On April 7, 2022 our Federal Government presented the 2022 Canadian Budget, that Budget was entitled A Plan to Grow Our Economy and Make Life More Affordable.
This budget will be of particular interest to real estate practitioners due several key points including:
1. A “Home Buyers’ Bill of Rights”
The Minister of Housing and Diversity and Inclusion will engage with provinces and territories over the next year to develop and implement a Home Buyers’ Bill of Rights and bring forward a
national plan to end blind bidding. This Bill of Rights could include a legal right to a home inspection and ensuring transparency on the history of sales prices on title searches.
2. Housing should be for Canadians to use as homes
There will be a federal review of housing as an asset class, in order to better understand the role of large corporate players in the market and the impact on Canadian renters and homeowners to address, inter alia, a rise in “renovictions”, when a landlord pressures and persuades their tenants to leave, or is formally permitted to evict them to make extensive renovations in order to raise rents.
3. Curbing Foreign Investment and Speculation
An intention to propose restrictions that would prohibit foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring nonrecreational, residential property in Canada for a period of two years. Non-resident, non-Canadians who own homes that are being underused or left vacant would be subject to the Underused Housing Tax once it is in effect.
4. Making Property Flippers Pay Their Fair Share
New rules to ensure profits from flipping properties are taxed fully and fairly. Specifically, any person who sells a property they have held for less than 12 months would be considered to be flipping properties and would be subject to full taxation on their profits as business income.
5. Taxing Assignment Sales
Making all assignment sales of newly constructed or substantially renovated residential housing
taxable for GST/HST purposes, effective May 7, 2022.
6. Protecting Canadians From Money Laundering
To help prevent financial crimes in the real estate sector, the federal government is announcing its intention to extend anti-money laundering and anti-terrorist financing requirements to all businesses conducting mortgage lending in Canada within the next year.
7. Implementing a Publicly Accessible Beneficial Ownership Registry
The government is accelerating by two years its commitment to amend the Canada Business Corporations Act to implement a public and searchable beneficial ownership registry, which will now be accessible before the end of 2023. The registry will cover corporations governed under the aforementioned Act and will be scalable to allow access to the beneficial ownership data held by provinces and territories that agree to participate in a national registry. Legislative proposals will be forthcoming as part of the Budget Implementation Act. The government will engage provincial and territorial governments at the earliest opportunity to advance a national approach to beneficial ownership transparency.
While it is yet to be seen how the above will be incorporated into law we must prepare ourselves and our law firms for the regulatory changes that will soon be upon us. In particular the Real Property Subsection expects that solicitors in Manitoba will need to be mindful of:
(i) Revising the form of Declaration as to Possession to ensure a seller does not run afoul of the law as it relates to foreign home buyers and perhaps imposing a trust condition with respect to same akin to the trust condition used regarding those who are not a non-resident of Canada;
(ii) Ensuring our reports to buyers have a generic statement as to the taxation of profits as business income in the event a property is bought and sold in less than 12 months;
(iii) Advising clients who “assign” agreements of purchase and sale on the tax implications of same;
(iv) Ensuring the proper anti-money laundering steps are taken when transacting with and acting for private lenders or borrowers transacting with private lenders;
(v) Knowing your client – while there is an existing Law Society of Manitoba rule obligating lawyers to know who they are dealing with, with the likely onset of a beneficial ownership registry to be accessible before 2023 we will need to continue to ensure that we know exactly who we are “dealing with” for the purpose of that registry and to honour existing Law Society of Manitoba rules.