The Speculation and Vacancy Tax Act

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The Speculation and Vacancy Tax Act

The Speculation and Vacancy Tax Act (the “Act”) was enacted by the British Columbia provincial government on November 27, 2018. The purpose of the Act is to combat speculation in the residential housing market and turn empty houses into homes for BC residents.

General Information about the Act

Unless exempted, all owners of residential property in designated regions must pay the speculation and vacancy tax (the “Speculation Tax”). The designated regions include most of the Capital Regional District and Metro Vancouver, the Cities of Abbotsford, Chilliwack, Kelowna, West Kelowna, and Nanaimo, as well as the Districts of Mission, and Lantzville.
Every owner of a residential property on December 31 in those regions must make a declaration by March 31 of the following year, even if the owner no longer owns the property.

The Speculation Tax is calculated as follows:
Tax payable = (tax rate) x (owner’s interest) x (assessed value of the property)

For 2018, the tax rate for all owners is 0.5%. For the 2019 calendar year and beyond, the tax rate will be 0.5% for Canadian citizens and permanent residents who are not members of Satellite Families (defined below). Foreign owners and members of Satellite Families will be charged a tax rate of 2%. “Satellite Families” are households who declare less than 50% of their total income for the year on Canadian income tax returns.

Owners who owe taxes must pay by July 2 of the year following the assessed year. For the 2018 calendar year, the Speculation Tax must be paid by July 2, 2019. Failure to pay on time may result in interest and penalties.

Exemptions
If an owner qualifies for one of the following exemptions, they will not have to pay the Speculation Tax. However, failure to declare will result in being assessed at the highest tax rate (2%), even if the owner would have otherwise been exempt. Below is a list of some, but not all, of the exemptions under the Act.

1. Principal Residence
Owners are exempt if the residential property is their principal residence. If owners own multiple properties, they can only claim this exemption for the place they lived the longest in. Spouses cannot claim two different places unless there is a specific reason, such as work, medical leave, or divorce. Foreign owners and members of a Satellite Family cannot claim this exemption. If the owners do not live in the residence for the necessary time, they may still be able to claim the exemption if they were absent for certain reasons, such as medical leave or residential care.

2. Tenants
If the property is occupied by a tenant for periods of at least 30 days and for a total of 6 months (3 months for 2018), the owner can claim an exemption. There must be a written tenancy agreement, unless the tenant has a non-arm’s length relationship with the owner (e.g. close friend of family member).

3. Under Construction or Renovation
If the property is uninhabitable for a period of at least 90 days due to construction or renovations, the owner may be able to claim this exemption. The owner must demonstrate that they have taken reasonable steps to ensure that the building activity continues without undue delay, or that any undue delay was beyond their control.

Other Information
The Speculation Tax is completely separate from an owner’s other taxes, including income tax, property tax, and the Vancouver Empty Homes Tax.

The Speculation Tax attaches to the owner, not the property. This means that a new buyer does not have to worry about hidden liability when they buy a house and that the seller may be liable to pay the Speculation Tax even after they sell a house.

Owners may be able to claim tax credits against any Speculation Tax assessed. BC residents who are not members of a Satellite Family get tax credits of $2,000 per property and per person, which means that the first $400,000 of a property will usually be tax free.

If you have any questions about how the Speculation and Vacancy Tax Act may apply to you, please contact Heath Law LLP at 250-753-2202 or toll free: 1-866-753-2202.

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Proprietary Estoppel

Generally, when asking a Court to find that a promise between two parties is legally enforceable, the Court will require the elements of a contract to be present. The basic elements of a contract include, among other things, offer, acceptance, and consideration. While all of the elements are vital, consideration (some benefit flowing to both parties) is important as it is an objective measure that both parties intended to enter into a legal relationship. Without these elements present between a party, generally, a Court will not enforce a contract.  However, the Supreme Court of Canada, in Cowper-Smith v Morgan (2017 SCC 61) has recently affirmed the use of proprietary estoppel in Canada. Proprietary estoppel might allow people to protect their rights and interests without consideration being exchanged between the parties.

