It’s property tax time

By now home owners and businesses throughout the province have received their annual property tax notices in the mail. Property taxes are due July 3, 2012.

Property owners who haven’t received a tax notice, should contact their municipal finance department and arrange for a duplicate notice. Property owners are responsible for ensuring that the local government and BC Assessment have your correct mailing address. Property owners must pay property taxes whether or not they receive a notice.

What taxes do property owners pay?

Take a close look at a property tax notice. About 50% of the amount owing is levied by the local municipality. Municipalities are also required to collect the remainder for other taxing authorities and have no control over these levies. Here is a summary:

Municipal tax – is set by council and staff in the municipality’s annual budget process. It’s based on revenue needs for infrastructure and services.

Regional district tax – is set by the regional districts for services such as regional water and sewage treatment. For example, Metro Vancouver tells their municipal governments what their revenue needs are, and the municipalities collect on their behalf. In rural areas, the province (Surveyor of Taxes) collects for regional districts.

School tax – is set by the BC government to fund schools. Residential rates vary by school district. School taxes are paid by residential and non-residential property owners.

Hospital tax – is set by the regional hospital district to help fund local health facilities. For example, Metro Vancouver hospitals are funded by the province, not by property taxes. Outside Metro Vancouver, hospital taxes are still levied.

Other taxes – are set by local taxing authorities and collected by the municipality to fund BC Assessment, the Municipal Finance Authority of BC and TransLink.

For questions about taxes levied by other taxing authorities, contact:

• BC Assessment Authority, 604.241.1361
• Greater Vancouver Transportation Authority (TransLink), 604.453.4000
• Metro Vancouver, 604.432.6200
• Municipal Finance Authority, 250.383.1181 (Victoria)
• School Taxes, 250.590.0239, (Ministry of Finance, Victoria)

Avoid late payment penalties

Property owners must pay their taxes by July 3, 2012 or there is a 5% penalty. Property taxpayers who don’t pay by September 4, 2012, face an additional 5% penalty. Property owners failing to pay for three consecutive years, could forfeit their property to tax sale. Information about tax sale dates can be found on local government websites.

The upside of property taxes

Property taxes help fund a range of local capital projects and services, including:

• Animal control and shelters
• Archives/libraries/museums
• Bicycle lanes/paths/walkways
• Building regulation
• Community centres
• Energy efficiency upgrades
• Environmental protection
• Garbage and recycling
• Heritage planning
• Local road maintenance
• Parks/trails/green space
• Police/fire/emergency services
• Safe drinking water
• Sewage treatment
• Sidewalks
• Swimming pools/tennis courts/skating rinks/playing fields

A helping hand - the Home Owner Grant

Since 1957, the BC government’s Home Owner Grant program has helped reduce residential property taxes for qualifying home owners. Eligibility requirements restrict the grant to Canadian citizens and landed immigrants who are permanent residents, and whose home is their principal residence.

Types of Home Owner Grants

There are four categories of grants:

1. Basic Home Owner Grant

This is a grant of up to $570 for qualifying home owners. For 2012, the Basic Grant is reduced by $5 for each $1,000 of assessed value over $1,285,000, and is eliminated on homes assessed at $1,399,000 or more.

2. Additional Home Owner Grant

This is an additional grant of up to $275 for qualifying home owners age 65+, disabled persons or veterans, bringing the total Basic and Additional Grant amounts up to $845. The Additional Grant is eliminated on homes assessed at $1,454,000 or more.

For the Basic and the Additional Grants, spouses living together (married, common-law or same gender) can qualify for a grant on only one principal residence each year.

Spouses living apart can each claim a grant on their principal residence provided they have a written separation agreement or a court order recognizing their separation.

3. Multiple Home Owner Grant

Property owners jointly owning a home must decide who is paying the property taxes to avoid paying twice. 
Even if all owners live in the home as a principal residence, only one Home Owner Grant can be claimed.

Shareholders of a corporation or members of a housing cooperative or housing society that owns an apartment building, housing cooperative buildings or housing society buildings may also be eligible to claim the Home Owner Grant.

