Will Vancouver home buyers be on the hook for a seller’s vacancy tax liability?

Published by Noah Sarna & Zheting Su

If you thought Vancouver’s vacancy tax (or “empty homes tax”) was a problem only for absentee condo owners, think again. A flaw in the scheme of the tax makes it a serious risk for virtually anyone who buys a home in Vancouver after 2017.  This should also alarm local realtors and real estate lawyers, all of whom need to be aware of the issue.

The Scheme of the Tax

As background, the tax is equal to 1% of a property’s annual assessed value. The tax is generally intended to apply to certain under-used residential parcels. The details of the tax are contained in a governing bylaw, which includes reporting, assessment, collection and dispute-resolution provisions. In sum:

  • Each owner must file a declaration concerning the status of the parcel during a calendar year. For 2017 the declaration can be filed now and is due by February 2, 2018.
  • If the owner declares that the parcel is taxable, they will receive a notice confirming the amount of the tax and the mid-April payment deadline.
  • If the owner declares that the parcel is not taxable, they might receive a notice confirming that no tax is due. Or they might receive a request for supporting information and documentation.
  • Upon review, the city might disagree with the owner’s declaration and assess the tax. Or the city might agree and issue a notice confirming that no tax is due, but within the next two years (e.g. by December 31, 2019) could re-consider and assess the tax for the year.
  • The owner can dispute an assessment through a dispute-resolution process within the city bureaucracy. Meanwhile, the tax becomes a levy collectible by the city as additional property tax.

The Problem for Buyers

Initially, this scheme might seem acceptable. But, upon closer examination, a problem for buyers becomes apparent.  It is due to the conceptual basis of the tax, which is affirmed by the text of the bylaw.

Unlike income tax, sales tax and property transfer tax, the vacancy tax is similar in concept to property tax in that it runs with the land. It is not tied to a particular taxpayer, supplier or transferee. For this reason, the reporting, assessment, collection and objection provisions were not drafted in contemplation of a sale after a taxation year. A change in the identity of the owner is irrelevant. What matters is the property. The rights and obligations under the bylaw that relate to the property belong to the owner, whomever that might be from time to time.

But the details of the vacancy tax are very different from property tax, particularly for residential transactions. It cannot be dealt with essentially by allocating a fixed tax bill between parties. The vacancy tax is different.  For instance, under the bylaw the declaration must be filed by a “registered owner”, which is essentially defined to mean the person registered in the land title office as entitled to the fee simple. There is nothing in the bylaw that specifies, in the event of a sale during the declaration period, which owner has the filing obligation. Similarly, the city is entitled under the bylaw to require a “registered owner” to provide information at any time and for up to two years after a taxation year. Again, does this mean an owner in 2019 can be requested information about the individual who occupied the property in 2017, with whom they might have absolutely no connection? And who is entitled to dispute an assessment? How would that work?

This has several implications for buyers of a Vancouver home.  For example, a buyer, especially one with a January closing, might effectively be required to make a declaration regarding the seller’s use of the property, if the seller did not make the declaration before the sale. This would generally put the buyer in a difficult position. They would need to try to compel the seller to make the declaration; try to make the declaration themselves based on indirect knowledge; or deliberately refuse to make the declaration, which would trigger the tax and possibly penalties.

This issue is relatively easy to remedy in most cases, provided that the buyer’s realtor and real estate lawyer are up to speed. The buyer could require the seller to make the declaration as a condition of closing. However, a more important issue arises even where the seller has made the declaration. After the sale, the city might conduct an audit and disagree with the seller’s declaration. Or the city might agree originally with the seller’s declaration but then re-consider and assess within two years.  Disputing the assessment might be impossible, and the tax would become payable by the buyer, even though it involves the seller’s period of ownership.

The potential options for addressing this second issue are far more limited in scope and might be unworkable.  For example, should a buyer insist on obtaining the evidence needed from the seller to dispute a later assessment? In suspicious circumstances, should the buyer insist on a holdback?  If so, how much of a holdback? Would an indemnity be sufficient? None of these address fully the underlying problem, which is the risk confronted by the buyer vis-à-vis the city, and some might add a complicated and unhelpful item for the parties to have to balance during negotiations.


Many buyers in Vancouver’s pricey real estate market are already accepting considerable risk in making the purchase and are often stretched beyond their budget. The possibility of them inheriting a seller’s vacancy tax liability after the purchase is not only unfair – it might also be too much to bear. It clearly points to a problem with the design of the tax that needs to be remedied.