The SCC acknowledged that proprietary estoppel is commonly concerned with interests in land but acknowledged that the constraint is arbitrary. The court noted that the BC Court of Appeal in Sabey v. von Hopffgarten Estate (2014 BCCA 360 at para 32) entertained the question but did not make a decision on the issue. The Court will consider the following elements to determine whether equitable interests arises:

  1. a representation or assurance is made to the claimant, on the basis of which the claimant expects that he will enjoy some right or benefit over property;
  2. the claimant relies on that expectation by doing or refraining from doing something, and his reliance is reasonable in all the circumstances; and
  3. the claimant suffers a detriment as a result of his reasonable reliance, such that it would be unfair or unjust for the party responsible for the representation or assurance to go back on her word.
  • Cowper-Smith, supra, para. 15.

Unlike other forms of estoppel, proprietary estoppel can be the foundation for a lawsuit. The purpose of proprietary estoppel is to avoid unfairness or injustice that would result to one party if the other were to break their work and rely on their strict legal rights. For example, English courts have used the doctrine in relation to chattels, insurance policies, intellectual property rights, commercial assets, and other forms of property. However, the SCC did not make any decisions on this issue.

Currently, it is somewhat of an open question to determine how far Canadian Courts will extend proprietary estoppel. If you have relied on someone else’s promise to your detriment, please give us a call to discuss your possible legal remedies.

 

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Collaborative Family Law

Collaborative family law is a form of dispute resolution where each spouse is separately represented by a lawyer, and the spouses and their lawyers sign a participation agreement which provides for the following:

  • If either party starts contested court proceedings, all of the collaborative professionals (including the lawyers) are disqualified from acting for the parties;
  • both parties agree to full and timely disclosure of all relevant information and documents, and agree to good faith negotiations;
  • the negotiations are confidential and without prejudice; and
  • the negotiations are concluded when the parties come to an agreement, which is put into writing (a separation agreement) by the lawyers and then signed by the parties and witnessed by the lawyers.

All collaborative professionals must be certified in the collaborative process. The process often includes the following professionals:

  • Coach, who is a licenced mental health professional whose primary function is to provide emotional support, communication, and conflict resolution between the spouses.  This provides for long-term improved communications, with the outcome that the parties are able to resolve their matters on their own in future rather than requiring further legal assistance and litigation.  There can be one Coach for both parties or each party may be separately supported by a Coach;
  • Child Specialist, who is a licenced mental health professional whose primary function is to provide a voice for the children and ensure that their thoughts, concerns, and needs are heard in the separation process.  This is one Child Specialist for all children and this person is referred to as a “neutral”, meaning that he or she has no allegiance or bias for one party over the other.  He or she has the primary goal of speaking for the children;
  • Financial Specialist, who is a certified financial professional whose primary function is to help the spouses analyze their financial, business, and tax situation and plans for the future.  The intention is to help the parties make the most out of their settlement and settle on financial terms that are the most advantageous to both spouses.  The Financial Specialist is a neutral;
  • Collaborative Lawyer, who is a member in good standing of the Law Society of BC and assists their client by providing legal advice, supporting and facilitating negotiation and communication, and ensuring that their client’s legal interests are protected.

There is a myth that Collaborative Family Law is more expensive than negotiation and litigation because of the involvement of all of the experts.  The process is designed so that the action taken by each of the experts is not duplicated by the others, but rather each of the experts address a particular issue in their respective areas of expertise.  In addition, it is often possible to submit the expenses from the Coach and/or Child Specialist to one’s extended health benefits as it is an invoice from a registered clinical counsellor, psychologist or social worker.  Furthermore, the hourly rates charged by the non-lawyer specialists are often less than the rates charged by the lawyers.

Collaborative Family Law encourages and facilitates negotiations that are respectful and constructive.  This process is often more supportive of everyone involved, including the children.

