One of the most common questions I've been asked most about Power of Attorney (POA) is, what if I don't have a POA and I become incapable of making decisions for myself? My answer is - you're going to create a lot of trouble for your family or whoever needs to help you to manage your affairs.
When an adult needs help managing their affairs because of mental incapability due to an illness, accident, disability or diseases associated with aging, their judgment may be impaired in some way. They may forget to pay bills or put money away and forget where it is. The adult may also be confused about banking, investments, property, and personal belongings. However, they may have planned ahead and authorized someone else to make decisions and managing their financial and legal affairs through an enduring power of attorney.
But what if the adult does not have a POA?
The British Columbia government has launched the Condo and Strata Assignment Integrity Register (CSAIR) to crack down on tax evasion and improve fairness and transparency in B.C.’s real estate market. It is widely acknowledged that the practice of pre-sale flipping has been lacking of transparency. It is unknown exactly how many assignment flips occur each year. This new register will require developers to add or file assignments on new developments. This information will be gathered securely by the developer. The information that must be reported includes identity and citizenship of all parties to the assignment.
When a non-resident Seller disposes a real property in Canada, the profit from the sale of the property is, in most circumstances, subject to capital gain. If the Canadian Revenue Agency (CRA) cannot collect its fair share of tax that is supposedly remitted by the Seller, then the Buyer is on the hook and becomes liable for any tax owed by the non-resident Seller.
In order to avoid such situation in a purchase and sale transaction, the Seller’s legal representative must holdback 25% of the sale price for personal use property, or 25% of the land value and 50% of improvement value, prorated from current assessed values to actual price, for income generating property, until a clearance certificate is issued by the CRA. In order to obtain the clearance certificate, the non-resident will need to retain the service of an accountant to apply such certificate. The accountant will work closely with the Seller’s legal representative to ensure that the tax resulted in the disposition of the property is paid to the CRA from the holdback amount. This process can take up to 4-6 months.
Complication can arise if there is a mortgage on title. Since the holdback amount is quite significant, there is a chance that the sale proceeds after the holdback is not enough to pay off the mortgage. In such cases, the non-resident Seller will need to come up with extra funds from other sources to pay off the mortgage. To minimize the chance of this happening, the Seller can apply for the Clearance Certificate prior to the completion date, however, this can only be done if there is a subject free contract of purchase and sale. Since the process of obtaining the certificate can take up to 4-6 months, so in an ideal situation there would be a 4-6 months lead time between subject removal and the completion date. In most cases that we see nowadays, subject removal and completion is only a few weeks apart, sometimes days. Therefore, if you foresee such issue happening, please discuss with your lawyer or notary, and your accountant about your situation to ensure you have sufficient funds to pay off your mortgage on completion.
A bit about myself. I am a member of the British Columbia Notaries Public Society. I want to answer some of the most common questions that my clients have through my blog. Hope you find it useful.