The corporation, cooperative or society applies for grants for all eligible properties or units in a complex and passes the grant benefit to qualifying occupants. An eligible property may include:

• land shown as a separate taxable parcel on a tax roll that has a taxable improvement;
• a building containing at least two apartment units, each occupied by an eligible occupant;
• eligible land cooperative residence; and
• a multi-dwelling leased parcel with two or more residences on it.

4. Retroactive Home Owner Grant

For qualifying home owners, a retroactive grant may be approved for the previous year only. Home owners must:

• apply in writing for an extension on or after January 1 and before December 31 in the year following the year the owner did not apply for the grant; and
• complete an application form with documentation supporting residency and reasons for missing the deadline.

Applications must be made to the Municipal Tax Collector or to the Surveyor of Taxes if the property is in a rural area.

For eligibility criteria visit: www.sbr.gov.bc.ca and in the search box enter Home Owner Grant and then go to Retroactive Grant.

Two supplemental Home Owner Grant programs

1. Home Owner Grant Low-Income Grant Supplement

This program is aimed at qualifying low-income owners of homes assessed at more than $1,285,000 (for the 2012 tax year). Home owners must:

• be Canadian citizens or permanent residents;
• live in the home as their principal residence;
• have a maximum annual income of $32,000; and
• be 65+ years of age or a veteran, veteran’s spouse or widow/widower receiving veterans benefits, or a person with a disability; or have a dependent child.

The supplement is up to $845 in the Lower Mainland and up to $1,045 in northern and rural areas.

2. Home Owner Grant Veterans Supplement

This program is provided to qualifying low-income veterans who are not eligible for the Additional Grant. Veterans must:

• be Canadian citizens or permanent residents;
• be under the age of 65;
• live in the home as their principal residence; and
• have a maximum annual income of $32,000.

The grant is the difference between the Basic Grant ($570) and the Additional Grant ($275) to a maximum of $275.

For information, go to www.fin.gov.bc.ca and enter Home Owner Grant Supplement programs in the search box. 
Note: The Home Owner Grant does not apply to second homes, summer cottages or rental properties. Further information is available from the Home Owner Grant Explanatory Notes section on the back of the tax notice.

How are property taxes determined?

Property taxes are determined by municipal councils to meet their funding needs. The BC Local Government Act prohibits municipalities from running deficits. So if costs or services increase, municipalities must raise taxes and/or fees to meet costs.

Costs may increase for a number of reasons including inflation, additional required services such as fire or police or libraries, higher energy costs, new programs and even rising wages.

Property taxes are calculated through a formula that takes into account the assessed value of property as determined by BC Assessment, and the rate for the property class type.

For detailed information on how the municipality calculates taxes, contact your local municipality.

Graph Note: Does not include user charges for utilities such as sewer, water, recycling and garbage or school taxes. These increases are for the whole tax program and may not represent the tax change for any individual property.

Deferring taxes

Property owners unable to pay their property taxes on their principal residence may be eligible for assistance under the BC Property Tax Deferment Program.

This provincial low-interest loan program allows qualifying property owners to defer all or part of their property taxes on their principal residence.

1. Regular Deferment 55 & older, surviving spouse, person with a disability

To be eligible, property owners must be 55+ years or a surviving spouse, or a disabled person who is also a Canadian citizen or a permanent resident, and who meet four requirements:

• maintains a minimum equity of 25% of the current assessed value as determined by BC Assessment;
• has lived in BC for at least one year;
• occupies the home as a principal residence; and
• maintains fire insurance on the home.

2. Families with children deferment program

Property owners may qualify if they’re financially supporting a dependent child under age 18 and who have at least 15% equity in their home which is their principal residence. They must also be a Canadian citizen or permanent resident who has lived in BC for a least one year.

Qualifying property owners can defer their property taxes as long as they own and live in their home. They cannot defer utility charges, penalties, interest or user fees.

If a property owner plans to refinance, the lender may require full repayment of deferred taxes. Property owners can repay all or part of the deferred taxes and interest at any time without penalty.

