Selling the Apartment
There are many questions to ask before selling, including the reasons, the timing, price, terms and benefits. It is also necessary to consider how you will sell, including, selecting and negotiating with a realtor and a lawyer. One of the critical factors is deciding when to sell. Soon after we purchased our Condominium apartment, the worldwide property prices generally went down, Canmore was no exception but is was made worse by the poor reputation being earned at the Windtower by the incompetent management and a poor Board residing at the time. That is one reason why we rented for a period but we always recognised that if when our renter at the time gave notice and the realty market was in good shape that we would sell. This is what we did in 2016 as the market had improved and the improvements implemented by the new management structure were making the Windtower a desirable residence once again.
Because we were out-of-towners we had little choice but to use a realtor and agree the MLS system. As previously outlined, this is an expensive procedure relative to the UK. As it happened, at the brokerage we chose, the realtor with a recognisable reputation that we asked to work for us instead passed it onto another realtor. She was a lovely lady but as far as we could tell had not much of a reputation in the town but had sold some condo properties in the past so we went with it although she did not have a strong client list. However, since the apartment was MLS listed we figured it would get good visibility around town and some other realtor would probably end up selling it. And that is exactly what happened. It did however take 10 months.
Our first offer was form a kindergarten assistant in Banff. She was not a local and her realtor, Richard Maisonet turned out to be an acupuncturist with a part time interest in Real Estate. He clearly knew nothing about the Windtower except for the sales history of properties available to all realtors and he attempted to force down the offer price as he was comparing the sale price of a 1 bedroom apartment situated over the main entrance and the restaurant/bar to our 2 bedroom apartment situated at the much quieter rear of the building. He also talked to the manager about the Reserve Fund, but in the view of the manager and reading between the lines, Richard Maisonet didn’t have a clue about Condos so the buyer was very poorly informed. Although we did agree a sales price, inevitably the deal fell through.
Our second offer however was successful and the sale eventually went through satisfactorily. However, we did have a major problem with the buyer’s realtor, Jessica Stoner of ReMax, in that she refused to give us any up-front details of the buyer’s contact details or details of her lawyer. (This may have not been legal and we should have referred this to RECA). Eventually of course these facts have to be declared, and you may ask why was this such a big problem for us....well it is complicated and revolves around the Canadian Revenue tax requirements for ‘withholding tax’ where a rental property owned by a non-resident is involved. The ‘withholding tax’ requirements can be reduced or eliminated if the vendor obtains a ‘Certificate of Compliance’ from the CRA on a timely basis. We were denied this option by Jessica Stoner.
A summary of the required withholding tax procedures of the Canada Revenue Agency (CRA), both for the disposition withholding tax as well as the rental withholding tax are summarised HERE. Taxation form rental income is dealt with in the Rental menu.
The Canadian Tax Act requires that the a legal representative withholds 50% of the gross proceeds of the sale of the rental property owned by non-residents. These funds are to be paid to CRA within 30 days of completion of the sale unless a T2062, and possibly a T2016A, (Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Taxable Canadian Property) has been filed and accepted. A Notice of Actual Disposition must be sent to CRA by registered mail within 10 days of the completion of the sale if the facts and amounts differ from the T2062 or if no T2062 was filed. The CRA will review the T2062 and, if in agreement, and payment has been received they will issue a Certificate of Compliance. The Certificate of Compliance will allow the holder of the original 50% of gross proceeds to release the balance of the funds to the vendor. A personal Canadian tax return (T1) needs to be filed to claim the costs not allowed to be deducted on the T2062 (commissions and legal fees). Once the tax return is assessed, any balance paid with the T2062 greater than required by the tax return will be refunded to the taxpayer. The non-resident will have to recognize the sale on their tax return where they reside and will get a foreign tax credit for the amount withheld in Canada if the countries have a tax treaty.
Whilst this T2062 procedure looks straightforward, compliance for a non-resident is a real bundle of fun to sort out. The following is a list of the documentation required by CRA. The published CRA guide for the Certificate of Compliance process can be found HERE. Since the apartment was held in both the names of my wife and myself, the following documents had to be provided by both of us.
- •2015 United Kingdom Tax return
- •T2062 and T2062A documents
- •2016 Purchase Contract
- •2015 CRA Tax return
- •2014 CRA Tax return
- •2013 CRA Tax return
- •2008 Purchase statement
- •2008 Purchase contract
- •CCA Allowance schedule
- •Our Registered deeds
- •UK Certificates of Residence
We sent the documents to the local Tax Office in Calgary but after 3 months of hearing nothing we contacted CRA since there is an obligation not to have to wait longer than this and we were informed that Edmonton were dealing with it which they then did very promptly and issued our Certificates of Compliance to allow our lawyer to release the withheld funds. We did not have to pay any tax because we sold below the purchase price. This was not a total disaster since the £/CAD$ exchange rate worked for us as we purchased when the rate was high and sold when the rate was poor. Because of the exchange rate, it is a very unwise time to purchase a Canadian property right now.
From the above list, you will see that the last item is a UK Certificates of Residence. Now as a UK citizen with a UK passport you would expect such a document to be a mere formality......oh no it’s not! Our dealings with HMRC are detailed with in another section.
Since we were in the UK when the sale of the apartment was agreed, we were required to sign an Offer to Purchase sale agreement, an Affidavit of Execution signed before a witness and a Notary Public. Because our Notary found a number of legal ‘errors’ and typos in these documents, it had to go back to our lawyer 3 times before they got it right. This legal signing plus the cost of DHL amounted to £130 whereas if we had been in Canmore to sign, we would have not have had to pay.