Are your clients protected from the Vancouver Empty Homes Tax?
The Risk for Vancouver Home Buyers
Like most taxes, the Empty Homes Tax is attached to the land. As the bylaw requires a “registered owner” to provide information at any time and for up to two years after a taxation year, a new owner could be on the hook for a previous owner’s tax. Consider this scenario:
A young couple in Vancouver buys their first house in December 2017, with a closing date of April 30, 2018. In December, the seller declares that their home is occupied on their Empty Homes Tax Property Status Declaration. In March, the seller does not receive an EHT bill. The sale closes and the new owners live happily ever after… until November.
In November, the City of Vancouver conducts an audit on their new property and disagrees with the previous owner’s declaration. They ask the young couple (registered owners) to provide proof of the seller’s use of the property, but the sellers are nowhere to be found. It’s now at the discretion of the city’s auditor to determine whether the new owners will be responsible for the previous owner’s tax (and at 1% of the assessed value that amounts to $20,000 on this $2,000,000 property). If the auditor deems that tax was due for 2017, it will be added to the new owner’s 2018 tax bill.
With a homeowner title insurance policy from FCT, this lucky young couple is protected.
Coverage from FCT
Coverage for actual loss arising from the Empty Homes Tax assessed for the period prior to January 13th, 2018 can be found under covered title risk #14 of the Owner’s Platinum title insurance policy, with no additional requirements from an acting lawyer/notary.
As of January 13th, 2018 in order for an owner to be protected from loss as a result of a lien or charge on the title for the Empty Homes Tax (if the City reassesses and deems the previous owner’s property to have been vacant and subject to the tax), FCT will require that the lawyer or notary acting on behalf of a purchaser obtain a Statutory Declaration from the seller.
The seller must declare that:
- they filed the Empty Homes Declaration in accordance with Vacancy Tax By-Law No. 11674, and
- the land was not subject to the Empty Homes Tax.
Please refer to the actual Empty Homes Tax Endorsement enclosed in your policy package for coverage details.
Empty Homes Tax Best Practices
To ensure your clients are protected with every residential home purchase in Vancouver, follow these best practices:
- Ensure buyers obtain a Property Statutory Declaration from the sellers as a condition of closing. It does not need to be submitted with your request for title insurance, but in the event of a claim it will be requested to confirm coverage.
- If the declaration states that the house was not empty and the city reassesses and disagrees with the declaration in the future, buyers will be covered by FCT Title Insurance.
- If the declaration states that the house was empty and subject to the tax, ensure that the taxes are paid at the time of closing.
Are you protected?
Reduce purchasers’ risk of being landed with a significant Empty Homes Tax bill with title insurance from FCT.
To learn more, please contact your local business development manager or reach out to the Residential Solutions Team at 1.866.804.3122.
This is material is intended to provide general information only. For specific coverage and exclusions, refer to the applicable policy.