Vacancy Taxes, Do we still need them?
BC has two homes taxes that affect rental housing. The City of Vancouver has the Empty homes tax and the Province of BC has the Speculation Tax which has a similar effect for a majority of the Province.
Both taxes are designed to encourage people to not have their property vacant and have it used for housing either by a home owner or by a tenant. Current market conditions are having a significant effect on the rental market and vacancy rates. Rental rates are declining, while vacancy rates increase, due to the current supply of product exceeding demand. It is taking longer to find a quality tenant due to choices available to tenants. They are not in a rush to select a place. This could lead to your property being vacant past the time limit that the Speculation or Empty homes taxes become effective. Failure to have your property occupied could lead to these taxes being applied to your property.
This begs the question: are these taxes still needed? Maybe it is time for the City of Vancouver to consider removing the empty homes tax and the Province to reduce and or remove the Speculation Tax. The speculation tax is not applied to all areas of the Province at this time. This will only occur if the people make this a priority for the government to remove. The federal government also introduced the underused housing tax in 2024.
With all of these taxes and the current rental market supply and demand is going to push more products to the sales market which will push sales prices of homes down as well. This is what the government would like to see which is why we don’t think there will be any discussion to remove these taxes. The sales market has slowed and products are staying on the market longer than in the past few years. We anticipate the next two years will have the rental market on a downward decline in prices.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Security Deposit, What are they used for?
When a tenancy starts in BC the landlord is permitted to collect a security deposit and a pet deposit if there are pets in the rental unit. In BC the maximum allowable limit for the security and pet deposits is 50% of the first month’s rent. For example if the rent is $2000 the security deposit and pet deposit could be $1000 each.
When moving out tenants sometimes misunderstand what the deposits are used for.
We often have requests from people when vacating a property requesting we use the deposit funds as part of the last month of rent. This is not what either of these two deposits are designed for.
A security deposit is to be used for damage and other costs to the unit when the tenant vacates the property. We often experience people who fail to clean the unit to a satisfactory level. They often miss behind the fridges and under stoves for example. In strata corporations there are move out fees applied which tenants sometimes fail to pay.
The pet deposit is a different item which is to be used for specific damage to the unit caused by the animal. The animal would not fail to clean behind the fridge, or book the move out. It would scratch and damage the floors, baseboards, carpets and other items of this nature.
The other main factor tenants misunderstand is that the deposits are not to be returned until the forwading address has been provided to the landlord. A tenant is required to meet and complete the move out inspection report with the landlord or their agent to determine if part of the deposits should be withheld. On the move out form is a section to provide the frowarding address. Some tenants at this time refuse to provide a forwarding address believing that the requirement of the landlord returning the deposit within 15 days allows them to claim twice the amount of the deposit. The time of the 15 days starts when the tenant provides the forwarding address.
The move out form also has a section where a tenant can sign the form and provide the forwarding address but disagree with the proposed withholding of the funds. If this section is indicated then the landlord must file a claim with the RTB for dispute resolution within the 15 day time frame. Failing to file in the 15 days could result in the landlord owing the tenant twice the deposit amounts.
What if the tenant fails to attend the move out inspection, sign the form or provide a forwarding address. A tenant has two years to provide the forwarding address. What this means is that as a property management company we must hold these funds in trust for two years before dispersing them to the owner. If self managed the tenant can provide the address in that two years and then at that time the 15 day period begins. If the landlord has not held the funds they would need to distribute them to the tenant in 15 days.
A landlord should perform the move out inspection even when the tenant fails to attend the meeting and complete the form as if they were in attendance.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
When a tenancy starts in BC the landlord is permitted to collect a security deposit and a pet deposit if there are pets in the rental unit. In BC the maximum allowable limit for the security and pet deposits is 50% of the first month’s rent. For example if the rent is $2000 the security deposit and pet deposit could be $1000 each.
When moving out tenants sometimes misunderstand what the deposits are used for. We often have requests from people when vacating a property requesting we use the deposit funds as part of the last month of rent. This is not what either of these two deposits are designed for.
A security deposit is to be used for damage and other costs to the unit when the tenant vacates the property. We often experience people who fail to clean the unit to a satisfactory level. They often miss behind the fridges and under stoves for example. In strata corporations there are move out fees applied which tenants sometimes fail to pay.
