Purchasing property in Canada is relatively straight forward, and there are no restrictions on EU nationals purchasing a ski property provided less than six months per year are spent in Canada. The only restriction in place is associated with the purchase of property in Banff which is a national park, and as such, only business owners and employees may purchase property there.
Selecting the Real Estate Agent
Unless purchasing from a developer, anyone making a purchase of any kind of real estate in Canada needs to register with a qualified and licensed Realtor. Unlike European Estate Agents, properties are available for all agents and realtor’s to sell so there is no need to contact multiple agencies.
Purchase and Sales Contract
The real estate representative or agent, preferably with the lawyer, helps prepare the Offer to Purchase to the seller. The Offer of Purchase is presented to the seller with a deposit usually no more than 10% of the purchase price. The seller will accept, reject or make a counteroffer.
The buyer and the seller agree on the price.
A copy of the signed agreement is sent to the lawyer who will examine any conditions of sale and note the closing date. The lawyer must be informed on how the buyer, and any other co-buyers if any, will be registered in the title to the property.
During closing, all conditions in the Offer to Purchase, such as home inspection, must be satisfied by the stated date.
Have an up-to-date land survey done on the property.
The lawyer searches the title to ensure the seller has a clean title. The lawyer must also check government regulations and other legalities. This includes ensuring property taxes are paid, and that there are no liens.
The lawyer prepares a Statement of Adjustment, which will confirm the selling price, the amount the buyer has to pay the seller, the balance of the down payment and adjustments. A certified cheque for this total should be made payable to the lawyer in trust.
Finally, the lawyer pays the seller, registers the home in the buyer´s name and provides a deed and the keys to the new house
Property Type & Location
Properties in ski resorts in Canada fall into two main types: new builds and re-sales.
New build properties
New build properties are defined as those dwellings sold within five years of completion of construction or restoration. When buying a newly built home up to $350,000, purchasers are entitled to a rebate of 36% of the GST, up to $8,750. Between $350,000 and $450,000, the rebate is reduced on a sliding scale, and there is no rebate on homes above $450,000. The rebate can be assigned to the builder at the time of purchase, or you can claim it directly afterwards.
These are sold by private owners or estate agents. The buyer purchases the property freehold and is free to use, rent, renovate or sell the property. There is no restriction on re-sale, though capital gains tax and VAT may be payable.
Lawyers (or notaries in Quebec) review the Offer to Purchase, search the title and draw up mortgage documents and oversees the closing details. Legal fees are generally negotiable (subject to a minimum of CAD500 plus GST/HST), depending upon the province, the complexity of the sale-purchase process and the value of the property.
Real estate agent´s fees are negotiable between 3% and 7% of the property value, plus 6% GST. Typically, realtors charge 7% on the first CAD100,000 of the sale price and 3% on the remainder. The vendor normally pays for the agent´s fees but in certain cases there are two agents involved - the seller´s agent and the buyer´s agent.
Non-resident borrowers will generally require a minimum of 35%-50% payment.
Qualifying for mortgage financing is probably no more rigorous than what borrowers in other countries are accustomed to. The borrowers will be interviewed via phone, fax or email to gather personal information including assets/liabilities, and employment/income info. Each application will be considered on a case by case basis.
The mortgage approval may take 24 to 48 hours after application and documentation have been submitted to the lender.
Documentation generally required is income verification, tax returns, credit reports, down payment confirmation via bank statements, copy of 2 pieces of ID and real estate appraisal.
The borrower will need to open a Canadian bank account for debiting of mortgage payments.
The borrower will require the services of a Canadian lawyer or notary public to prepare mortgage documents and registration at the Land Titles office. It's best if the borrower is available in Canada to sign mortgage documents at the time of completion. If documents need to be couriered outside of Canada for signing, this will need to be arranged with the lawyer and lender well in advance of the completion date.
If you propose to use mortgage funds from your resident country (i.e. outside of Canada) to buy your property, currency risk and fluctuation must be taken into account.
Payments for New-Builds
Payments for new-builds are usually made in stages:
Roof Stage / Roof Tight – Approximately 35% complete. A survey is required by first draw.
Intermediate / Lock Up – Approximately 65% complete (prior to the drywall being installed). If acreage property, the well & septic is required at this stage.
Final Occupancy / Completion – Most lenders will not issue final advance unless home is 100% complete (less 3% allowance for seasonal holdbacks). Seasonal holdbacks are always minor, exterior to property and weather related.
Estoppel Certificate Fee
This $100 fee only applies if you are purchasing in a condominium or strata property. Rather than purely appraising the value of the condo, an estoppel certificate verifies the legitimacy and fiscal health of the condominium corporation or strata council. It ensures the condo is in good condition, or if it’s a new unit still under construction, it ensures the project is viable and the financials are in good shape.
Property Ownership Taxes & Running Costs
An annual real estate tax is collected by each Province. The tax rate ranges from 0.5% and 2.5% and is based on the assessed value of the real estate, which is generally below the property's market price. As well as this tax, additional running costs include: utility bills, service charges associated with general maintenance.
Renting & Income Tax
Rental agencies operate in the majority of all major ski resorts in Canada, providing full rental and management services, typically for 7%-11% commission depending on the type of property and its location.
There are currently two categories that a non-Canadian resident will fall into:
Non-resident investment: You’ll need to consider taxation issues on the income earned on such property, as well as when the property changes hands either through sale or inheritance.
Non-resident vacation: If you plan on occupying the home on a part-time basis, in addition to the previous considerations you’ll need to be aware of circumstances under which you could be deemed liable to pay Canadian income tax. This currently applies to stays of six months or longer within a calendar year.
Non-residents who earn income in Canada from properties they own in Canada are subject to tax by the Canadian Revenue Agency (CRA). Income tax is calculated separately from other taxes, and may be based on gross or net rental income for the taxation year. The taxation year for individuals and certain other entities begins January 1st and ends December 31st. For corporations, it is their regular fiscal year-end.
Property Transfer Tax
The tax rate is one per cent on the first $200,000 of the property's fair market value and two per cent on the remaining fair market value (not including Alberta, rural Nova Scotia or Saskatchewan).
Capital Gains Tax
Only 50% is liable to tax at your marginal tax rate in the year of the gain. It is possible to deduct selling and purchase costs, capital expenditures and costs incurred during improvements and renovations.
Goods and Services Tax
The 5% GST applies to the purchase price of newly-constructed and substantially renovated homes. In addition, a temporary transition tax of 2% may apply on the purchase price of a new home where construction or substantial renovation of the new home was at least 10% complete before April 1, 2013, and either possession or ownership of the new home transfers, or a deemed sale of the new home transfers, before April 1, 2015.
Canada does not impose a wealth tax.
Inheritance/ Succession Tax
There is no Inheritance or Estate Tax in Canada. However there maybe tax to pay in the Country of Residence.