Canada

No “welcome tax” for luxury condos in Montreal

News Today || Canada News |

MONTREAL – While Montreal property transfer taxes, commonly called the “welcome tax,” climb at the same rate as the real estate market, large fortunes are exempted because of a technical detail that the city now wants to tackle, La Presse has learned.

Condos in many of the city’s most prestigious buildings – often listed for more than $1 million – have been sold and purchased without contribution to the city’s coffers for decades. “No welcome tax” is being claimed on many currently active real estate listings.

The Plante administration is calling on the Quebec government to tackle this “unacceptable” situation by changing the law.

“We firmly believe that everyone should contribute to the public treasury in an equitable manner,” said the mayor’s office. The city currently collects more than $150 million per year in property transfer taxes.

Ads

At the heart of the problem: joint ownership through shares. Buildings that are organized in this way are owned by a single company and each resident owns a number of shares in the company depending on the size of their condo. The shares are associated with exclusive access to a condo.

When it comes to selling an apartment, it’s the shares that change hands. And the transfer of shares is not covered by the property transfer tax law.

RELATED:  Ontario reports 1,076 new COVID-19 cases as more regions set to see stay-at-home order lifted | CBC News

Several prestigious buildings in the Golden Square Mile – the most expensive neighbourhood in the entire province – are structured this way. For example, this is the case for the Port-Royal, Acadia, Linton and Château buildings on Sherbrooke Street W, which together account for roughly 450 housing units. It is also the case for the Westmount Square residential tower, among others, or the Cours de l’Ambassade on Docteur-Penfield Avenue.

These buildings are notoriously home to large fortunes, as well as judges, lawyers, famous artists and ex-diplomats.

“An aberration”

Some joint-stock condominiums have been structured this way because they were born at a time when the concept of divided condominiums did not exist in law, said Denys-Claude Lamontagne, an expert in notarial law.

“It first appeared in 1969. It was unthinkable (before then),” he said. “That was probably the genesis.”

After decades of being exempt from transfer taxes, the City of Montreal wants to put an end to the inequality. Tax losses are difficult to assess, but they are significant for city hall’s budget.

“In the context of the affordability crisis that is raging in the metropolis and which has been exacerbated by the pandemic, this situation is as much an aberration as it is unacceptable,” Plante’s team wrote in an email to La Presse.

RELATED:  Wear a mask or avoid public spaces: Fitzgerald

“It goes without saying that this method of acquiring condominiums raises some eyebrows,” the statement said. “At a time when the middle class is struggling to find housing, the City of Montreal vigorously denounces this privilege to select property owners. This goes against the principle of tax fairness, and the Quebec government should correct the law.”

From a financial standpoint, shares in a joint-stock condominium are already considered property in some cases. For example, they are exempt from capital gains taxes at the time of sale, provided they are linked to a condominium that serves as a primary residence.

Buyer drawbacks

Real estate broker Tristan P. Bournot sells dozens of prestigious properties per year in downtown Montreal, including several condominium apartments.

“This type of condominium, it’s very particular to Ville-Marie, especially the Golden Square Mile, and Westmount,“ he said. ”It’s kind of based on the New York model. Park Avenue and Fifth Avenue, all around Central Park, it’s organized by the same model.“

In his opinion, the welcome tax exemption has virtually no effect on the decision of buyers who want to settle in these prestigious buildings.

In fact, this form of ownership “can be very scary” to some buyers, who would rather have a clear claim to an apartment than a certain amount of shares in a company that owns the building, he said.

RELATED:  Quebec to begin inoculating today against COVID-19 as first vaccines arrive

Loading…

Loading…Loading…Loading…Loading…Loading…

“The rule of thumb is that per square foot (this type of apartment) sells for statistically less than a divided condominium,” Bournot said.

The buyer faces additional drawbacks, he added. Financing is much more difficult than in a transaction where the property can be given as collateral. All these sales are also made without legal warranty, he said.

Instead of the welcome tax exemption, it is the location and historical character of the building that draws buyers to these buildings, said Bournot.

Latest Canadian News Today & Breaking Headlines – Check More

Today News || News Now || World News || US Headlines || Health || Technology News || Education News

Source

Tags
Show More

Related Articles

Back to top button
Close