The Why, Who, When, and How of the BC Speculation Tax

By now you’ve likely heard of the new BC speculation tax.  Whether you’ve followed the discussions on it in detail, or only heard about it in passing, the speculation tax is now a clear and present reality.  That said, it’s important you as a homeowner are aware of what it means.  How it affects you. This quick read will provide you with a brief outline of the speculation tax.  It will give you direction that you’ll want to take immediately.

Why?

The BC speculation tax was designed as a provincial measure aimed at tackling the housing crisis in BC’s major urban centers. Its purpose is to target both foreign and domestic speculators.  Those who own homes in BC, but don’t pay provincial taxes.  As well, the speculation tax seeks to turn empty homes into good housing opportunities.  Thus relieving both rental shortages and discriminatively high home prices.

Who?

The speculation tax applies to only those homeowners living within designated taxable regions in BC.  It’s believed that over 99% of British Columbians will be exempt from the tax. To be exempt, there are several facts you should know about how the speculation tax works, and about what you’ll need to do to ensure you’re handling it correctly.  

First and foremost, BC residents whose BC home qualifies as their primary residence (meaning they live there 6 months or more per year) will be considered exempt from the speculation tax.  Also, if you are a BC resident and you own property that is rented for at least 6 months out of a year, you may be considered exempt.

If you are a homeowner in BC, and you’re not a BC resident, then you will likely be subject to the speculation tax.  The rate at which you are taxed will differ according to your residential status and locale. Please consult with your accountant to determine your precise rate.  

When?

To qualify for exemption from the BC speculation tax, each person on title needs to individually file a disclosure through the accepted methods.  The disclosure must be filed no later than March 31, 2019.

Failure to disclose by March 31, 2019, will result in mandatory payment of 0.5% of assessed property value.  If there are two people on title, and only one person discloses, then the person who did not disclose will be expected to pay 0.5% of their half of the assessed property value.

How?

Applicable BC homeowners will need to file for exemption from the speculation tax each year.  Each homeowner on the title will receive a notice by mail.  Then each individual must register either online at gov.bc.ca/spectax or by calling 1-833-554-2323

If you are required to pay the speculation tax, payment will be due July 2, 2019.

Any time a new tax is announced there’s a natural amount of confusion and perhaps some fear.  Knowing the facts, however, is key to keeping confusion minimal and fear at bay. Most important right now is that you’ve read this and are a little wiser as to how to proceed.  The BC speculation tax is upon us, so be sure to prepare yourself accordingly. If you’re a BC resident, and living within the taxable regions, then please do yourself a favor and file your disclosure for exemption immediately.  You won’t be sorry you did.

Call a team member at Vrecko Real Estate Group for current real estate market statistics.

Condos and townhomes are growing in popularity so it’s important to understand what strata fees include.

Condos and townhomes are not only the top home choices for first-time buyers but are a great option for empty nesters and professionals. Proximity to amenities makes them perfect choices for a wide range of buyers. They also require little-to-no maintenance – potentially a great combo for fresh homebuyers who may not want to take on the potential work inherent with a traditional Kelowna home. But with condos and townhomes come something extra – strata fees!  Scary words if you ask most. What are they even for? Strata fees are, at the very least, misunderstood.   Fortunately, it’s not nearly as scary as you may think.  Let’s take a look at exactly what strata fees are and what they include.

How are Strata Fees calculated?

Every condo owner pays a pre-set, monthly fee. The amount is based essentially on the size of your unit (square footage) and generally does not take into account deck space or parking spaces.  For instance, we recently sold a Kelowna penthouse that had a 1,100 sq ft rooftop patio – and the owner doesn’t pay any more in strata than someone with a 200 sq ft deck.

As far as what constitutes the actual monthly amount, factors are divided into three main categories:

1. Utilities and Insurance
2. Common Area Maintenance
3. Reserve Fund.

Strata Fees: Utilities

The condo fee goes to utilities such as water, sewer, common area heat, and A/C, and sometimes heat in the individual units. Many new Kelowna condominiums are built with individual heat pumps that are controlled and paid for by individual owners. As in detached Kelowna homes, there are many ways to heat and cool your condo, so make sure you’re clear on your strata fees before you buy.  Inclusions like heat & A/C can have substantial impacts on the strata fee, so when perusing Realtor.ca or looking over listings sent by one of our QVA agents, be cognizant of too-high or too-low strata fees – as the old saying goes, when something is too good (or bad) to be true…

Rule of thumb: generally you’ll be responsible for your own electricity and cable, and all other utilities will be covered by the strata fee.  Bonus: strata corporations are required to hold insurance policies, including fire, etc for the entire building, so by default your insurance is covered by the strata fee as well.

Strata Fees: Common Area Maintenance

We’ve already mentioned that condo ownership means fewer hours on the roof and mowing the lawn. But somebody’s got to do it, right? Fortunately, all maintenance and repair of common areas is covered by the strata fee.  They also cover snow and garbage removal, cleaning of common areas, exterior window washing, parkade cleaning, and so on.

Overall, the more amenities your Kelowna development has, the higher the fees will be. Think pool, gym, and sports courts. For this reason, some people, who know they will never use a glamorous pool deck, may choose to move to a development with fewer amenities, and a lower strata fee.

Strata Fees: Reserve Fund

Finally, a portion of your condo fee is set aside in the Reserve Fund.  Every condo board must maintain a large savings account for big-ticket items that inevitably arise as the building ages, with the aim of avoiding extra expenses for the unit owners if something expensive does arise – roof & window replacement or re-paving the main driveway for instance.  In the case of an inadequate reserve fund, the strata board may elect to collect a Special Assessment. These are generally reserved for surprise or unknown issues that require immediate repair.  Each condo owner will be responsible for a portion of the repair, generally in line with the square footage of their unit.  This may sound like a good reason never to own a condo, but remember that owning any home will result in a surprise bill here and there.  Hot water tanks don’t last forever!

So there you have it.  Make sure you incorporate the condo fee into your budget. Also, make sure to leave a buffer in case your condo fees increase. Any increases are at the discretion of the condo board. Be sure to attend every meeting and vote on the important stuff.

If you are looking for strata homes in Kelowna, contact the team at Quincy Vrecko and Associates.  They will guide you through the process of purchasing a home in Kelowna.  They will make sure your investment in a condo or townhouse will benefit you for the years to come.  Read the top reasons why you should work with Quincy Vrecko and Associates on your next purchase.