British Columbia’s provincial government is looking to implement new solutions to tackle the province’s ongoing housing crisis by focusing on the condominium market’s connection to tax evasion with the launch of the Condo and Strata Assignment Integrity Register (“CSAIR”).
CSAIR is effective January 1, 2019 and administered through the Land Title and Survey Authority’s myLTSA online service portal where developers must now collect and report information regarding condominium and other strata presale assignments on a quarterly basis.
CSAIR arrives as a promise from the government’s “Homes for B.C.: a 30-point Plan for Housing Affordability in British Columbia,” released as part of the 2018 Budget. Revisions to the Real Estate Development Marketing Act, S.B.C. 2004, c. 41 (the “Act”) outline the changes developers need to adopt in their marketing practices as well as the information regarding presale assignments they are required to report to CSAIR.
CSAIR is the first registry of its kind in Canada and its introduction comes on the heels of other housing affordability measures such as the City of Vancouver Empty Homes Tax and the British Columbia Speculation and Vacancy Tax.
Tax Evasion in B.C.
Typically, any profit generated from flipping real estate is taxable either as business income or a capital gain, payable by the seller in addition to the property transfer tax payable by the buyer. Assessment of the applicable tax can be difficult when presale purchase agreements are assigned because such transactions are not normally registered in the land title office or any other public register.
The introduction of CSAIR is one of a handful of measures the provincial government has examined that endeavours to forward the requisite information to CRA so that tax can be assessed appropriately when owed.
In its February 25, 2019 press release, the B.C. government stated that “[i]t is widely acknowledged that the practice of pre-sale flipping has been a factor in driving up real estate prices while facilitating tax evasion.” Using the information collected in CSAIR, the government plans to police the payment of income tax, capital gains and property transfer tax, reporting as necessary to the CRA, to ensure taxes are collected.
Details reported to CSAIR will aid the government in creating future housing and tax policy; however, no further details were provided as to how else the information may be used. While the government’s ability to disclose personal or corporate information from the register is primarily tax-focused, there is broad disclosure allowance “for the purpose of the compilation of statistical information by the government [of British Columbia] or the government of Canada” pursuant to section 20.5(1)(d) of the Act.
Assignment Reporting Requirements
The Act’s new Part 2.1 creates reporting requirements to CSAIR for assigned strata lots in British Columbia “development properties” (a defined term referring to those comprised of five or more strata lots), while the regulations to the Act prescribe the information to be collected.
Developers are now obligated to file quarterly reports containing party-specific information from every presale assignment from their own myLTSA Enterprise account and will be charged $195 per each assignment referred to in the report. Should there be no assignments during any given quarter, developers must report this to CSAIR.
In support of this, the Act requires developers to include the following provisions in their purchase agreements:
- a term prohibiting any assignment of the purchase agreement without the prior consent of the developer;
- notice that, before the developer consents to an assignment of the purchase agreement, the developer will be required to collect from the proposed parties to the assignment agreement the following information and records with the purpose of reporting the same to CSAIR:
- identities of the parties (including date of birth, social insurance number, and residency status if a party is an individual);
- contact information for the parties; and
- business information of the parties;
- a term that all proposed parties must comply by providing the above information to the developer in order to complete the assignment.
Newly issued Policy Statement 16 prescribes exact wording for the above which developers must use in their disclosure statements and purchase agreements. Developers must keep fully executed copies of each consented to assignment agreement at their place of business or address of service for a period ending six years following the strata plan deposit date. Alternatively, Part 2.1 of the Act provides developers with the option of prohibiting the assignment of presale purchase agreements altogether.
The Act’s transitional provisions cover the issue of purchase agreements entered into prior to January 1, 2019.
If a pre-existing purchase agreement provides that an assignment of the purchase agreement requires the consent of the developer, the developer may consent to the assignment only if that developer first makes a reasonable effort to collect, from each proposed party to the assignment agreement, the assignment information and records mentioned above prior to consenting to the assignment.
Similarly, if a pre-existing purchase agreement provides that assignment does not require the consent of the developer, or is silent on obtaining the developer’s consent, the developer still must make a reasonable effort to collect the above assignment information and records from each party, including collecting an executed copy of the assignment agreement, if the developer receives notice of assignment. To accompany the new reporting requirements and the creation of CSAIR, maximum penalties have drastically increased for all non-compliance orders and all offences under the Act.
The first quarter of the reporting period ends on March 31, and as such, developers will be required to file their first reports with CSAIR by April 30, 2019.
For more information about how CSAIR might affect you, please contact one of our B.C. real estate lawyers.