Realtor rapped for transfer tax advice
NEW LAW: Real Estate Council of B.C. investigating agent Mike Stewart after email sent to clients Tuesday
A top-selling real estate agent in Vancouver who sent an email advertising how to circumvent the new foreign purchasers’ property transfer tax is being investigated by the Real Estate Council of B.C.
The council said Wednesday it was aware of a statement by Mike Stewart of Century 21 offering ways people could avoid the new 15-per-cent tax, including selling presale contracts to friends or family members who are Canadian citizens or residents.
Such promises are not allowed, said Marilees Peters, a spokeswoman for the real estate council.
“We’ve contacted this licensee to advise them they need to cease these advertisements and we will be looking into the matter very closely.”
Stewart’s message came just 24 hours after the B.C. government introduced legislation to try to cool Vancouver’s white-hot housing market. It brought in the 15-per-cent property transfer tax after discovering that in the month of June alone, nearly one in 10 houses in Vancouver were bought by foreigners.
Stewart sent out a mass email to potential clients Tuesday suggesting he had found a solution to the property transfer tax. But he suggested his agency could help foreign clients who have bought pre-sale contracts.
“Most of the presales bought in the last 24-36 months have seen significant increases in value,” according to his email, a copy of which was obtained by Postmedia.
“It is possible in many cases to assign the presale purchase contract to a family member or friend who is a Canadian Citizen or Resident. For those of you who do not have that option, we may be able to sell the presale to a third party at a profit to you,” the email suggested.
It added people could get more information by following a link, but that page on Stewart’s corporate website has now been taken down.
Calls and text messages to Stewart’s phone were not returned.
In an interview with radio station CKNW, however, he said he wasn’t counselling people to find loopholes. Instead, he said, his advice pertained to pre-sale contracts not yet registered in the Land Titles Office.
“It is primarily a specific solution for a very specific situation. I want to be very clear I am not telling anybody about how to avoid a tax that is payable because that is illegal and that is not something that I do and that I am allowed to do,” he said in the interview.
“What this entails is for international buyers who have bought pre-construction, so they have not registered at land titles. According to my understanding, these are exempt from the taxation rules.
“What we’re just saying is you could just assign it to a family member. Assign means to transfer ownership. This is all before it is registered at land titles, this is all before it is taxable.”
His email, however, was widely distributed to local and Canadian potential buyers who had signed up for information with a number of developers who market pre-sale projects.
Stewart said he felt the new tax legislation was “a bit abrupt and unfair” because it penalizes pre-sale contracts for units that are still years away from being built.
“There are people from all over the world from all walks of life who have bought properties that are pre-construction, pre-sale, and that are completing in a few years with the expectation of moving here or settling here and they’ve been suddenly hit with a 15-per-cent tax rather arbitrarily,” he said.
However, the Real Estate Council of B.C. says Stewart’s offer was clearly the kind of message the provincial government was prepared for when it drafted the legislation.
“The legislation that the government introduced does include anti-avoidance rules,” Peters said. “We’ve advised all licensees that they need to recommend to their clients to get independent professional advice to find out if their deal will be subject to the property transfer tax.”
Premier Christy Clark also weighed in, saying her government will be auditing sales to make sure offshore purchasers aren’t trying to game the system. She chastised real estate agents who are advising clients to re-assign their pre-sale contracts to Canadian citizens to avoid the tax.
However, NDP housing critic David Eby says he doesn’t think Stewart did anything wrong, especially since he was talking about presales contracts. He said the dispute helps illustrate loopholes the NDP warned the Liberal government were in the legislation.
“It is true you can assign a pre-sale contract without paying the tax. It is totally clear in the legislation that the tax doesn’t kick in until the title is registered,” Eby said. “I don’t think it is OK. It demonstrates the flaws in the government’s proposal.”
Stewart told CKNW his overseas clients are already backing away.
“A lot of them have decided to buy elsewhere because of the tax.”