The BC government pays the municipal all property taxes. Deferred taxes and interest must be repaid before a property can be legally transferred to a new owner, other than to a surviving spouse upon the death of the agreement holder(s).

For information visit: www.sbr.gov.bc.ca and in the search box enter Property Tax Deferment Program.

For New Home Owners

If a new home owner didn’t get a tax notice or the notice has the previous owner’s name on it, the new owner should:

1. Contact the BC Land Title and Survey Authority for a Certificate of Title to prove ownership and then complete the Home Owner Grant application. The Lower Mainland office phone number is: 604.660.0380.
2. Phone or visit the local City Hall Taxation Office and request a duplicate tax bill.

The property taxes must be paid and the grant claimed, if eligible, by the due date to avoid late penalties.

Property tax notice explained

1. Owners’ Name and Address – All owners’ names appear. If there is more than one owner, then each name is listed. Where a single notice was mailed in the past, now each owner receives a copy.
2. Folio Number – A unique property identification number belonging to the property and not the owner.
3. Access – A code used to epost™ tax payments or to apply for the online Home Owner Grant.
4. Legal Description – Written method to delineate a specific property under the land title system.
5. Total Net Assessed Value for Taxation Purposes – BC Assessment’s classification of property, e.g. residential, business, farm, and the assessed values for different tax purposes.
6. PID – Parcel identifier used to cross reference to Land Title and BC Assessment.
7. Net School Taxes – Total school taxes after the Home Owner Grant is deducted.
8. BC Assessment – Funds BC Assessment operations.
9. TransLink – Funds TransLink.
10. Regional District – Funds shared operations and services such as sewer and water provided by Metro Vancouver.
11. Municipal Finance Authority – Funds the Municipal Finance Authority which provides capital financing and financial services to local governments.
12. Total Other Levies – Total owing to other taxing authorities.
13. City Services – The “municipal tax.”
14. Police Services – Funds policing.
15. Asset Renewal Levy – Funds collected to cover the replacement of aging city assets.
16. Firehall Replacement Levy – Funds fire services.
17. Storm Drainage – Funds local storm drainage.
18. Net Municipal Levies – Municipal tax less any unused Home Owner Grant.
19. Tax Prepayment Adjustments – Total tax installments made.
20. Total Outstanding Taxes – What you owe.

For the fourth time in the past four years, the Federal Government has announced further action to restrict mortgage credit. The new measures include:

• The maximum amortization on a prime mortgage will be reduced from 30 to 25 years.
• Mortgage insurance will not be provided for properties valued over $1 million.
• Refinancing has been lowered from a maximum of 85% loan-to-value to a maximum of 80% loan-to-value.
• The maximum gross debt service (GDS) and total debt service (TDS) will be limited to a maximum of 39% and 44% respectively. Currently, GDS does not apply to qualified borrowers with credit scores over 680.

These measures will take effect July 9, 2012.

Implications for the BC home market:

• The new 25 year amortization will have a small but material impact on affordability for homebuyers. For a $300,000 mortgage, the shorter amortization period will add over $150 per month to mortgage carrying costs for homebuyers that would have instead opted for a 30 year amortization. This is equivalent to an approximately 1 per cent increase in mortgage rates.
• Longer amortization period may also impact the rental market where investors have utilized longer amortization period to lower carrying costs.
• Prohibiting mortgage insurance for properties over $1 million will impact Vancouver markets to a much greater extent than other Canadian jurisdictions. While this policy may have limited impact on credit access for high-ratio borrowers, it will tighten credit for the $1 million and over segment of the market through its impact on lenders risk management practices. This is particularly true in light of the CMHC already rationing portfolio insurance for low-ratio mortgages.

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PRICE IS WHAT YOU PAY.  VALUE IS WHAT YOU GET.  "There is hardly anything in the world that someone cannot make a little worse and sell a little cheaper, and the people who consider price alone are that person's lawful prey. 

It is unwise to pay too much, but it is also unwise to pay to little.  When you pay too much, you lose a little money, that is all. 

When you pay too little, you sometimes lose everything because the thing you bought is incapable of doing the thing you bought it to do. 

And if you do that, you will have enough to pay for something better."

