatory” tax.
Wilkie filed a lawsuit claiming Jeong had breached the contract by failing to complete the sale. She sought a declaration that the contract was binding and an order that Jeong direct her agent to pay the deposit to Wilkie.
Jeong, in turn, claimed the new tax was unforeseen and had frustrated the contract and that she should be entitled to keep her deposit.
In her ruling, the judge said the tax made performance of the contract by Jeong more onerous than she expected, but found it was well-established that increased expense or hardship alone does not frustrate a contract.
The new tax was not the fault of either party, but it did not destroy the basis for the contract, the judge said.
“It did not radically change the nature of the parties’ contractual obligations and performance of the contract would not result in something different from that which was undertaken by the parties,” Warren said. “To the contrary, the fundamental purpose of the contract, namely the transfer of title of the property in exchange for the purchase price, was entirely unaffected. … For these reasons, the contract was not frustrated.”
Regarding the issue of the deposit, the judge said that there was nothing to suggest Wilkie’s conduct was anything but entirely proper and nothing to suggest Jeong had suffered under any disability or disadvantage.
“There was no inequality of bargaining power between the parties that resulted in an unfair bargain,” the judge said. “The amount of the deposit was reasonable and well within the normal range for residential real estate sales.”
The judge declared Jeong had breached the contract and ordered her to direct her agent to pay the $180,000 deposit to Wilkie. The plaintiff also sued for damages for breach of contract and will have those damages assessed at a later date.
“She’s relieved because they were counting on this property being sold more than a year ago,” Bryan Baynham, a lawyer for Wilkie, said of his client.
“They’ve just recently resold the property, it’s been more than a year, and they’ve had to carry it, they’ve had to pay insurance on it, they’ve had to pay taxes on it and utilities and all that sort of stuff. So it’s had a dramatic effect on them as well.”