//LEGALLY SPEAKING
CONSIDERATIONS FOR BUYING
foreign property
» by JAYSON SCHWARZ
JAYSON SCHWARZ
LL.M. is a Toronto real estate lawyer and senior partner in the law firm Schwarz Law LLP. If you have a topic in mind, mail, deliver or fax letters to the magazine or to the firm, email (info@schwarzlaw.ca) and give us your questions, concerns, critiques and quandaries.
Canadians have never been more interested in owning foreign property than now. Whether it’s to plan for retirement, generate additional income or have a vacation place of your own, we are often drawn to homeownership at our favourite destination. Thanks to low interest rates and a stable economy, Canadians have the upper hand and the world knows it. However, homeownership in another jurisdiction means a slew of considerations that are complex and at times overwhelming. In the U.S., for example, there are estate tax issues that come up, and you may require a specially designed Trust to avoid Uncle Sam as a partner with you or your kids after death. There are issues of law if the country does not have a British system and if it’s run on civil or Napoleonic law; Martinique and St. Martin are examples. There may be other issues of property ownership such that foreign nationals may only be able to lease, not own. The next issues relate to the vendor. Are you purchasing from a reputable organization? If it is a condo, how are you sure the developer will be around if things go wrong? What guarantees are there on your deposits if they go broke and does not finish the project? It sounds like a lot to think about… but it was so easy to sign up during the tour. So, really, what are you buying? Are you buying a timeshare, outright ownership or a long-term lease? More and more questions. Here is a list of a few questions that need to be answered on a preliminary basis on a resort or new condo purchase before you make any offer: 1. Location – why are you choosing this location for a second home? 2. How much time will you spend in a typical year in your second home? 3. Will you typically bring friends and family? 4. What are the common fees and how are they set and controlled? 5. What are resales like for the development? 6. What is the legal structure and laws that apply in the country you are looking at purchasing? 7. Would you rent the property, and if yes, what are your expectations and needs on rental income? 8. What security is there for deposits and payments?
52 NEW HOME GUIDE GTA | JUNE 14 - 28, 2014
Here is the litmus test to go forward: A. How did the resort or sales centre answer those eight questions? B. Did they satisfy you with their knowledge and professionalism? C. Did they try to push you into signing something without the opportunity to consult with a lawyer? If those questions are answered to your satisfaction, then you know you are in the right place. If you have an intention to buy, make inquiries and find a lawyer, possibly a referral from your lawyer or friends at home. You need to understand the tax implications of a purchase, and more importantly, the tax impact if you sell for a profit or earn income. As an example, Barbados is a Canadian tax treaty partner and you may get favourable consideration on a capital gain or on rental income. Each country is unique and you need a lawyer or accountant to help you figure it all out. Buying a second home in a warm locale is a dream many Canadians share. If the deal is properly structured, the home you purchase can bring years and years of happy memories and quite possibly a great return down the road. Good luck.