If you would like to book an appointment with our Collaborative Family Law lawyer, Kathleen Sugiyama, please contact Heath Law LLP at 250-753-2202 or TOLL FREE: 1-866-753-2202.

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Litigation – What is an Examination for Discovery

What is an Examination for Discovery?

In nearly all litigation matters, parties will undergo what is termed an “Examination for Discovery” or “Discovery” for short. Typically, a Discovery means that you will be questioned under oath by a lawyer acting for the other party in your legal action. The main purpose is to learn more about the case, assess your credibility and reliability as a witness, and to have evidence provided under oath to rebut contrary evidence that you may give at trial.

While the foregoing description makes many parties nervous, Discoveries are oftentimes quite casual. You will be in a room with the lawyers, often times the other party, and a Court Reporter. The lawyer who is conducting the Discovery will ask you a series of questions about your case in an effort to obtain admissions to prove certain facts at trial. The Court Reporter will record and transcribe the Discovery, and produce a transcript afterwards.

As everything you say is being recorded and transcribed, the following are important reminders:

  • Listen to each question carefully and think before your answer
    • It is always acceptable to answer with an “I don’t know” if you do not know an answer a question asked of you
  • If you do not understand a question, ask the lawyer to rephrase it for you
  • Disclose only as much information as necessary to answer the question asked of you;
    • For instance, if asked “what color was the car” it would not be in your best interest to provide a vivid description of the car, the surrounding circumstances, and the weather that day
  • Answer the question truthfully and to the best of your ability
    • You are under oath, and are legally obligated to tell the truth. Answers contrary to available evidence could lead to a Judge not accepting your evidence at trial due to credibility concerns
  • Make sure to answer with a verbal response
    • The transcript will not pick up cues such as “mhm” or “uh huh”, nor will the Court Report record that you made hand gestures

The best way for a witness to act at a Discovery is calm, collected, and with confidence. Lawyers know that parties who do well at Discovery will do well at trial.

If you require assistance with your legal matter, contact Heath Law LLP.

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Surveillance Cyber Searches Social Media

Surveillance, Cyber Searches and Social Media

Most personal injury lawyers will warn you to close down your social media accounts, or limit access, once you commence your personal injury claim. While such advice is not misguided, it generally only applies to select claims: those involving alleged catastrophic losses or those involving litigants who appear to be untruthful.

The reality is that insurers do oftentimes hire surveillance teams to monitor the day to day activities of individuals with personal injury claims. These individuals will often follow litigants as they complete everyday tasks such as grocery shopping, driving, or going to the gym.

In addition, most insurers have internal or external teams to conduct what are known as “cyber searches”. These searches compile all of a litigant’s social media information, as well as additional information (such as land title searches and previous lawsuits) into a tidy package for the defence.

While the above appears to be a complete invasion of privacy, it is commonly used and permitted by the Courts. Again, however, it tends to only be collected, or used, when a case is catastrophic or where there are serious concerns about a claim.

For instance, if you are involved in a minor motor vehicle accident but tell your doctor that you can no longer walk, be assured that surveillance may be placed on you.

Surveillance and cyber searches only become useful to the defence if you are caught misrepresenting the extent of your injuries. In the above example, if surveillance or cyber searches show you running a marathon, you can bet that the evidence will be introduced at trial to harm your case.

It is recognized that social media is an important part of most people’s lives, and helps keep them connected with friends and family. When commencing a personal injury claim, it is important to discuss the extent of your social media use to determine whether any restrictions need to be put into place in your specific case.

For a free consultation about your personal injury claim, contact Heath Law LLP.

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Estate Planning & Risks of Joint Tenancy

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Estate Planning – Considerations when Adding a Child as Joint Tenant to your Property

Many parents put their children on title to their residence as a form of estate planning. While this can help avoid probate fees and possibly assist with ease of administration of an estate, the case of Gully v. Gully, 2018 BCSC 1590 [Gully], demonstrates that parents must be careful when adding children onto title to their residence.

In Gully, a mother added her son as a joint tenant on title to her Burnaby property. She did so based on legal advice she received, including that her estate could avoid probate fees. She did not tell her son that he had been added as a joint tenant to title of the property.

