OWNING PROEPRTY IN CANADA
Real Property is defined as any right, interest or benefit in land, which includes mines, minerals and improvements on, above or below the surface of the land.
Ownership of Real Property in Canada is organized under the Land Titles or Land Registry systems, where each property is uniquely and legally described (i.e. Lot 2 Concession 3 Ware Township)
and registered at the Land Title/Registry Office.
At the Land Titles/Registry Office the owner's name is registered with the property, along with any mortgages, liens, and other forms of ownership that may be associated with the property.
When your name is registered to the property (also called "on title") you then have what is called a "Bundle of Rights". A Bundle of Rights is the right to sell, to lease, to use, to enter and to refrain from
using the property.
In Ontario, both Canadians and Non-Residents can have their name registered on title and will thus have the same Bundle of Rights.
A common misconception is that Non-Residents can only lease property in Canada. Although there are circumstances where Non-Residents do lease property from land owners,
this is only one type of ownership. Non-Residents can purcahse land as opposed to leasing and have their names registered on title making them the owner in what is called
Fee Simple Ownership.
Another misconception is that Non-Residents have to pay additional taxes and fees. Prior to May of 1997, there was an additional surtax of 20% for Non-Residents who purchased land in Ontario. However, this act was amended in May of
1997 and is no longer applicable. Any other fees or taxes remaining are the same for both Canadians and Canadian land owners living outside of Canada.
Yes you can. You are treated just like a Canadian Buyer and enojy the same "Bundle of Rights" as Canadians.
The bottom line is that U.S. Citizens, and other non-resident Buyers can make an offer and purchase proeprty in Ontario, just the same as Canadians would.
No. There are no additional taxes for Non-Residents. However, if the property is being sold by a company or by a person who is in the business of buying and selling land such as a land developer or investor,
a Goods and Services Tax (GST) of six (6) percent of the purchase price is applicable. This tax is collected by the Lawyer and is remitted to the Canadian Government upon closing of the deal.
If applicable, this tax may be paid by the buyer, whether they are Canadian Citizens or not.
Non-Resident Sellers may also be subject to Capital Gains, where profits derived from the sale of land they own in Canada is considered a form of income and may be taxed under Ontario's Income Tax laws. If Capital Gains tax is applicable,
it is collected and remitted by your Lawyer to the Canadian Government. However, your Lawyer may be able retrieve a portion of these taxes paid. In these cases, your Lawyer and Accountant are best suited to advise you.
In Canada, closings are done by Canadian Lawyers, and a Lawyer in the provice that the property is located in will be required.
Both the Buyer and the Seller have a Lawyer and the Lawyers advise each on their requirements, closing costs and changing title on the property to refect the new owner.
Closing costs are typically made up of three separate fees and are paid by Canadian and non Canadian Buyers and Sellers alike. 1) Land Transfer Tax (LTT): This is collected by the lawyer and remitted to the Provincial Government, and your Lawyer is best suited to advise you.
For calculating this tax, the purchase price is converted to Canadian Dollars and the formula for Land Transfer Tax is $5 per thousand for the first $55,000
$10 per thousand for the next $145,000
$15 per thousand on any amount over $250,000
For example:
a purchase price of $50,000, the LTT would be $200 Cdn.. For a purchase price of $80,000, the LTT would be $525 Cdn.
Here is a handy Land Transfer Tax Calculator for your convenience: (based on purchase price of a resale residential home. Please note that this calculation is based on a resale property and not on a newly constructed home which typically includes GST in the price; if you are buying from a builder, i.e. buying a newly contstructed home, the Ontario Land Transfer Tax is calculated on a price which is net of GST and therefore the Ontario Land Transfer Tax will be slightly less for a new home than for a resale home with the same price.)
Land
Transfer Tax Calculator
2) Disbursements: This would include, long distance calls, courier costs, title searches, photocopies, stamps, seals etc. Typically these costs average in
the $250 to $300 CAD range and are the costs that the Lawyer will incur while providing you with their legal services. Depending on the circumstances, these fees will vary and your Lawyer will be best to advise you of
what you can expect.
3) Legal Fees: This fee would be what the Lawyer actually charges you for his or her time to handle your transaction. This fee would be what you negotiate with the Lawyer.
It is a good idea to shop around a little bit as some Lawyers are more negotiable with their fees than others. They all have to do the same work and guarantee title for you, and the Lawyer's job is to ensure that you are
actually buying the property you have made an offer on.
Your Lawyer reviews the Title Search on the property with you, explains the terminology and ensures that you have clear title to the property. Typical costs could range from $700 to $1,500
depending on the amount of work required. Your Lawyer is best to advise you on this after they have a chance to reveiw the Property and the circumstances of your case.
No. The residency of the transferee is not relevant to the amount of land transfer tax paid on the purchase of an interest in land in Ontario.