- John Ruskin (1819 – 1900)

OIL TANKS

As late as the 1970’s, heavy oil was still used to heat homes on the North Shore.  Many of these tanks still remain, and are either buried in the ground or rest above the ground.  Depending on how a home was converted to gas heating, there is a chance that the old tank may still contain petroleum product.  As you can imagine, abandoned tanks potentially present environmental & health concerns. If you are selling a home where there is the possibility an oil tank exists, it will be YOUR responsibility to remove it.  In accordance with the provisions of the BC Fire Code, Waste Mgmt Act & local bylaws, ANY unused underground tanks must be removed, the surrounding soil tested & cleaned if necessary.  We have experienced the safe & uneventful removal of many oil tanks in our practise, and have a list of contractors who specialize in this, as recommended by the municipalities of North & West Vancouver.  Selling or not, we highly recommend that  homeowners should not ignore an unused tank, but get it removed as soon as possible.  If you’d like more information, please call !

In general terms, market value is the price expected if a reasonable amount of time is allowed to find a purchaser and if both seller and prospective buyer are fully informed. For assessment purposes in British Columbia, market value is the most probable price that an unencumbered property would sell for on the open market on July 1st.

The annual assessment process is often a confusing one for many commercial and residential property owners.  Typically there is a difference between the property value assessment on the assessment notice and the current market value as determined by a REALTOR®.

This difference is a result of two factors.  The first factor involved BCA’s mass appraisal system, which calculates property value by evaluating prices for homes sold in each neighborhood or for units in a strata complex and then applies the information to arrive at an assessed value.  This information is typically obtained from MLS sales, NOT by visiting the properties in question.  The variables BCA uses to calculate this value include house type, square footage, age, heating, property classification or use, and additions or demolitions of features such as garages, sheds, pools and spas.

The second factor depends on the time at which a property is assessed.  Normally, a 2012 assessment notice is BCA’s estimate of a property’s market value as of July 1, 2011, whereas a REALTOR®’s market value reflects the current state of the market, not the market six months ago.

 “Market value assessment” is widely considered to be the fairest system for distributing the property tax burden.  As the real estate market can change very quickly, depending on an historical assessment (July assessment for next year’s tax purposes) to be an accurate indicator of market value can be erroneous.

BCREA ECONOMICS NOW

Canadian Real GDP Growth - October 31, 2011

The Canadian economy expanded 0.3 per cent in August following an upwardly revised 0.4 per cent gain in July. Economic growth was led by a 2.8 per cent increase in output in the energy sector as projects re-started from temporary shutdowns in the summer. Excluding the energy sector, monthly GDP growth was flat.

Through the first two months of the third quarter the Canadian economy is growing at about a 2.0 per cent rate – an improvement from the recession fears of the summer, but far from robust. We anticipate the economy will continue to grow at about a 1.5 to 2.0 per cent rate for the second half of the year. Slower than potential economic growth will put moderate downward pressure on inflation and keep the Bank of Canada in a holding pattern.

For more information, please contact: 

BCREA represents 11 member real estate boards and their approximately 18,000 REALTORS® on all provincial issues, providing an extensive communications network, standard forms, economic research and analysis, government relations, applied practice courses and continuing professional education (cpe).

Copyright British Columbia Real Estate Association. Reprinted with permission. BCREA makes no guarantees as to the accuracy or completeness of this information.

At 9:00 am EST, September 7th, 2011, the Bank of Canada did what we expected them to do… they maintained their overnight rate.  What this means to you is that the prime rate on your mortgage or line of credit will not change and remains at 3.00%.  This is great news as you still have a great low rate and so continue to make the most of the low payments

Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:

“The global economic outlook has deteriorated in recent weeks as several downside risks have been realized. The European sovereign debt crisis has intensified, a broad range of data has signalled slower global growth, and financial market volatility has increased sharply. Recent benchmark revisions show that the U.S. recession was deeper and its recovery has been shallower than previously reported.   Canadian net exports are now expected to remain a major source of weakness, reflecting more modest global demand and ongoing competitiveness challenges, in particular the persistent strength of the Canadian dollar.”