The pet deposit is a different item which is to be used for specific damage to the unit caused by the animal. The animal would not fail to clean behind the fridge, or book the move out. It would scratch and damage the floors, baseboards, carpets and other items of this nature.
The other main factor tenants misunderstand is that the deposits are not to be returned until the forwarding address has been provided to the landlord. A tenant is required to meet and complete the move out inspection report with the landlord or their agent to determine if part of the deposits should be withheld. On the move out form is a section to provide the frowarding address. Some tenants at this time refuse to provide a forwarding address believing that the requirement of the landlord returning the deposit within 15 days allows them to claim twice the amount of the deposit. The time of the 15 days starts when the tenant provides the forwarding address.
The move out form also has a section where a tenant can sign the form and provide the forwarding address but disagree with the proposed withholding of the funds. If this section is indicated then the landlord must file a claim with the RTB for dispute resolution within the 15 day time frame. Failing to file in the 15 days could result in the landlord owing the tenant twice the deposit amounts.
What if the tenant fails to attend the move out inspection, sign the form or provide a forwarding address. A tenant has two years to provide the forwarding address. What this means is that as a property management company we must hold these funds in trust for two years before dispersing them to the owner. If self managed the tenant can provide the address in that two years and then at that time the 15 day period begins. If the landlord has not held the funds they would need to distribute them to the tenant in 15 days.
A landlord should perform the move out inspection even when the tenant fails to attend the meeting and complete the form as if they were in attendance.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
What has caused the rental market to slow down?
Often now when speaking with a client or potential clients the most common question is why is the rental market slow at the moment. The first question is has the Air BnB ban caused the rental market to decrease that much?
Our response is that although the Air BnB ban has contributed to the current market conditions it is not the main or only cause of the slower rental market.
When covid occurred in March of 2020 the first reaction to the rental market was rental prices decreased. In the fall of 2020 the housing sales market started to increase and many individual rental products were sold removing a large number of rental products from the market, which created a significant supply shortage compared to demand.
Governments at various levels have attempted to control the housing market with the implimentation of the Empty homes tax in Vancouver which required a property be occupied for at least six months of the year. The Provincial government had implemented the Speculation tax which also required home owners to occupy the unit or have it rented to avoid the speculation tax.
During covid the economy started to experience high levels of inflation and in 2022 the bank of Canada started to increase the interest rates to slow inflation. This eventually had an effect on the housing sales market which led to less rental properties being sold and removed from the rental market.
The BC Government in 2022 made a change to the strata property act eliminating the right of some strata corporations to have a rental restriction bylaws. Prior to this, properties built before 2010 had the ability to restrict the number of rentals in their building. The intention of this change was to increase the number of rental properties in the market.
The federal government then brought in a restriction on foreign buyers being allowed to buy property in Canada which took effect January 2023. This would slow housing sales which has an effect on the rental market.
Prior to covid and during covid both federal and provincial governments were trying to control the increasing costs of housing by providing developers incentives to build more purpose built rental properties adding more supply to the market.
Provincial governments and other officials complained about the amount of immigrants being brought into the country at increased levels in the past few years. The federal government made changes to the immigration policy reducing the number of students and imigrants that would be permitted to enter the country reducing the demand for rental properties.
In the lower mainland many new condo and rental developments were in the process of being built and are completed and are now entering the rental market increasing the supply to the rental market.
In 2024 the BC government brought in a restriction on short term rentals throughout the province with some exceptions including spaces in your primary residence, and some smaller communities. This prohibits people from renting out full condos or homes on short term rental sites which adds more product to the rental market.
Starting January 2025 a new tax, the anti flipping tax was brought in to prevent people from buying and selling properties in a short period of time. If you buy and sell a property within two years the seller will be subject to an additional 20% tax on the profit of the sale of the property.
The current rental market has been affected by all of the above factors. The one other factor that governments don’t like to admit is the economy has slowed and may or may not be in what is considered a recession.
For all of the above reasons the rental market has slowed causing a greater supply than demand for rental properties. When the supply is greater than the demand this is called a tenant favourable market, which allows tenants to take their time to find the right property and negotiate with landlords for the best rental price of the property. During tenant favourable markets we also find more questionable tenants seeking to move and relocate. Why does this increase?. When small landlords have a property vacant for multiple months it might be difficult for them to continue to keep the property payments without incoming rent, causing landlords to make decisions on potential tenants without performing their due diligence.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Subletting, what is it?
