Can I Find Out If a Property I Want to Buy Has Vacancy Taxes Owing?
Can I Find Out If a Property I Want to Buy Has Vacancy Taxes Owing?
Yes, but there is an important distinction between the different vacancy taxes in B.C. and how outstanding amounts are dealt with.
If you are buying a property in North Vancouver, West Vancouver or elsewhere in B.C., you may want to know whether the current owner has any outstanding Speculation and Vacancy Tax owing. If you are buying in the City of Vancouver, you may instead be dealing with the City's Empty Homes Tax, which has different rules.
The good news for buyers is that you generally do not simply inherit the seller's provincial Speculation and Vacancy Tax debt. However, an unpaid tax debt can result in a lien being registered against the property, so it is important that the issue is identified and dealt with as part of the purchase and sale process.
Disclaimer: This article is for general informational purposes only and does not constitute legal, financial, or professional advice. Buyers and sellers should seek legal or professional advice specific to their situation.
What is the Speculation and Vacancy Tax?
The B.C. Speculation and Vacancy Tax (SVT) is an annual tax that applies to certain owners of residential property in designated areas of British Columbia.
Whether an owner actually owes the tax depends on factors such as how the property is used, the owner's residency and income circumstances, and whether an exemption or tax credit applies. More than 99% of people in B.C. are expected to be exempt from the tax, but owners in designated areas are still generally required to complete an annual declaration.
This is different from the City of Vancouver Empty Homes Tax and the federal Underused Housing Tax.
For buyers on the North Shore, understanding which tax applies to the property is important.
Does a buyer become responsible for the seller's Speculation and Vacancy Tax?
No. A buyer does not take on the seller's Speculation and Vacancy Tax debt simply by purchasing the property.
The B.C. government specifically states that the Speculation and Vacancy Tax is a liability of the individual owner who was assessed the tax. A purchaser does not assume the seller's tax debt.
There is, however, an important qualification.
If the seller does not pay the amount owing, the Province may register a lien against the property to secure the debt. That lien can appear on a Land Title and Survey Authority of B.C. (LTSA) title search.
This is why buyers should not simply assume that because they are not personally responsible for the seller's tax, the issue can be ignored.
How can I find out if there is a Speculation and Vacancy Tax lien on a property?
One of the important steps in a real estate transaction is a title search.
The Province of B.C. specifically states that an LTSA title search can be used to confirm whether there are outstanding liens against the property that could affect the purchase or sale.
This is an important distinction:
The Province does not provide real estate professionals with the seller's private Speculation and Vacancy Tax account information.
The Province says that tax assessments and amounts owing are confidential matters between the Ministry of Finance and the homeowner. If an owner owes SVT, they receive information about their balance directly.
As a result, a real estate agent cannot simply call the Province and ask, “Does this seller owe Speculation and Vacancy Tax, and if so, how much?”
Instead, the transaction can be structured to obtain appropriate confirmation from the seller and ensure that any issue affecting the property is dealt with before completion.
Can a buyer ask the seller to confirm whether they owe Speculation and Vacancy Tax?
Yes. This can be addressed as part of the purchase and sale process.
BCFSA provides a sample clause under which the seller warrants that they have made the required Speculation and Vacancy Tax filings and will provide the buyer with reasonable evidence that the filing has been made.
Depending on the circumstances, a buyer may therefore want to consider including appropriate terms in the Contract of Purchase and Sale.
For example, a buyer may want confirmation that:
- The seller has completed the required Speculation and Vacancy Tax declarations;
- The seller has paid any amounts owing;
- There are no outstanding liens affecting the property; and
- Any amount that must be dealt with before or on completion will be the seller's responsibility.
The exact wording and approach should depend on the circumstances of the transaction. Your real estate agent can help identify the issue and discuss appropriate contract terms, while your lawyer or notary can advise you on the legal and conveyancing implications.
What if the seller says they don't owe the tax?
This is where things can become a little more complicated.
