Law Times

PAGE 14 FOCUS Software makes it easier yers may be getting up to speed on the process, a new version of the software introduced in the last month has reportedly made things easier. Toronto's new land transfer tax up and running T BY HELEN BURNETT Law Times oronto's new municipal land transfer tax is now in effect, and while law- work. One of the main issues with the new land transfer tax is the vari- ous exemptions, he says. "If someone's buying a prop- The municipal land trans- fer tax, approved by Toronto city council last fall, took effect for real estate deals closing af- ter Feb. 1, adding a new tax of 5 per cent on the first $55,000, one per cent on purchases be- tween $55,000 and $400,000, and two per cent on property over $400,000 to purchases in the city of Toronto, in addition to the province's land transfer tax. Teranet currently collects the land transfer taxes on behalf of the province and the city when the transaction is registered by a real estate lawyer. Steven Pearlstein, a real estate lawyer with Minden Gross LLP in Toronto, says that lawyers are administering a second taxation regime, which is not identical to the provincial land transfer tax in terms of rules and has created more erty in the city of Toronto and they normally would pay land transfer tax, then they just pay more land transfer tax. It's where there's family transfers or corpo- rate reorganization . . . there's a lot of exemptions and you have to decide whether you fit into the exemption," he says. "Some of them are similar, some of them are not and they've been developed over years, and then you're not sure whether the policy is the same with the city or the province," he says. Some of the situations where clients are exempt or entitled to a rebate with the new municipal land transfer tax include first- time home purchasers up to a maximum of $3,725, grandfa- thering situations (if an agree- ment of purchase and sale was entered into before Dec. 31, with a closing date on or after Feb. 1), school boards, hospitals, To- ronto Community Housing, and Crown agencies. "Originally they told us you had to pay the tax and then apply for a rebate," he says, and no one knew how long that process would take. This was later changed in fa- vour of submitting things ahead of time, but then there was a ques- tion of whether it would have to be submitted to the city or Tera- view. "Now they've got all those procedures set down now, so that's helped," he says. According to the City of To- ronto, for rebates of the entire amount of land transfer tax, au- tomatic rebates are issued when a lawyer registers the property transaction. For rebates on a por- tion of the tax, the full tax is col- lected when the lawyer registers the property transaction. After the lawyer submits a rebate ap- plication form and affidavit, the rebated amount is sent to the purchaser. Starting this summer, all rebates will be automatically deducted from the municipal land transfer tax owing at the time the property is registered, says the city. Lawyers dealing with the new tax may also have an easier time after last month, as a new ver- sion of the Teraview software was launched, which lawyers say will be an improvement for those dealing with Toronto properties because of the new tax. Bill Yee, a residential real estate lawyer with Yee & Lee in Toronto, says that the new version of Teraview has helped lawyers greatly, especially for those transactions that are above the $400,000 threshold. With the previous version, he says, lawyers were required to enter the new tax information separately, whereas now it is included, making it much easier to do the calculations. "Under the current system, we basically have to prepare forms on a web site that is separate and apart from what we do in a gen- eral conveyance transaction. The new system will integrate, so it will all be one, so that's an im- provement, that saves time," says Jeffrey Schwartz, a Toronto real estate lawyer and chairman of the Ontario Bar Association real property section. In terms of the effect of the new tax on the real estate market, Yee says that they have noticed fewer transactions, but whether that is exclusively due to the new land transfer tax, he is not sure. He says he anticipates that law- yers will not know until next year, as factors such as the his- torically bad winter weather may have contributed to this trend. "In talking to various people, they do say that the MLTT is a big factor in their decision to buy," he says. At this point, he notes that there are a number of deals that are grandfathered and are now closing, as well as many first-time homebuyers, so many people have not yet had to pay the land transfer tax. "Once all the grandfathered stuff goes, it will just be first- time homebuyers that will not be affected," he says. While he sees the deals after they're done, Pearlstein says that, although the market seems softer, he doesn't think the tax is having that great of an effect, compared with factors such as the economy and the price of gas. Given that the average price of a house in the city is some- where around $400,000, "I'm just not sure that that is having as negative an effect as the econ- omy and the Canadian dollar and the price of gas . . . and the credit crunch. There's no doubt that it's softer, but I'm not sure you could say that it is actually the land transfer tax," he says. Pearlstein notes this is a tax that could be seen in other municipali- ties to some degree, and that this is something that lawyers in other areas of the province could be dealing with at some point. "You would think Ottawa, Windsor, Mississauga, any of those big urban centres could do that for an alternative source of in- come," he says. if they were looking LT JUNE 16, 2008 / LAW TIMES Shopping Centre Leases, Second Edition Harvey M. Haber, Q.C., LSM, and contributing authors who are leading practitioners in the field Revised and updated, the Second Edition includes a collection of new articles and precedents on various topics of current interest written by the best commercial leasing practitioners in Canada. 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