Selling Information

SALES OF PROPERTY BY NON-RESIDENT VENDORS
It is a condition of a Non-resident selling property in Canada that they first obtain a Clearance Certificate from Revenue Canada. The current wait for a Clearance Certificate (October 1999) is approximately 6 to 8 weeks. Prior to Revenue Canada issuing a Clearance Certificate they will wish to collect any tax payable with respect to the property - this will include any tax payable on the rental income from the property which has not already been remitted as well as tax on the capital gain experienced on the property and possibly recapture of capital cost allowance.

In calculating the capital gain on the property Revenue Canada allows only the following to be added to the purchase price to determine the adjusted cost base:
1. Property Transfer Tax;
2. Legal fees and disbursements in conjunction with the purchase;
3. Furnishings and renovations included in the selling price;
(receipts for the included items will be required)
4. GST;
5. A portion of the interest on mortgage payments (only if the Vendor has properly elected to have a portion of the interest capitalized on their tax return).

Revenue Canada does not allow any deductions from the selling price in determining the gain (ie. you cannot subtract the real estate commission, legal fees or GST paid on the selling). The amount required to be remitted on the gain is 33.333 percent of the gain. By filing a Canadian tax return subsequent to the sale, some of the tax paid may be recovered.

Vendors should contact their accountants or lawyers with respect to requesting a Clearance Certificate as soon as an accepted offer has been received with respect to the property. Should the completion date be prior to the issuance of the Clearance Certificate, a holdback of between 33% and 50% of the sale price will be required by the Purchaser's solicitor until the Clearance Certificate is issued.

Please note that the Purchasers solicitor may take the position that if the property has been rented out it is a commercial property and therefore the holdback is 50% of the sale price not 331/3%. There is case law supporting this position.

Our firm's legal fees for obtaining a Clearance Certificate and handling the sale on behalf of a Vendor having clear title to a property is $700.00 plus disbursements and PST and GST.
In the event that the Vendor has a mortgage to be cleared, the charges are $850.00 plus disbursements, PST and GST (total approximately $1,000.00).