What if a tenant says I want to sublet my unit?. What are a landlord’s rights?.
The RTA says a landlord can’t reasonably refuse a tenants permission to sublet the property if there is more than six months left on the fixed term of the tenancy agreement. The key point here is the fixed term.
First let’s look at what a sublet is. This is often missunderstood by tenants. To sublet your apartment means that you, the tenant vacate the unit and someone else resides in the unit until you return to occupy the unit. When the tenant sublets the unit they continue to be the tenant who pays rent to the landlord and the other party becomes a sub tenant of the current tenant. The original tenant is still responsible for all activities at the property while it is subletted.
What subletting is not. It is not two people renting a two bedroom unit and one party vacating the unit and the other party having a different roommate renting the second bedroom. This would be an end to the current tenancy and the two new people renting the property under a new contract.
A tenant wishing to sublett must provide and the landlord can ask for details to confirm there is a legitimate reason for the sublett. A job transfer to another location would be considered a valid reason, and the landlord could request the documentation from the employer to verify this situation.
If the tenant is granted permission to have another party rent the second bedroom then there is no official process to remove that person from the property when the other party returns. When the one party subletts they agree to a subcontract with the subtenant for a term shorter than the current fixed term.
If the current tenancy is on a month to month tenancy there is no requirement for the landlord to approve the tenants sublett the unit. The tenants would in this case terminate the agreement and end the tenancy and the landlord would seek a new tenant for the property. If the fixed term has less than six months on the term the landlord is not required to approve a sublett to a tenant, as in this situation the landlord could again seek a new tenant to mitigate their loss.
Understanding your rights as a landlord is important when tenants inquire or ask about changing the terms of their agreement.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Flipping Tax, Yes Another Tax on your property.
During Covid the housing sale and rental prices increased dramatically. The result of this has caused all levels of government to step in and try to reduce the cost of housing and the most recent way for the BC government is to implement another tax for home sellers.
The anti-flipping tax came into effect Jan 1, 2025. What is the flipping tax? This tax is to help reduce speculative house buying and selling. What is speculative house buying? This is when someone buys a home and in a short period of time, turns around and sells the property for a profit due to the increase in value in the market.
The new flipping tax is making it a requirement of owners to hold onto their properties for a minimum of two years. If you purchased a property in 2024 and sold it in 2025 you will be subject to the flipping tax. The tax rate is 20% of the profit on the home. If you bought your property in 2020 and sold it in 2025 then you would not be subject to the flipping tax. The intent of the tax is to encourage people to hold the properties for a few years before selling the property.
How is this going to affect the current rental market?. A few things could happen.
This tax could cause people to delay buying a property to live in as they are unsure what their short term future is and don’t want to be in a position where they must sell and pay the flipping tax. It may delay current owners who recently bought from selling their property as well. This may cause those people to seek a place to rent which would help the rental market and it would put more downward pressure on sales decreasing the price to buy a property.
When there are less options for selling your property, the owner will try to rent the property which will add more inventory to the market. We anticipate the rental quantity will increase in the short term as there are many developments currently under construction that will be completed in the next year and those owners would be subject to the flipping tax. They will look to the rental market for their property increasing supply which will decrease the demand.
The market could go the other way as well and many people may choose this is a good time to buy due to the above pressure pulling down the prices, making it more affordable to own instead of renting. A strong rental market coincides with a good sales market.
We anticipate this is going to create an initial increase in product entering the rental market affecting the rental prices. We are not sure how long that will affect the market and how far it will push rental rates down. We anticipate it will have an effect on the market for at least two years. The tax will eventually slow down new construction as most new construction is developed with investors in mind and they may opt out of purchasing products if they are required to hold them for a minimum of two years which eventually will slow development in the market place. After that there will be a decrease of products entering the rental market.
We always advise clients who are investing in a rental property that to realize gains you need to hold the property for three to five years, more like five in slower growing or declining markets like we are in today. In that case it would not affect the investor who holds the property for five years before disposing of it.
For more information on the anti- flipping tax visis the BC government website in the link below.
https://www2.gov.bc.ca/gov/content/taxes/income-taxes/bc-home-flipping-tax
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com