Vancouver class action lawsuit seeks to halt tax on foreign property purchases
Lead plaintiff is Chinese student who must pay C$84,000 extra for home in Canadian city that imposed tax to cool down overheated market
A class action lawsuit has been filed in the Canadian city of Vancouver over a tax on foreign home ownership, just weeks after the measure was introduced by officials hoping to cool a housing market that ranks among the worlds least affordable.
The provincial government of British Columbia ushered in the 15% tax some six weeks ago amid growing pressure to curb home prices in Vancouver. Low interest rates and growing demand from foreign investors many of them from China had helped push the cost of a detached home in Vancouver to C$1.56m in June, a 39% jump from a year earlier.
The tax, which echoes measures imposed on foreign buyers in Hong Kong and Singapore, applies to all property purchases in metro Vancouver by those who are not Canadian or permanent residents as well as those by corporations that are not registered in Canada or which are controlled by foreigners.
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As many as 4,000 real estate deals were thought to be immediately affected by the tax. Those caught by surprise by the tax included Jing Li, a 29-year-old university student from the Peoples Republic of China who moved to Canada three years ago and has yet to obtain permanent residency.
In July, with help from her parents and friends, she put down a 10% deposit on a C$560,000 townhouse in metro Vancouver. The new tax came into effect soon after, adding C$84,000 to the overall price of the property. Reneging on the deal will cost her a non-refundable deposit of C$56,000.
Jing is now the lead plaintiff on the lawsuit, which argues that the tax violates more than 30 international treaties signed by Canada. These treaties, entered into with countries ranging from China to the United States, include provisions to ensure that Canada treats citizens of these countries as equal to its own citizens, said Luciana Brasil, a partner with Branch MacMaster LLP, the law firm that filed the class action suit on behalf of Jing.
When I go and buy the same property that Ms Li bought and I dont have to pay the tax because I happen to have permanent residency or Canadian citizenship, then shes being treated less favourably, said Brasil. It is discrimination based on commitments that Canada has made not to treat them differently.
The lawsuit, filed on behalf of foreign buyers from more than 30 countries, seeks to overturn the legislation behind the tax as well as force the province to refund foreign buyers for any tax paid to date.
In its efforts to address a critical issue, the tax wrongly targets many foreigners who are legally living and working in Canada, said Brasil, penalising many of them as they make their way through the years-long process of obtaining permanent residency. We say they used the wrong tool for the job. Its like trying to use a screwdriver to put a nail in the wall. It just doesnt work.
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A judge will now decide whether the class action suit can proceed, a process that could take up to a year. The provincial government has yet to file a response to the lawsuit.
In September, the Real Estate Board of Greater Vancouver linked the new tax to a 26% drop in home sales in August in the Vancouver region. The average price of detached properties dropped to C$1.47m in August, a decrease of 17% from one month earlier.