A seller may be exempt from the Speculation and Vacancy Tax for a particular year, but the Province can review declarations and conduct audits. The Province says that assessments can result from a declaration or an audit, and collection action can be taken if an amount remains unpaid.
For this reason, buyers may want more than a casual assurance that the seller “doesn't owe vacancy tax.”
Depending on the circumstances, it may be appropriate to obtain confirmation of the seller's declaration or include specific representations, warranties or other protections in the contract.
This can be particularly important when a property has been vacant, used as a secondary residence, rented for only part of the year, or otherwise has circumstances that could make the property's history relevant to the tax.
What about Vancouver's Empty Homes Tax?
If you are purchasing a property within the City of Vancouver, there is a separate municipal tax called the Empty Homes Tax (EHT).
The rules are different from the provincial Speculation and Vacancy Tax.
The City of Vancouver states that its Empty Homes Tax is an assessment on the property rather than simply a personal liability of the owner. Unpaid Empty Homes Tax and penalties can remain associated with the property's tax account, meaning a change in ownership does not necessarily eliminate the liability.
This makes the issue particularly important for a buyer purchasing a Vancouver property.
The City provides a tax certificate that can show information including whether a property status declaration was submitted, the declared status, potential liability, amounts owing and certain audit or review information.
The City also recommends that buyers consider requesting documentation such as the seller's completed property status declaration and, in appropriate circumstances, a statutory declaration from the seller. If the City has not yet determined whether a property is subject to the tax, a holdback may also be appropriate.
So, while the general question may be “Does this property have vacancy tax owing?”, the answer depends on which vacancy tax applies and where the property is located.
What if the property is in North Vancouver or West Vancouver?
For properties on the North Shore, the provincial Speculation and Vacancy Tax is the tax buyers are most likely to be concerned about in this context.
The Province's designated taxable areas should be checked because the tax applies only in specified areas, and the applicable areas can change. The Province provides an interactive map for determining whether a property is in a taxable area.
If you are considering purchasing a property in North Vancouver or West Vancouver, your real estate agent can help you identify whether vacancy-tax issues should be investigated as part of your due diligence.
Can a real estate agent find out how much the seller owes?
Not directly from the Province.
The Province considers the seller's Speculation and Vacancy Tax assessment and balance to be confidential. Real estate professionals do not have access to the seller's private tax account.
An experienced real estate agent can, however, help you navigate the process of finding out what information is available, identifying potential concerns and negotiating appropriate terms with the seller.
Your lawyer or notary can then handle the appropriate legal and conveyancing searches and advise you about any registered liens or other issues affecting the transaction.
This is one of the advantages of having an experienced buyer's agent involved. You are not expected to know every question that needs to be asked before purchasing a property.
What should I do if I am concerned about vacancy tax on a property I want to buy?
If you are considering making an offer on a property and are concerned about possible vacancy taxes, talk to your real estate agent before submitting the offer or before removing your conditions.
An experienced agent can help you determine what questions should be asked, what information should be requested from the seller and whether specific terms should be included in your offer.
If the issue raises legal or tax questions, your agent can also recommend involving your lawyer, notary or tax professional.
The bottom line
Yes, there are ways to investigate whether a property has outstanding vacancy-tax issues, but the process depends on which tax applies.
For the B.C. Speculation and Vacancy Tax, the buyer does not inherit the seller's personal tax debt. However, an unpaid amount can result in a lien against the property, which is why title searches and appropriate due diligence are important.
For Vancouver's Empty Homes Tax, the rules are different, and unpaid amounts can remain associated with the property tax account. The City specifically recommends that buyers consider obtaining documentation and addressing potential liabilities as part of the transaction.
If you are buying a home in North Vancouver or West Vancouver and have questions about vacancy taxes, title issues or other due diligence, talk to your agent before you make an offer or remove your conditions.
Thinking about buying on the North Shore? Contact our team — we'd be happy to help you understand what to look for before you commit to a purchase. We are experienced North Shore real estate agents and can help you identify potential issues, navigate the transaction and bring in the appropriate legal or tax professionals when needed.