Written by Leanne Rutley, Associate
Effective February 17, 2016, the provincial government announced a few significant changes to the Property Transfer Tax (“PTT”):
1. in an effort to promote new home construction, there is no PTT on new homes (to be used as the buyer’s principal residence) having a price of up to $750,000.00; and
2. there is a new tier of 3% for all properties (both residential and commercial) over $2,000,000.
PTT remains at 1% of the first $200,000 and 2% for that part of the price over $200,000 up to $2,000,000 when the new tier of 3% is applied. There are no changes to the First Time Home Buyer’s exemption criteria.
To qualify for the new home exemption, the property must be registered at the Land Title Office after February 16, 2016 and the buyer must be an individual (i.e. not a company) who is a Canadian citizen or permanent resident. The property must be located in BC, be used as the buyer’s principal residence, have a fair market value of $750,000 or less and be 0.5 hectares (1.24 acres) or less in size.
A new home includes, among other things, a house constructed and affixed to vacant land, a new apartment in a newly built condominium building, a manufactured home affixed to vacant land, and a house converted from an existing improvement on land (e.g. a warehouse converted into a home or apartments).
The buyer must move into the new home within 92 days after the purchase, and must occupy the home as their principal residence for at least the remainder of the first year. If an owner passes away or must move due to a separation within that first year, the exemption may still apply.
Buyers of new homes are entitled to the new home exemption even if they have just moved from another province. This differs from the First Time Home Buyer’s exemption which has a residency requirement – the First Time Home Buyer must have lived in BC for at least 12 consecutive months before they take ownership of their home. In both cases, the buyer must live in the home for at least 1 year after the purchase. The PTT branch will send the buyer a letter at the end of the first year to request confirmation of the residency requirements.
Although buyers may qualify for the First Time Home Buyer’s exemption only once, there is no limit to the number of times a particular buyer can qualify for the PTT exemption on new homes, provided that the exemption criteria are met. A buyer cannot apply for both the FTHB exemption and the new home exemption on the same purchase.
With the new home exemption up to $750,000, this represents savings to the buyer of up to $13,000.00. There is a partial exemption for properties having a fair market value over $750,000 but less than $800,000. There is no exemption for a new home having a fair market value of more than $800,000. For example, if the property is valued at $805,000, there is PTT on the entire price – not just on the last $5,000. There is also no exemption for new or used homes that are purchased as investment or rental properties.