46 | spring 2017 cmba-achc.ca CmB magazine
avoiding the problems. Some creditors in
foreclosure matters are taking order absolute
and then completing the sale directly to the
buyer. It may be that this approach remains
worthwhile even though it means the bank
has to pay property transfer taxes, increased
legal costs and can delay the sale to the
ultimate purchaser. Perhaps more significant
is that by the creditor taking order absolute,
the creditor may breach its obligation to
CMHC; the taking of order absolute negates
CMHC's ability to pursue the seller for any
shortfall under the mortgage.
Some lenders are providing an indemnity
to the buyer. is is simply the result of risk
analysis by the lender, on a deal by deal basis.
It would be prudent for a lender to obligate the
borrower to provide residency information in
the paperwork leading to the initial funding,
and to update the information periodically as
well as on significant changes occurring. e
thoroughness and currency of the information
on the lender's file could minimize its risk in
providing the indemnity.
In British Columbia, consideration is
being given to amend the standard form of
purchase agreement to include a requirement
that the seller provide a declaration as to
residency status in respect of the ITA.
A mortgage broker can help a client avoid
the above problems by suggesting, if all else
fails, that the client explore with his lawyer
completing the purchase from the non-
resident by withholding and paying the tax
amount directly to CRA.
Takeaways
Many of the key takeaways have been italicized
in this article. Perhaps the two most important
takeaways for a mortgage broker are:
n
A mortgage broker can help a buyer by
suggesting, if all else fails, that the client
explore with his lawyer completing the
purchase from the non-resident by paying
the tax amount directly to CRA. is can
allow the arranged mortgage to fund as
scheduled.
n
A mortgage broker can help a lending client
by suggesting that the lender:
.
obtain and maintain documentation, on
file, as to residency status of the borrower;
and
.
allow for the fact that, in the event
foreclosure is necessary and the borrower
is a non-resident, the sale proceeds
available to pay out the mortgage might
be reduced by the amount of capital
gains tax.
taxburden
