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
Would it help if tenants’ rents were reported on their credit reports?
We often hear tenants calling for rents to be included on the credit report services to help them secure a tenancy. Is this really necessary? The questions for the landlord should be what are you using the credit report for in the tenant selection process? What information are you looking for on the credit report?
The tenant selection process is and should be a long process. It starts with the first contact from the potential tenant inquiring about the property. From that point on it is a constant interview of the potential tenant, until the final decision to rent the property is made. Many details are provided in the pre-screening process and the showing of the property that a landlord should make notes of and review when the application form is supplied to confirm those details match the information provided.
We often hear infomation about employment that is not what the applicant puts on the application form. This can include location, estimated income or role at the employer. When the information provided is incorrect it should be a red flag the applicant is trying to provide information to make them look better than they are. We have received phone numbers that are direct to individuals and when we call the company indicated on the application form the individual is not employed at the company.
We contact landlord, personal and employment references with the intention to verify the information provided. When you ask an employer if the 50K salary is accurate when the application says they earn 75K and the employer doesn’t correct you, that is a red flag.
When you call a personal reference whe syas they have been friends for 20 years and they have no idea what they do for work, they are not really long time friends.
We use the credit report as the final step to verify there are no glaring financial issues that could be of a concern. The credit report provides more information than just the credit score.
It shows the credit score. If shows they have one or two car loans, as discussed in the application process. It shows the previous address the applicants lived at. All of these details are information that helps the landlords determine if the person is telling me the truth about who they are and are they going to be a good tenant.
Our experience is people who are good tenants, don’t hide anything, they provide the information we ask for in a timely manner and we are able to find the details about their work, places of residence online before we begin making calls to verify the details.
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 am I allowed to do?
We hope your Christmas and new years were full of joy and happiness.
Over the holidays I was watching some youtube videos providing advice on property management in BC. In BC there are three different types of licenes that fall under the BCFSA regulatory authority. One is Trading, which is real estate sales, the second is Strata Management and the third is Rental Property Management.
Each license allows the party to provide different services to the market and each license is not permitted to provide advice or guidance on the other subjects if they are not licensed in that category.
One of the videos I watched was from a Licensed trading Real Estate Agent who indicated they were also an investor in real estate themselves. They provided five factors that they use in managing their rental properties that are good practices to follow. The problem is that some of their suggestions were issues that are not permitted or create risk for the landlords when managing their own properties.
The first item they mentioned was that they ask the applicants or tenants to provide copies of their ID. In BC a landlord has the right to request to “view only” a tenants or applicants ID, landlords are not allowed to make and keep copies. If the applicant supplies it on their own without asking, then that is the applicant’s choice. This information is identified clearly on the RTB website on what documents are able to collect under privacy laws.
https://www2.gov.bc.ca/gov/content/housing-tenancy/residential-tenancies/starting-a-tenancy/list-and-show-a-rental-unit
The next item they recommended was when doing reference checks one option is to use a third party to perform a credit check. Under OIPC ( The Office of Information and Privacy Commissioner) it suggests that a landlord must understand how and what personal information they are collecting and how they are using it. When you have an application form and it says “you” will perform a credit check on an applicant. If you then use a third party to perform the credit check and you have not informed the applicant that the third party would be the one doing the check you may be violtating a person’s privacy with regards to their personal information, by providing the third party with the applicant’s personal details without their permission.
The third item this person mentioned was they perform a criminal records check on the applicants. The OIPC specifies that criminal records checks are only to be performed where a reasonable person would expect them to be used. The example they give is if the building the rental unit is in has a daycare in it then it would be reasonable to perform a criminal records check to ensure the person doesn’t have any record regarding children. When searching for a tenant a landlord has the right to search information that provides them information to prove they are suitable for the tenant which means can they pay the rent and will they take care of the property. What in the criminal records are you going to find that will cause you to determine the person should not be renting your property. A Landlord should be able to determine if the person is a criminal without performing a criminal records check. I have heard people saying they are looking for things like they are being sued, or have an order for a divorce in court. These are details you can ask for in questioning the applicant for their financial position which is allowed. If the applicant indicates they are divorced then the questioning can lead to are you paying or receiving spousal or child support and you can ask for details on this as it determines the applicant’s ability to pay the rent.
If you are unsure on what is involved in managing a rental property in BC we recommend you sue a licensed property manager.
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
Who is the Landlord?