A non-resident pays land transfer tax at the same rate as Canadians. Prior to May 1997, the Land Transfer Tax Act required that non-residents pay a higher rate of land transfer tax on
certain transactions, however, this act has since been amended and no longer applies.
You Realtor is best to advise you on making an offer and should be consulted at all times, as there are many issues that you will need advice on.
Your Realtor has the knowledge and experience to help you make the right decisions.
Once you have found your property, your Realtor will prepare an offer and present it to the Seller's Realtor. The Seller then has one of three options:
1) They can accept the offer, 2) They can reject the offer, or 3) they can counter the offer with changes to it as they desire. If the offer is countered, the the Buyer has the same options of acceptence,
rejecting or countering (counter-counter offer). Counter offers can continue several times until a mutually acceptable offer is reached.
Once the offer is accepted the Buyer sends in the agreed deposit amount which goes towards the purchase price. A deposit can be any amount but typically is about 10% of the purchase price.
If there are competing offers from different Buyers, a large deposit may be an advantage over price, as it will show that a Buyer is serious and committed to closing the deal. A deposit
can also be submitted when the offer is presented to the Seller to show the Seller that the Buyer is making a serious offer.
The deposit is placed in a Trust Account and cannot be released until the deal is closed, and then it goes towards the purchase price. Only the Lawyer can release the deposit from the
trust account, and if for some reason the deal falls apart, both the Buyer and the Seller must Mutually Release each other from the offer. THe Mutual Release includes direction for the
deposit to be returned to the Buyer in full.
When buying a property in Canada, an offer must be made in writing so that all aspects of the transaction are clearly outlined within the offer. Once the Buyer has signed the offer, it
becomes legally binding until the Irrevocable Date. Thet Irrevocable Date is the day that the offer is valid until. The Seller has until this date to decide if they will accept the offer or not.
Once the offer is signed by the Buyer and presented to the Seller, you cannot withdrawl from the from from it unless the Seller rejects or coutners the offer, or signs a mutual rlease. If you do
try to break the offer, you may lose your deposit and the Seller may have gorunds to take action against you.
When you make your offer, make sure that every item staying in the property, eg. carpets, fixtures and appliances, is written on the offer as 'chattels included'. Chattels are any item
that is not fixed to the property. If it is unclear whether or not the item is a Chattel, then it is best to include it so as to avoid any confusion. Serial numbers, make, model should
be specified. When including chattels in your offer, be as specific as possible. If you specify that "The Boat" is included as a chattel, then all the Seller would be obligated to do is leave any
boat, be it a canoe or an 18 footer with an outboard motor. Photos of each chattel could also be taken so that there is no dispute upon closing.
If there is any item that is attached to the property, called Fixtures, they should be included in the "Fixtures Excluded" section of the offer. A built-in dishwasher would be a fixture,
as would be a Chandelier. As with Chattels, if it is unclear, then include it in the offer with Make, Model and serial number and photos if available.
In today's market, it is advisable to always include three conditions:
1) Inspection - You should have the property and any buildings inspected by a Certified Property/Home Inspector. They
provide an abundance of advice that is invaluable and will make you aware of any issues that may cause you problems down the road.
The cost of a Property/Home Inspection is paid by the Buyer.
2) Financing - Make sure that you are able to secure suitable financing. If the deal closes and something comes up at the last moment that you were unprepared for, the Seller can still hold you
liable and force you to pay. A financing condition protects you so that you are gauranteed that you will have enough funds to close the deal.
3) Insurance - insurance is becoming one of the most common conditions of an offer. Insurance companies may not insure you for any number of reasons, from oil tanks and environmental
issues, to the age of roof shingles or foundation type. Insurance costs may prove to be too expensive, or the insurance company may force you to make repairs or alterations at your expense.
Always make sure that you can find suitable insurance before closing any deal.
When you obtain insurance, your insurance company may also hire their own inspector to look at the property, so be up front about your property details and provide them with any information they request.
Finally, with an accepted offer, the deposit made and conditions met, the lawyers will proceed to close the deal, transfer the purchase price amount to the Seller and put the Buyer's name on title.
When a non-resident sells Canadian real estate, he/she is required to pay the appropriate amount of taxes on any capital gain. The normal
Canadian tax rates will be applied to 50% of the gain. However, a non-resident is required to pay an estimate of the tax before the sale, an amount equal to 25% of the gain. This amount
is to be retained by the seller's lawyer until such time as a clearance certificate is received from the Canada Revenue Agency (CRA) in connection with the sale of the property. Upon
payment, the CRA will issue a clearance certificate to the seller, but not until there has been a contract of purchase and sale with all subjects (conditions) removed. The wait for the
certificate is usually 6-8 weeks. The non-resident seller should file a Canadian income tax return for the year in which the sale occurs and should expect to receive a refund of a portion
of the taxes paid.
