Closing Costs:  As a Mortgage Broker, our job is to ensure you can produce not only the down payment, but all CLOSING COSTS as well.  Today I wanted to cover off the largest one that surprisingly, many forget to budget for:  Property Transfer Tax

What Is PTT?

Property Transfer Tax is a Provincial Government tax payable by purchasers of real estate. The tax applies to all types of real estate: residential, commercial or industrial and is only paid when a property changes hands (i.e. title is transferred). Taxable transactions include:

• transfer of fee simple
• right to purchase or agreement for sale
• lease or lease modification agreements
• life estate
• inheritance
• foreclosure
• crown grant
• escheat, forfeiture or quit claim
• transfer as a result of corporate reorganization

It is important to point out that this is NOT the same thing as the annual property tax, which is a city tax that is due on a yearly basis.

How and When Is It Calculated?

Property Transfer Tax is calculated as 1% on the first $200,000.00 of the property’s fair market value, 2% on the amount between $200,000 and $2,000,000, and 3% on the amount between $2,000,000 and $3,000,000, and 5% of the remaining fair market value.  The PTT is calculated by the lawyer or notary at the time the statement of adjustments is done, and they are the ones that will apply and organize the documentation for the payment of monies.

First Time Home Buyer Exemption

Just a reminder, a FTHB means the Buyer:

• Has never have owned an interest in a principal residence anywhere in the world at any time;
• Is a citizen of or a permanent resident of Canada;
• Resided in B.C. for 12 consecutive months immediately before the date they become the registered owner, or the Purchaser has filed two income tax returns as a British Columbia resident within the prior 6 years of becoming the owner;
• Moves into the property within ninety-two days after registration of the purchase of the property and reside in the property for at least one year.

Exemption limits: This exemption applies when the fair market value of the property is $500,000 or less (if the fair market value of the property is higher than $500,000.00 but less than $525,000.00, they qualify for a partial exemption)

The Sliding Scale can be found HERE.

Newly Built Home Buyer – This exception is not limited to First Time Home Buyers – anyone purchasing a NEW BUILD can qualify, as long as the following criteria is met:

1. The property must be newly built; a newly built home includes:
   1. a house constructed and affixed on a parcel of vacant land
   2. a new apartment in a newly built condominium building
   3. a manufactured home that is placed and affixed on a parcel of vacant land
   4. an already constructed house that is removed from one parcel of land and affixed to another parcel of vacant land, as long as the house hasn’t been occupied since it was placed on the new parcel of vacant land
   5. a house resulting from the division of an existing improvement affixed to a parcel of land that was also subdivided, as long as this house hasn’t been occupied since the subdivision of the parcel
   6. a house converted from an existing improvement on the land. The previous improvement couldn’t have been used as residential (e.g. a warehouse converted into apartments).
2. The Buyer must be an individual and a Canadian citizen or permanent resident;
3. The property must be used as the principal residence of the Buyer, who must move into the property within ninety-two days after registration of the purchase of the property and reside in the property for at least one year;
4. The property must be 1.24 acres or smaller.

Exception limits:  This exemption applies when the fair market value of the property is $750,000 or less (if the fair market value of the property is higher than $750,000.00 but less than $800,000.00, they qualify for a partial exemption).  

The Sliding Scale can be found HERE.