Province OKs rent-to-own program that helps 'avoid' foreign buyers' tax

The B.C. finance ministry has reviewed a developer's rent-to-own scheme that promises to help homebuyers "avoid paying the 15-per-cent foreign buyers' tax" and found it doesn'tviolate any law.

The Vancouver Rent to Own program from Apex Western Homes offers potential buyers a lease agreement on a home, with the option to buy within five years. That gives foreign buyers time to secure permanent residency or a work permit in Canada.

A video on the program's website explains a bit further: "Did you know that you can buy a house in North Vancouver, one of the most desirable cities in the world, with only five per cent down? And if you're a foreign buyer, you can avoid paying the 15 per cent foreign buyers' tax?"

In an emailed statement Wednesday, thefinance ministry said:"We have reviewed the structure of the rent-to-own model offered by this company." A ministry spokesperson confirmed the government found no issues with the program.

However, the ministry reached out to CBC News after this story was published to clarify thatrent-to-own models in general cannot be used to avoid paying taxes, and stressed the government would crack down on schemes of this nature.

The ministry's evaluation left Vancouver real estate lawyer Richard Bell scratching his head.

"The word 'avoid' sounds like tax avoidance to me," Belltold CBC News, referring to the wording used by Apex.

"If the purpose of that structure is to avoid the tax, why would that not fall within the definition of tax avoidance?"

'It's actually a delay'

But ApexCEO RayVeselyinsists he isn't trying to help foreign buyers dodge the tax.

"I'm starting to suspect the word 'avoid' is a bad word," Veselysaid.

Instead, he said he's trying to help newcomers get a foothold in the real estate market before prices shoot up even further.

"It's actually a delay. It gives an opportunity for somebody to come here, live in the house that they're purchasing, then in five years they get their permanent residency and when they close...they don't have to pay the 15 per cent," he said.

The price of the home is locked in at the beginning of the agreement, and a portion of the monthly rent goes toward the principal. If, after five years, the buyer still hasn't obtained the necessary status in Canada, the foreign buyers' tax will still apply.

'The housing market crashed on us'

Vesely first started thinking about the idea last year, when the B.C. government announced the additional 15-per-cent property transfer tax, initially levelled on buyers who weren't permanent residents or citizens.

"The housing market crashed on us, and we had about six houses for sale," Vesely said.

Rent-to-own programs are popular in parts of the U.S., and Vesely said he spoke with a California man who was interested in setting up something similar if he moved to Vancouver for a new job.

Vesely said he consulted a lawyer and the Real Estate Board of Greater Vancouver before offering the program.

The provincial government was first alerted to the program by a report from the independent news site ThinkPol.ca, which charged that Apex was advertising online in China.

Vesely said he was unaware of any China-specific ads, but acknowledged it was possible the program was being promoted on Chinese websites.

"It would have been one of my staff members. I don't know," he said. "All I know is we put it on the internet."

No takers yet

He hopes the program will be attractive to anyone struggling to find the cash for a down payment in a real estate market where home prices are rises faster than most people can save.

But according to Vesely, the company has yet to sign a rent-to-own agreement with anyone local or foreign.

He said he came close with a Londoner whose company was transferring him to the Lower Mainland, but in the midst of making the deal, the province decided to exempt people with work permits from the tax. The client opted to simply buy instead.

The provincial government recommends that anyone buying real estate in B.C. should get an advance tax ruling to make sure they're clear on the tax implications of the deal.

In a`statement, the finance ministry also noted the province's Property Transfer Act includes a broad anti-avoidance rule that prevents someone from structuring a transaction to avoid paying the additional property transfer tax.