Soaring real estate values have contributed to a doubling of revenues from provincial property transfer tax over the past five years.

That revelation was little comfort to residents of two high-end condominium towers in Vancouver who have been shocked by assessments for additional property transfer taxes.

Some seniors on fixed incomes have received demands for an extra $4,000 or more.

The tax, which is charged at one per cent of the first $200,000 of property value, and two per cent on the balance, is estimated to have generated about $520 million in the fiscal year just ended, the ministry of provincial revenue says.

That compares to $242 million in 1999-2000, $260 million in 2000-2001, $302 million in 2001-2002, and $392 million in 2002-2003.

The extra taxes assessed on luxury units at The Concord on False Creek and Carina on Coal Harbour reflect skyrocketing values between the time the units were purchased on a pre-build basis and when they were ready for occupancy.

B.C. legislation dictates that property transfer tax is based on fair market value at the time the purchase is completed and registered, rather than the price at which the units were sold, sometimes two or three years earlier.

By taxing value rather than the selling price, Concord resident Randi Winter says the government is abusing the spirit of the legislation which was designed to ensure that purchases were not fraudulently transacted at lower than market prices to reduce or avoid the transfer tax.

“It wasn’t meant to penalize people who three years ago took a very, very risky bet on a promise when there was very little else in the landscape of luxury buildings,” she said.

After paying $11,600 in property transfer tax, Winter and her dentist husband, Dan, president of Concord‘s strata council, are being charged an extra $4,700 on their 1,500 sq. ft. apartment, the smallest size in the building.

“Fortunately I am still working but we have a lot of retired people in the building who are on fixed incomes,” he said.

“Many of them sold family homes they bought 30 or 40 years ago and with that money they were able to buy an apartment in a building that happens to be handicapped accessible.

“None of them are poor people but they are on fixed incomes. This has been a terrible shock to all of us.”

On Friday Revenue Minister Rick Thorpe denied that the two luxury towers have been targeted. He said taxes paid by the buyers were subject to the same review applied to all real estate sales in British Columbia.

“There is no targeting whatsoever,” Thorpe said in a telephone interview. “I wouldn’t say there have been a lot of reassessments in the past but it has taken place.”

Buyers have 90 days to appeal tax assessments through the independent appeals branch of the revenue ministry. If their appeals are rejected, they can seek recourse through the courts.

“There is no flexibility in the way this legislation is written but any time people feel they are paying too much taxes, it is an issue that we have to look at,” Thorpe said.

As real estate values continue to soar, thousands of buyers of pre-build units can expect their property transfer taxes to be much higher than anticipated when they made their down payments.

Subject to several conditions, first-time buyers can escape the property transfer tax if their property is worth $275,000 or less in the Lower Mainland or Victoria, and $225,000 elsewhere in B.C.

Critics complain the tax was introduced in 1987 when the average price of a home in the Lower Mainland was around $112,000. Today it is well over $300,000 and home builders say the exemption thresholds for first-time buyers should be raised accordingly.

“I think a reasonable person could conclude that those exemptions should probably be reviewed but remember that taxes have to come from somewhere,” Thorpe said.

“Certainly this tax is producing more revenue but you may have also noticed that we’ve put $2 billion more into health care. I am not ruling out changing the tax thresholds but there are lots of pressures.”

Thorpe invited aggrieved home buyers to email [email protected] or call him at 250-356-6611.

“I have this bad habit, I return all phone calls,” he said.

© The Vancouver Sun 2004