In August of 2017, the son, and his company, consented to a judgment of $800,000.00 in favour of Ledcor Construction Limited (“Ledcor”). Ledcor discovered that the son was on title to the property and registered their certificate of judgment on the son’s undivided half interest in the property.

The mother sought a declaration, amongst other things, that the son held the property on a resulting trust for her estate. The court found that the son did not hold the property on a resulting trust for the estate and permitted Ledcor to retain their judgment on title, ultimately stating:

 [24]        Ms. Gully took a risk in registering her son as a joint tenant on her property. Whether she was properly advised of that risk is not before me. However, once she made the decision to register an interest in the Burnaby Property in Mr. Gully’s name, third party creditors of Mr. Gully became entitled to register judgments against Mr. Gully’s interest in the Burnaby property.

If you would like to book an appointment with any of our estate planning lawyers, please contact Heath Law LLP at
250-753-2202 or TOLL FREE: 1-866-753-2202.

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Injured in a car accident while working?

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If you were working at the time of the accident it is very important to determine if the other motorist involved in the accident was also working. According to the laws of British Columbia, special rules apply where both you and the other motorist involved in the accident were both working. In such a scenario, if you were injured and suffered loss and expense including a loss of income you can only seek compensation through WorkSafe BC.

There are strict timelines associated with your potential claim. The Workers Compensation Act of British Columbia places a three month limitation on claiming compensation through WorkSafe BC. This means that there is a short time frame to act to preserve your legal rights.

If the other motorist was not working at the time of the accident, then you can elect to make a claim through WorkSafe BC or make a claim against the other motorist through ICBC. The compensation systems under WorkSafe BC and ICBC generally yield very different results. If you have been in a car accident, you should contact Heath Law LLP to discuss your options.

Call 250-753-2202 or Toll Free: 1-866-753-2202

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Beneficiary Designations

In the recent case of Moore v. Sweet, 2018 SCC 52 [“Moore”], the Supreme Court of Canada considered whether a new common law spouse became unjustly enriched as a result of her beneficiary designation under her husband’s life insurance plan.

In Moore, the deceased’s ex-wife was designated as revocable beneficiary of her ex-husband’s life insurance policy. After separation, the ex-wife agreed to continue to pay policy premiums with a view to maintaining the beneficiary designation.  The ex-husband subsequently designated his new common law spouse as irrevocable beneficiary without the ex-wife’s knowledge.  When the ex-husband passed away, the insurance proceeds became payable to the new common law spouse.

The ex-wife sued the common law spouse, claiming that the common law spouse had been unjustly enriched and held the amounts paid from the life-insurance policy pursuant to a constructive trust for the ex-wife.

In its analysis, the Court found that the common law spouse had received a “tangible benefit” and became enriched by becoming beneficiary of the insurance policy (paras. 41 and 42). The Court also found that the ex-wife had been deprived of a benefit under the insurance policy (para. 52).  The Court continued on to find that there was no legal reason for the common law spouse’s enrichment at the expense of the ex-wife (para. 88).

The Court found that the monies from the insurance policy were held in trust by the common law spouse for the ex-wife and ordered that the funds be paid to the ex-wife (para 96).

If you would like to book an appointment with any of our family law lawyers, namely Kathleen Sugiyama, Christopher Murphy or Nathan Seaward, please contact Heath Law LLP at 250-753-2202 or TOLL FREE: 1-866-753-2202.

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Is a Gift from a Parent Subject to Division Between Separating Spouses?

Family Law – A Gift of Money from a Parent may still be Subject to Division between Separating Spouses

Under section 85 of the Family Law Act (the “Act”), gifts to a spouse from a third party are excluded property – meaning that they are not divided between the spouses at separation.  However, if a gift from a third party was intended to be made to both spouses, then the gift will qualify as family property and is subject to division at separation.

