3 Things You Need To Know When Buying A Property From A Non-Resident Seller

If you have bought a property, you probably skimmed through the standard clauses on pages 3 and 4 of the agreement of purchase and sale.  

There are few important things you need to know about Residency since it can be a very costly oversight.

The Income Tax Act details requirements for the collection of capital gains tax for non-resident sellers. The Act requires sellers to remit capital gains tax prior to closing in order to receive a clearance certificate from Minister of National Revenue. Otherwise, the buyer, yes the buyer is on the hook for paying capital gains tax within 10 days of closing! If the non-resident seller sold their property and is no longer in the country, the buyer is responsible for paying the seller's capital gains tax. Fair? Absolutely not but life is not fair!

3 Things You Need To Know When Buying A Property From A Non-Resident Seller

There are 3 things the buyer's lawyer will request from the seller's lawyer:

  1. Seller to provide statutory declaration they are residents of Canada. If they are not
  2. Seller to provide clearance certificate as proof of paying capital gains tax which could take a while and not be available prior to closing. If a clearance certificate is not provided, then
  3. Buyer's lawyer to withhold 25% of purchase price to cover for seller's capital gains requirements

It is important to hire a lawyer specializing in real estate transactions. It would be helpful as well to hire a full time real estate agent who asks the right questions and flags any potential issues upfront.

Looking for a sharp detail oriented real estate agent?  We'd love to help.