The Multiple Listing Contract and the HST

The Real Estate Board has been hearing concerns from brokers and REALTORS® about Clause 5B of the Multiple Listing Contract and how it might be affected by the introduction of the Harmonized Sales Tax on July 1, 2010. Concerns focus on when the commission is due and payable, in comparison to the position of the Canada Revenue Agency.

To clarify a brokerage’s obligations, the Real Estate Board has asked the Board’s legal counsel, Brian Taylor of Bull, Housser & Tupper for a legal opinion.

Clause 5B states:
"The remuneration due to the Listing Brokerage shall be payable on the earlier of the date the sale is completed, or the completion date, or where no contract of sale has been entered into, seven (7) days after written demand by the Listing Brokerage."

Clause 5 of the MLS® Contract provides that commission is due to the Listing Brokerage upon the occurrence of certain events (i.e., the execution of a legally binding contract of purchase and sale or the presentation of an offer to purchase from a buyer who is ready, willing and able to pay the Listing Price, even if the Seller refuses to accept that offer).

Despite the fact that the commission is due at an early stage in the transaction process, custom provides that it is not paid until the deal completes (or was intended to complete). In order to protect Brokerages and REALTORS® from a claim by the Canada Revenue Agency that GST was payable on commission earned from the date it was due as opposed to the date it was received Clause 5B was inserted into the MLS® Contract. Clause 5B provides that despite the fact that commission is due at the earlier stage it is not payable until the earlier of the Completion Date or the actual date the sale completes. In the case of an offer from a buyer ready, willing and able to pay the Listing Price that is not accepted by the seller the commission is payable seven (7) days after written demand.

Questions have arisen as to how that clause might affect transactions entered into prior to July 1, 2010 but completed afterJuly 1, 2010.

If you apply the strict wording of Clause 5B to a Contract of Purchase and Sale that was negotiated and entered into before July 1 but completed after July 1 you would arguably come to the conclusion that the applicable tax was to be calculated as of the date the sale completed and the commission was payable (i.e. after July 1) and therefore HST would be payable on the amount of the commission received.

However it is my understanding that the position of the taxing authorities is that where a transaction spans July 1, 2010 the Brokerage or REALTOR® is to calculate the percentage of services provided prior to July 1 and those provided after July 1 and only pay HST on the amount of services provided after July 1, 2010. That interpretation is obviously more favourable than a strict interpretation of Clause 5B and in my view should be followed by Brokerages and REALTORS®.

As the majority of the services provided by a Brokerage and REALTOR® are provided prior to the execution of the Contract of Purchase and Sale where a contract is entered into before July 1 and closes after July 1 the percentage amount of HST payable on those services will not be significant.

It should be noted that the foregoing is based on summaries provided in government bulletins and that the actual regulations implementing the transitional rules have not yet been released.

For more detailed questions concerning HST Brokerages and REALTORS® should consult their lawyers.

Brian E. Taylor, Partner
Bull, Housser & Tupper LLP

City of North Vancouver approves regulations for coach houses

They’re known as coach houses, carriage houses, laneway homes, garden suites or granny flats. And, after years of debate, the City of North Vancouver Council has agreed that home owners can build one in their back yard provided they comply with new regulations.

What is a coach house?

In the City of North Vancouver, a coach house is a small, detached secondary residence located on an alley or lane behind an existing detached home.

New Options

City of North Vancouver home owners have two options if they plan to build a new unit or replace their garage.
“This is great news,” says Dave Watt, a past president of the Real Estate Board and a long time North Shore REALTOR®.

“Coach houses can be an affordable, flexible solution that brings significant community benefits.”
As an example of these benefits, Watt explains that coach houses will help seniors and young families remain on the North Shore in their neighbourhoods.

“A coach house lets a senior stay in their home, and have an adult child or a caregiver live in their coach house. A senior can also move into their coach house and let their children and grandchildren live in their larger home,” says Watt, noting that the home owner also has the option of renting the coach house for added income.

While opponents often cite increased traffic and decreased neighbourhood privacy as significant concerns, most are convinced that coach homes benefit the environment. “They’re smaller, they’re more affordable and they don’t require new infrastructure since they can hook up to existing water mains, sewers and power,” explains Watt.

New regulations

The new regulations govern siting, access, setbacks, parking, habitable space, architectural style, privacy, building products, landscaping and use. Home owners who have built to the maximum allowable density on their property won’t be able to build a coach house.

A coach house can only be rented, it can’t be sold, which doesn’t make sense to Watt.

“I think the City should consider allowing coach houses to be under a strata plan similar to a duplex,” says Watt, who has been talking to North Vancouver City Council members about this option. “It’s a home owner’s property and their investment, and home owners should be able to sell their coach house if that’s what they want to do.”
Currently there are requirements in both the Land Title Act and the Strata Property Act that make such a subdivision difficult when the primary home already exists, says urban land use consultant, Bob Ransford.

“One requirement is that the existing building would have to meet current Building Code requirements,” explains Ransford. “Because the home might have been built some time ago it likely met Building Codes then in place but not the current ones.”

Watt believes allowing home owners to sell their coach houses would bring much-needed diversity to the local housing stock, and new affordability to neighbourhoods. (See diagram above right)

“What can I do as a REALTOR®?” asks Watt.

Watt suggests REALTORS® become a voice in their community when local councils are looking for new housing options to build better neighbourhoods.

“We have the knowledge, so let's share it with policy makers, to help build the best communities we can.”
For information on North Vancouver’s coach house regulations visit: www.nvc.com/coachhouse.