In Delaurier v. Massicotte, 2018 BCSC 1857, the Respondent sought to assert that a significant portion of the former family home was excluded property, including $100,000.00 which was a gift from the Respondent’s father. The Claimant took the position that the $100,000.00 was a gift to both the Respondent and the Claimant, and was therefore not excluded property.

In every case where a party is claiming that a gift or property is excluded property, the party asserting that position must prove, on a balance of probabilities, that the gift was only intended for them (para 124).

In Delaurier, the Respondent could have called his father to testify, however, he refused to do so on the grounds that his father did not speak English and was blind in one eye (para 132).

Madam Justice Fleming wrote that where a party to litigation fails to call a witness who would have knowledge of the facts and would be assumed to be willing to assist that party, the Court can draw an adverse inference that the failure to call that person amounts to an implied admission that the evidence of the absent witness would be contrary to the parties’ case or at least would not support it (para 130).

In the circumstances, Justice Fleming chose to draw an adverse inference against the Respondent, and found that the gift of $100,000.00 was intended to be given to both the Claimant and the Respondent, and therefore constituted family property.

If you would like to book an appointment with any of our family law lawyers, namely Kathleen Sugiyama, Christopher Murphy or Nathan Seaward, please contact Heath Law LLP at 250-753-2202 or TOLL FREE: 1-866-753-2202.

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Dividends and Determining Child & Spousal Support: Part 2

Part 1 of our article “Dividends and Determining Child & Spousal Support” explained what dividends and grossing up are. Part 2 explains how these lines on the income tax form affect child and spousal support payments.

For child support, the primary concern is estimating the means which the paying parent has available for child support. The more income a paying parent has, the more they will likely be required to pay. For spousal support, the court may award support to a spouse to provide for their needs or to relieve economic disadvantage or hardship resulting from the relationship. The difference in incomes of the spouses will be a critical factor in this determination.

The rules for child and spousal support come from the Federal Child Support Guidelines (the “Guidelines”). While there are many factors and formulas, the court will always want to know the spouses’ gross incomes. For dividends, section 5 of Schedule III requires that the actual amount, rather than the taxable amount, be used to determine a spouse’s annual income. This is a critical difference since the taxable amount is significantly greater than the actual amount. However, section 19(1)(h) of the Guidelines states that the court may add to a spouse’s income when the spouse derives a significant portion of income from dividends. This is to ensure consistency between a spouse earning a salaried income and a spouse who receives dividends instead of a salary.

When a spouse receives a significant part of their income from dividends, the court will determine if that accurately reflects their ability to pay for support. In many cases, people restructure their income by using solely owned corporations, trading their salary for dividends. After this transition, the spouse’s gross income is much lower because the corporation paid the tax, but their net income will be relatively similar to their previous net income.

For example, Widgets Ltd. has an annual profit of $41,000. Last year the sole shareholder, Kim, took home a salary of $40,000 and a dividend of $724.64. Her net income was $33,217. This year she decides to replace all of her salary with dividends. After the corporate tax, she is left with a dividend of $29,710.14. Due to dividend tax credits, her net income is also $29,710.14.

Where a spouse is the sole shareholder of a company and elects to receive dividends from the company in lieu of salary, courts will usually use the taxable dividend amount for the spouse’s gross income when calculating child support. If the spouse does not control any dividends paid to them, then the courts are more likely to use the actual dividend amount.

Things change when the courts consider spousal support. Courts have repeatedly stated that the purpose of adding income in this way is to enhance the resources available for the benefit of the children. While not ruling out the possibility of imputing income to dividends when determining spousal support, court have been extremely hesitant to do so.

Altogether, corporations and dividends can be useful tools in structuring your income and taxes. For spouses that try and use dividends to reduce their child support payments, courts have the tools and are willing to add income in order to provide greater resources for the children. When determining spousal support, courts are more likely to use the actual dividend amount.

If you have questions about incorporation, child or spousal support, or any other legal matter, please call Toll Free:1-866-753-2202 or 250-753-2202 to contact Heath Law LLP Barristers & Solicitors for your consultation.

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