June 14, 2005
Here at Weilers, we frequently represent Americans who are selling property in Northwestern Ontario. This article applies equally to individuals living in any other country.
In the last few years, demand for property in Northwestern Ontario has increased. Heavy demand for the products of Northwestern Ontario’s forestry industry have made acquiring private properties, even in remote areas, make financial sense for that industry. As well, properties located on the spectacular inland lakes of Northwestern Ontario are in great demand as individuals from all over the world seek vacation properties to take advantage of Northwestern Ontario’s great natural beauty, hunting and fishing. Increased demand has resulted in higher prices.
This has allowed many Americans to find that little piece of property in Ontario they owned to be far more valuable than they had previously thought.
Many of our American clients are surprised to find that selling a property in Ontario is different than selling property in their home states.
We’re here to help you navigate the process. In this article, we will identify some of the issues which are different or have been surprises to our American clients. We can play a role in ensuring you get top value for your property, keep your costs to a minimum, and make your transaction go smoothly.
Some basic differences – Many American states have relied on title insurers to cover over any problems with title/zoning of their properties. The result has been that fewer searches are conducted in most American real estate transactions than are conducted in Ontario. The simple fact is also that government plays a larger role in the average Canadian’s life than our American counterparts. Your purchaser’s lawyer will be checking zoning, taxes, and compliance with what may seem to be a million different legal obligations. A standard Ontario agreement of purchase and sale will require you to ensure that these items are all dealt with. The good news is that significant title problems are generally rare.
Just as there are considerable differences in laws between American states within the USA, you may find that there are significant differences in Ontario. We are here to help you navigate through all these requirements to make selling your Canadian property as smooth a transaction as possible, placing maximum profit in your hands.
- Capital Gains Tax
- The Canadian government charges a tax on the increase in value of real estate when it is sold. For non-residents, who are outside of the authority of the Canadian government, “teeth” have been incorporated into Canada’s Income Tax Act forcing those taxes to be paid immediately, from the sale proceeds. A purchaser must ensure the non-resident pays the tax, or pay the tax themselves. Again, we have considerable experience in advising our clients of the Canadian tax impact of the property sale, and navigating through the government forms and requirements to sell your property.
- Road Access
- In remote areas of the province, roads are not always owned and maintained by the government. This is extremely common in recreational properties, where access may be over privately or government owned land Purchasers who look at your property might think the property is accessible by road – because that is how they got there! For vendors, this issue arises because the Purchaser is not told the road is private before a contract is entered into, and come looking for a reduction in the purchase price. We help many of our vendors avoid this problem by determining how the property is accessed before you get into a contract with a purchaser.
- Government Reservations and Restrictions
- If you go back far enough, all property in Northern Ontario was originally owned by the Canadian government. Many of the original transfers of property by the government to individuals held back certain rights or reservations, rather than giving absolute title. For example, many properties will deal with “mineral rights” separate from “surface rights”. Other common restrictions are the right to cut down certain species of trees, or access to navigable waters and shorelines. Advising potential purchasers of any restrictions or reservations on the use of the property before you enter into a binding contract that says you will give them absolute title will avoid the situation where purchasers want a reduction in price when they learn title is not absolute. In most cases, these reservations or restrictions do not truly affect the purchasers intended use of the property, or its market value.
- Many of our American clients are dealing with property which has been in the family for generations. In our experience, Canadian requirements to deal with estates are quite similar to those in most US states. However, we do find that these properties are often overlooked when their original owners died. In some cases, the properties may pass through several generations, and several estates. We have a great deal of experience in assisting our American clients deal with estate issues from years gone by!
- Value of Funds
- Most of our American clients will specify a US dollar value when negotiating the price for their property. This makes sense, because it keeps your sale price the same despite fluctuations in the American and Canadian currencies. At Weilers we maintain a US fund trust account and convert only those funds which are necessary to pay the expenses of your transaction, leaving the rest intact as US funds, without conversion. This can often save our clients hundreds of dollars in exchanging funds from one currency to another.
The above article outlines some of the issues which arise for our American clients who are selling property in Ontario. Rather than intimidate you, we wish to assure you that there is an excellent opportunity to obtain substantial sums of money from selling your Canadian property. All of our clients have found the process to be worthwhile and our years of experience assists our clients in completing the sale, and getting you your sale proceeds as quickly and easily as possible.