On the left-hand side, go to Accessory Coach Houses and then Coach House. This will take you to a page, Coach House Community Working Group. Scroll down to:

• Staff Report with Coach House Bylaws, dated February 24, 2010 (Contains the Coach House Implementation Bylaws)

• Comparative Summary Level-A and Level-B Accessory Coach Houses

• Level-A Accessory Coach House Development Permit Guidelines

• Level-B Accessory Coach House Development Permit Guidelines

Knock, knock who’s there? 98,000 REALTORS®

REBGV PAC Representatives meet new MP Fin Donnelly (L-R Harriet Permut, Willard Dunn, Fin Donnelly, Jim Woolsey, Sylvia Sam, Don Mussenden, Gayle Carter).

Each year, Real Estate Board of Greater Vancouver’s Government Relations (GR) Committee representatives meet face-to-face with local MPs in Ottawa to talk about top issues as part of the Canadian Real Estate Association’s annual Political Action Committee conference (PAC Days).

This year marked the 25th year for REALTORS® lobbying on Parliament Hill, and during meetings, May 2-4, 2010, recommendations included:

Unlocking Property Reinvestment: allow capital gains tax and recaptured capital cost allowance deferral when an income property is sold and the proceeds are reinvested in another income property within one year.

The Home Buyer’s Plan: index the Home Buyer’s Plan RRSP withdrawal limit since the average home price has doubled in eight of ten provinces since 1992.

(L-R): REBGV Past President Allan Corbett, MP John Cummins, Sylvia Sam	(L-R): Jim Woolsey, NDP Deputy Leader Libby Davies, Don Mussenden

West Vancouver legalizes secondary suites

Suites must be licensed by September 30, 2010

There may be up to 3,000 secondary suites in West Vancouver, according to the District. To help ensure community safety, the District has made all of them legal as of March 1, 2010 and subject to the District Zoning Bylaw. REALTORS® listing and advertising a property in West Vancouver which contain a secondary suite should familiarize themselves with the new guidelines and regulations, located in Zoning Bylaw 2200, Section 31-109.

What is a secondary suite?

West Vancouver defines a secondary suite as a separate residential unit accessory to a single family or two-family dwelling. The suite must have two or more rooms and include at least one living room, one kitchen and one bathroom.

A property with a secondary suite must meet the following requirements:

1. Only one secondary suite is permitted per lot.

2. The secondary suite cannot be detached from the principal building.

3. The secondary suite must occupy a minimum floor area of 215 sq. ft and a maximum of 968 sq. ft. or 40 % of the total floor area of the building excluding garage space, whichever is less.

4. The registered owner(s) of the property must occupy either the principal dwelling unit or the secondary suite.

5. A building containing a secondary suite cannot have lodgers, a personal care facility, a child care use, or a bed and breakfast.

6. A secondary suite must have a separate exterior entrance from the principal dwelling unit.

7. The secondary suite must have an additional off-street parking spot exclusively for the use of the secondary suite and at least two off-street parking spaces for the exclusive use of the principal dwelling unit.

8. The secondary suite parking must be located so that any vehicle parked in any required vehicle parking space on the lot may exit without needing to manoeuvre other vehicles and must be provided in addition to parking spaces required for visitor parking.

9. The secondary suite must not be subdivided from the principal dwelling unit under the Land Title Act or the Strata Property Act.

10. Water and electrical service for the secondary suite must not be separately metered.

By September 30, 2010 property owners must:

1. Apply for a business licence and pay a fee of $250. As ofOctober 1, 2010 this fee increases to $400. (Note: March 1, West Vancouver stopped accepting applications for in-law suites.)

2. Submit a general plan for the site including the existing floor plan of the unit showing the suite and the location of parking spaces.

3. Have the suite inspected.

4. Meet any requirements as a result of the inspection, including a follow-up inspection.

5. Sign an affidavit that the home owner will occupy either the principal dwelling or the secondary suite.

In-law suites

Previously, in-law suites were legal for family members only. New applications for in-law suites are no longer accepted and only existing in-law suites with valid permits can continue as legal, non-conforming uses.

Penalties

If a West Vancouver home owner does not comply, they could be found to be in violation of the Zoning Bylaw and could face fines of up to $300 a day.

Quarterly reports on secondary suites

West Vancouver staff now prepare a Secondary Suites Quarterly Report which includes:

• the number of new suites applied for and approved and their addresses;

• the number of existing suites legalized and approved and their addresses; and

• the number of files from various listing agencies advertising secondary suites for rent or existing in homes for sale in West Vancouver.

West Vancouver REALTORS® should take the time to review quarterly reports to keep up to date. The April 23, 2010 report (listed as Appendix D) is available at:

www.westvancouver.ca/uploadedFiles/Your_Government/Agendas_and_Minutes/2010/May/10may03-7.PDF

West Vancouver secondary suites – important documents

An FAQ sheet is available at: http://westvancouver.ca/uploadedFiles/Bylaws_and_Licenses/Permits_and_Licenses/FAQ_S_FOR_SECONDARY_SUITES.PDF

A Secondary Suite Business Licence Application is available at: http://westvancouver.ca/uploadedFiles/Bylaws_and_Licenses/Permits_and_Licenses/SECONDARY_SUITE_LIC_APPLICATION.PDF

Fees & Charges Bylaw (for cost of business license) is available at http://westvancouver.ca/government/bylaws.aspx. See Schedule 4 Business Licences, and then Secondary Suites.

Zoning Bylaw No. 2200 is available at: http://westvancouver.ca/government/bylaws.aspx

The Zoning bylaw amendment adopted on December 18, 2009 for Secondary Suites is available at: http://www.westvancouver.ca/uploadedFiles/Your_Government/Agendas_and_Minutes/2009/December/09dec18-5.PDF

For information, contact West Vancouver’s Bylaw & Licensing department at 604.925.7152 or visit http://westvancouver.ca.