Many countries, such as the U.S., have tax treaties with Canada that prevent you from being taxed in both Canada and your home country. It is advisable to contact a tax accountant in
your country for more information.
If you stay in Canada for six months or less each year, the government considers you a tourist or non-resident.
(Americans don’t need a visa to enter the country.) That means that you can do just about anything - open a bank account, buy land, a car. Purchase stocks or bonds - except vote or get free health care.
Americans who live in Canada for more than half the year but who don’t want to apply for working authorization simply leave Canada every six months. Each time they return, the six month "tourist"
period begins again. There’s no limit on the number of times you can go back and forth across the border. For more detailed information contact Canada Customs and Immigration. If you are considering frequent travel to Canada, you may want to look into a CANPASS.
PROPERTY RIGHTS, HISTORICAL CONTEXT
The ownership of surface rights and mining rights varies from one parcel of land to the next across Ontario. The Crown (Canada) has created land title since the early days when Ontario was an English
colony. There have been a number of different practices spanning over 300 years of land settlement. The practice of the Crown in England, for example, was to reserve to the King or Queen
the precious metals of gold and silver in the grants of land termed "Patents."
In 1913, the province amended its Public Lands Act so that any title granted by the Crown before the amendment included mineral rights ownership. Any parcels of land granted by the
Crown after May 6, 1913, may or may not include the mining rights depending on how the title is worded. Ontario’s current Public Lands Act authorizes the Minister of Natural
Resources to sell or lease land. Today the province’s policy is to reserve mining rights to the Crown in the majority of land grants.
All waterfront property in Northern Ontario has a standard 66 foot Shoreline Reservation, unless otherwise transferred to the Deed.
This reservation can be as deep as 200 feet on some properties. This part of the property is owned and controlled by the Ministry of Natural Resources. No permanent
development or shoreline development is allowed on this reservation. In most cases the shoreline reservation may be purchased from the Ministry of Natural Resources.
The purpose of a Shoreline Reservation is to preserve the natural habitats and environments of aquatic creatures, birds and plants.
There are parcels of land in Ontario where land owners may own the surface rights but do not own the mineral rights in, on or below their land. The Ontario Mining Act provides a statutory right to stake mining claims on Crown mineral rights and to conduct assessment work on the mining claims even if the surface rights are privately owned.
Section 78 of the Mining Act requires that the holder of a mining claim notify the surface rights owner of their intention to perform assessment work on that claim. This notice is only given once, prior to the commencement of assessment work.
The Mining Act also provides for a process of compensation if there is damage to the property of the surface rights holder. Should there be any damage to surface rights, the Mining and Lands Commissioner may award compensation. There have been approximately fourteen applications filed with the Commissioner on compensation issues over the last ten years.
Section 32 of the Mining Act prohibits prospecting and staking on that part of a lot where there is a dwelling, cemetery, public building, garden, orchard or crops that may be damaged. Prospecting and staking can only occur in these areas with the consent of the surface rights holder or by order of the Provincial Mining Recorder or Commissioner. If consent is not given, it may mean that the mining claim is invalid or that parts of the mining claim may be excluded.
Surface rights refer to any right of land that is not mining rights..You are the Deeded property owner and have the legal right to walk & enjoy the surface of the property. You can build or construct a dwelling on the surface of the property. For more information about Surface Rights Click Here
Timber rights reserved means that all the timber (trees) standing on the property do not belong with the property. These trees are reserved to the Provincial Government. or to an individual. This includes all tree species except Pine trees. Although the Government owns the trees they do require the permission of the property owner to harvest those trees. If the property owner wishes to harvest the trees on the parcel, the owner must call the Ontario Ministry of Natural Resources District Office for further details.. A stumpage fee is owed to the Ministry of Natural Resources when harvested.
All Pine trees standing on the property are owned by the Provincial Government. The property owner does not own these trees. To harvest Pine trees you must contact the Ontario Ministry of Natural Resources. The Pine rights can be purchased from the Government.
The minerals above or below the surface have been reserved by the Government, a Mining Company, Prospector or Private Individual.
This includes all precious metals, ores, sand & gravel. When a Mining Company, Prospector or other Individual owns the mineral rights, they do not need the owner's permission to go on the property and do exploration work. The Mining Company, Prospector or other individual only needs to inform you in writing the day before of their intent to perform work.
Owning the timber rights on the property, when the mineral rights are reserved, is a very large plus for the property owner.
The majority of prospectors and mining companies are very good to work with, and between the owner and themselves, will normally work out a fair compensation package for any exploration work that will be performed.
All private properties that were patent under the Private Lands Act prior to 1913, have the mineral rights included in the property.
For more information (and there is a lot more), please call the Ontario Ministry of Northern Development & Mines. 1-705-670-5742 or 1-888-41-9845 or Click Here
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