When renting a property in BC the standard tenancy agreement requires some specific details be included. One of those details is, who is the landlord?. The RTA has definitions of who the landlord can be. The definition is the landlord can be one of the following.
in relation to a rental unit, includes any of the following:
the owner of the rental unit, the owner's agent or another person who, on behalf of the landlord,
(i) permits occupation of the rental unit under a tenancy agreement, or
(ii) exercises powers and performs duties under this Act, the tenancy agreement or a service agreement;
the heirs, assigns, personal representatives and successors in title to a person referred to in paragraph (a);
(c) a person, other than a tenant occupying the rental unit, who
(i) is entitled to possession of the rental unit, and
(ii) exercises any of the rights of a landlord under a tenancy agreement or this Act in relation to the rental unit;
(d) a former landlord, when the context requires this;
On the standard tenancy agreement there is space for identifying the landlord, the tenants and the Landlords agent. If you are managing your property yourself then you would be the landlord and should be identified on the agreement in this capacity.
When a Landlord hires a property manager the property manager would be the Landlords Agent and should be identified in this capacity.
The Landlord and the Landlords Agent are two different parties and need to be clearly identified as different people on the tenancy agreement. We have taken over managing various properties where the landlord agents listed themself as the landlord and the landlord’s agent.
As a Property management company Cartref Properties always lists the owner as the landlord, and ourselves as the Agent for the landlord. This recently became an issue in an RTB case where the property management company listed themselves as the landlord. When the RTB ruled in favour of the tenant and issued the order against the property management company they realized they had filled out the tenancy agreement incorrectly.
The management company attempted in court to have this reversed and make the owner the party listed as the landlord and therefore responsible for the monetary order the RTB approved. The landlord and the court ruled against the property management company and are now responsible to pay the tenant the awarded costs. This would not be a significant issue for a few hundred dollars. In this case the amount exceeded $15,000.
When filling for the RTB an agent should file on behalf of the owner so the monetary order is issued in the name of the owner not the agent for the owner.
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
Rent Controls, who benefits?
During covid we heard a tremendous number of people supporting tenants that there should be more controls on landlords ability to increase rent. In particular they were advocating for rent stabalization between tenants, meaning a landlord should not be able to increase the rent when one tenant vacates to the current market rent. It should be required to rent the unit at the old price. Oddly tenants never advocate for this during the times when rents are decreasing, which is what is happening at this time.
Landlords on the other side were advocating for the right to raise rents to current market rates due to increased costs of operating their property. This could be the cost of the mortgage, heating or other costs associated with the property. At this time landlords are also not advocating for the ability to increase the rent to an amount of their choosing. For the opposite reason as the tenants, they don’t want their property vacant, requiring them to search for another tenant.
When covid started the housing market first dipped including rents from March 2020 through to November of that year rents declined. Then the sales market took off on an upward trajectory. In BC and Canada, many cities use individually owned condos as a large portion of the rental stock for their market. When these products are sold in the free market they are removed from the rental stock. A decrease in supply increases demand and therefore the price of rentals. All levels of governments made amendments to laws trying to combat increased cost of housing.
These changes take time to effect the markets and as they do the markets change.
We now see a large inventory of rental products giving tenant options to choose.
The larger factor is tenants are not being forced out of their properties due to a property being sold, which provides them time to look for the best option. These factors are creating a higher vacancy rate and units are staying vacant for multiple months at a time.
What landlords are not hearing at this time and advocates are not demanding is that the rental rates be left at the previous rental price. The reason for this is, if you rented your property after Nov 2020 you are not likely to achieve the same rent at this time for that property.
We are also hearing less of the landlords advocating for the right to raise the rent to any level they choose. Why? Due to the supply and demand they have no choice other than to offer their product at what the market will pay. A landlord may have rented their property at a higher price two years ago and wants that price now, except the market refuses to pay their requested rate requiring the landlord to accept what tenants will pay today for the rental in property.
Are rent controls good for the tenant or landlords?
A restriction of the amount of rent a landlord can increase the rent does benefit the tenant. How does it benefit the landlord?. If you were restricted to increase the rent to the government approved rate in the past two years your tenants current rent may be comparable to the market and they may not choose to seek a new place to live, giving the landlord stability with their rental property. If a landlord raises the rent higher than the market amounts, tenants have tremendous options at this time to find a better price, location and product to meet their needs.
Rent controls can be beneficial to both parties.
We believe that BC has rent “restrictions” not rent controls. Landlords have the right to charge any amount of rent for their property. During economic good times the landlord is restricted to increase the rent to a level deemed suitable for a tenant to manage in their budget. During slow times the landlords have the right to adjust those agreements aswell to keep tenants and or attract new ones. Often landlords will refuse a tenants request to reduce the rent allowing a tenant to continue residing at the property which causes tenants to vacate the property. Turnover costs can be expensive for landlords and tenants. Increasing rents may provide landlords with increased income today. It may also cause high turnover causing landlords to experience multiple months of vacancy affecting their total income in the long run if the unit is not continuously rented.
The laws are always going to change, and being able to adjust is part of being a landlord.
We recommend as a landlord even in good times be prepared for your property to be vacant or not receiving rent for a minimum of three months each year. If you are not able to carry at least that amount of the expenses you may be in some financial difficulties with your investment property.
Rental restrictions protect both parties of a tenancy 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