Until he learned that a new provincial real estate tax law would bump the price of his new home by an unexpected $78,000, Nic Benner thought he’d found the ideal place for his family.
The townhouse under construction in Langley Township across the street from the Church of Latter-Day Saints (LDS) temple, is perfect for Benner, who is an LDS member.
The Langley temple is the only one in B.C.
The Colorado resident had just been transferred to Burnaby by the high-tech consulting company he works for.
Benner paid a non-refundable $25,000 deposit on the townhouse and found a place for his family to stay in Fort Langley until construction was completed and they took possession on Nov. 1. He arrived in Langley with his wife and four children in July.
“As we were moving, we discovered there had been a new law passed,” Benner said.
In response to complaints that house prices were being driven up by offshore investors, the B.C. government imposed a 15 per cent tax on property purchased in Metro Vancouver by non-Canadian citizens or residents.
The law took effect after Benner made the deposit, but it still applied because the purchase didn’t close until construction was complete, which meant he now had to come up with another $78,000 on top of the purchase price.
“I don’t have that money,” Benner told the Times.
And, he said, the banks won’t lend him the money to pay a tax.
Benner said he managed to get a meeting with Fort Langley-Aldergrove MLA and provincial minister in charge of housing, Rich Coleman (pictured), earlier this month to argue for an exemption.
He said Coleman declined to consider it and told him that there were only “six to eight” instances of people in a similar situation.
Reached for comment, Coleman said he only told Benner he was personally aware of that many cases, and the figure should not be considered an estimate of the total number.
Coleman told the Times that he walked Benner through the reasons why changes in tax law have to apply without exception.
Aside from the administrative complexity of granting exemptions, Coleman said it would allow people to “game the system” by back-dating contracts if the tax was not being applied in cases where contracts haven’t closed.
Coleman also said it would not be good practice to give advance notice of the tax changes because that would affect the markets.
Benner said he was “disappointed, but not terribly surprised” by Coleman’s response and is taking legal action under the North American Free Trade Agreement (NAFTA).
He said he filed a notice of intent to submit a claim to arbitration himself after he was unable to find a Canadian lawyer willing to represent him.
The provincial tax, he said, violates the treaty which is supposed to ensure equal treatment for investors in Canada, the U.S. and Mexico, no matter which country they come from.
Benner said he has only a few weeks before he faces defaulting on his $25,000 deposit.
“My desire has never been to come to this country and cause legal problems,” Benner said, “But they’ve left me no other option.”
Trying to sue under the NAFTA agreement will be a “complicated” process, according to the associate Dean of the Trinity Western University School of Business in Langley, Mark McKay.
McKay, an American who is able to teach in Canada under NAFTA, said a challenge by a group or class of people would be more likely to succeed than action launched by a single person.
It would also would be “a tough call” to determine which section of the complex trade agreement applies, he warned.
And even with NAFTA, McKay said there are still barriers to cross-border investment in both Canada and the U.S.
Some people have taken a different approach by launching a class action lawsuit against the B.C. tax, but Benner said he has not joined, yet.
He said that’s because the class action case will take a long time to become certified and doesn’t seek an injunction restricting the B.C. government from enforcing the tax on people with pre-existing contracts.
NDP housing critic David Eby tried to get the tax law amended to exempt people with work permits who buy houses, but the proposal was defeated by the Liberal majority.
“If you’re (a foreign national) living, working and paying taxes in B.C., it doesn’t make a lot of sense,” Eby said of the tax law.
“I thought they (the Liberals) were going to fix it and I’m kind of surprised they didn’t.”
Eby thinks the provincial government is taking a tough line because it doesn’t want to be seen “stepping away” from the apparently popular tax.
A recent Insights West survey found 76 per cent of B.C. residents support the foreign buyer tax, while 17 per cent oppose it and seven per cent are undecided.
Support for the tax ran across party lines, according to Insights West.