Laws for selling real estate property in Canada

Selling of property in Canada is very easy and simple. There are basic legal formalities and procedures that ensure the rights of both the parties are preserved. There are slightly different rules for people who are foreign nationals and wish to sell a property in Canada. A non resident is requires to pay an amount from capital gains in taxation.

Normally, 50 % of the capital gain is considered for taxes but if a person happens to be a non resident, he is required to pay an amount equal to the estimation before the gain which is approximately around 25% of the total gain. The amount is taken care of by the seller’s lawyer until a clearance certificate is issues by the Canada Revenue Agency. Then the payment of tax is made; CRA issues a clearance certificate to the seller. This may take up to 6-8 weeks.

The certificate is issues only after a contract of sale and purchase is made and has all the conditions removes in it. If, the certificate is not issued, the purchaser may halt all the ongoing proceedings with regard to the purchase of the property and stall the payment of 25-50% from the purchase price. At the closing date, the mortgage money is transferred to the seller’s account and the title of the property is transferred to the buyer.

A non-resident national should pay the complete taxes as applicable for the current year and wait for the refunds on the taxes as the rule goes. Different tax rules are applicable of different types of properties. Each property from principal residence, a business property or a rental property has a different set of taxation rules. For example in case of rental property, a 25% tax for foreign nationals must be paid on the total rent paid by the tenant.

It is advised to use a property manager who will, by law, withhold 25% of the total rental revenue at and pay it to the Canada Revenue Agency. After this, on or before March 31 of the coming year, the property manager issues an NR4 form which earns you the right to file a Canadian tax return. You are required to file the tax return before the 30th of June and this enables you to claim expense and refund against that income.

Here is a youtube video I find very informative. Will definately help you understand the law.

The real estate option contract

A real estate option contract is a document that gives a particular buyer an added advantage over the other potential buyers in the market. It is obvious that when a seller puts a property in the market, many buyers approach for buying the property. When a buyer gets the option contract, the seller loses the right to consider selling his property to any other buyer. This however does not obligate the buyer to buy the property.

A real estate option is a contract that is signed between the buyer and the seller. The buyer pays a predefined purchase price for M City Condos and buys the right to be able to buy the property. After the contract is signed, the seller loses the right of selling the property to any other buyer. The buyer can however stay for a defined period which is approximately six months to a year. He is in no way obligated to buy the property. The money given at the time of signing the contract is kept buy the seller even if the buyer chooses not to buy the property.

Buyer’s advantage

Real estate option has advantage for the buyer. If a buyer wants to buy land and plans to construct a house on it, he can sign an option contract with the seller. This ensures that the seller will not sell the land to anyone else. In the meanwhile the buyer can wait for the agreed upon time and arrange for the additional money required. The seller has to sell the property after the end of term on the agreed cost. Some option contracts however allow the property cost to be calculated at the end of the term according to different factors.

Investor’s advantage

If played wisely, the option contract can be of great advantage. An investor can see a developing project and can lock the land for sale of that project by signing an option contract. Now he can approach different people who are in development businesses telling them about the successful development projects in future on the said land. He will obviously quote the land price at a much higher rate than he has signed the contract for. This will promise the investor great profit without having investing his actual money.

Option contract is a safe way of securing the property for a buyer who is genuinely interested in buying the property.

Here is a very good video breaking down the option contract.