If you have been a homeowner for a number of years, you are probably quite familiar with having to pay your property taxes and/or utilities every year. But everyone can benefit from a refresher.
Property Taxes
Property taxes are a primary source of income for cities and municipalities to help fund services like police, fire fighting, recreation and community centres, libraries, and parks.
In most municipalities, property taxes are due every year at the start of July (usually the first or second business day of July). The City of Vancouver differs in that it requires residents to pay an advance tax portion earlier in the year, normally due on the second business day in February. The advance tax is 50% of last year’s total property taxes after subtracting any grant amounts, which is then rounded up to the nearest dollar.
Penalties will apply if you do not pay the property taxes on or before the due date.
Make sure you are always aware of the due dates. Bills are sent to homeowners via regular mail. It is your responsibility to make sure that the municipality has the correct mailing address. If you do not receive a bill by a couple weeks before the due date, stop by City Hall and ask for the bill so you can pay it and avoid paying any penalties. The City will not be particularly sympathetic with the “It was lost in the mail!” explanation for not paying your property taxes on time.
For information on the City of Vancouver’s Empty Homes Tax, please click the following link:
https://dbmlaw.ca/blog/emptyhomestax/
Utilities
Utilities, in the context of municipal taxes, are sources of income for water consumption, sewer and drainage maintenance, infrastructure replacement and garbage, recycling and organics collection. This is separate from BC Hydro, Fortis, etc.
Every municipality collects utilities differently. Some municipalities charge utilities separately from the property taxes, which are paid annually. Others will include utilities in the property taxes. Others will charge utilities on a metered basis, where the homeowner will receive a Metered Utility Bill every 3-4 months according to consumption.
Some municipalities will charge a separate utilities bill to each strata owner. Others will charge one master utilities bill to the entire strata or multi-family dwelling.
I have encountered many purchasers who are surprised that they will be getting their own utilities bill, believing that utilities are paid by the strata (which are covered by the owners’ strata fees). If you are looking at the property, don’t necessarily rely on the seller’s recollection of what they pay every year. You can go to City Hall and obtain a tax search of the property of interest for a relatively nominal fee.
Penalties will apply if you do not pay the utilities on or before the due date.
Make sure you are always aware of the due dates. Bills are sent to homeowners via regular mail. It is your responsibility to make sure that the municipality has the correct mailing address. If you do not receive a bill by a couple weeks before the due date, stop by City Hall and ask for the bill so you can pay it and avoid paying any penalties. The City will not be particularly sympathetic with the “It was lost in the mail!” explanation for not paying your utilities on time.
Home Owner Grant
The home owner grant reduces the amount of property tax you pay for your principal residence. You must apply for the home owner grant each year to receive it. Only one grant can be claimed for a property each year.
The grant is available to homeowners that pay property taxes to a municipality or to the province if they live in a rural area. If you pay your property taxes to a First Nations, contact the First Nations directly.
The maximum regular grant (also called the basic grant) amount for people under the age of 65 is $570 in the Capital Regional District, Greater Vancouver Regional District and the Fraser Valley Regional District. For all other areas of the province the amount is $770.
To qualify for the grant, you must:
1) Be the registered owner of the residence
2) Be a Canadian citizen or permanent resident of Canada
3) Live in B.C.
4) Occupy the property as your principal residence
Your principal residence is the usual place that you make your home. It’s where you live and conduct your daily affairs, like paying bills and receiving mail, and it’s generally the residence used in your government records for things like your income tax, medical services plan, driver’s licence and vehicle registration.
The grant threshold is the maximum value of an assessed or partitioned property where home owners are eligible to claim the home owner grant. The threshold amount is reviewed every year to ensure that the value of at least 91% of homes in B.C. are eligible for the grant. If your home’s assessed value is above the grant threshold value, then the Home Owner Grant may be reduced partially or entirely.
If you purchased your property during the current tax year, you may be eligible for the home owner grant if you meet the following requirements:
1) The previous owner didn’t pay all of the property taxes
2) The previous owner didn’t claim the grant
3) You didn’t receive a grant this year for another home
4) You’re occupying the property when you apply for the grant
The home owner grant that you’re eligible to claim will be applied against only the property taxes that the previous owner didn’t pay.
The NDP Government recently announced that the Home Owner Grant Program will be reviewed by the Province, to see if it can benefit both homeowners and landlords similarly.
Starting in 2019, homeowners will need to provide their Social Insurance Number when applying for the Home Owner Grant. This new information can then be cross referenced with income tax information to catch people inappropriately claiming the grant.
Tax Installment Prepayment Plan
Either with their mortgage lender or with their municipality, homeowners can set up a Tax Instalment Prepayment Plan, where money is automatically deducted from their bank account for the payment of property taxes. Homeowners can set up a similar plan with their municipalities for utilities, but very rarely with their mortgage lenders because each municipality charges and collects utilities so differently.
The benefit with this plan is the convenience and the avoidance of potentially forgetting to pay or scrounging around for money.
But remember, you will still need to claim the Home Owner Grant (assuming you qualify). When setting up this plan with your mortgage lender, they would have asked if this property was to be your principal residence. If so, your mortgage lender will pay the property that they collected over the year at the reduced amount. If you forget to claim the Home Owner Grant, then you will owe your municipality the amount of the grant plus applicable penalties for late payment.
If you are selling your home and are making pre-authorized payments at City Hall for your property taxes on a monthly basis, please contact City Hall to cancel this service immediately. If you forget to do this, they will continue to take money from your bank account even after the Completion Date. And cancel it as soon as possible—even after making the request to cancel the plan, it can take some time for it to be cancelled. Future prepayments may still be made. Getting that money back to you can be quite the ordeal.
If you are buying, consider asking whether the seller has set up this plan with the municipality. If so, ask the amount currently held by the municipality (or better yet, go to City Hall and obtain a tax search of the property of interest for a relatively nominal fee). The municipalities very rarely refund balance credits to the seller under the plan. Rather, it is expected that the purchaser will credit the seller the amount of the balance credit at time of completion (the credit to be used towards the upcoming property tax due date). Make sure you have enough money to reimburse the seller.
Property Tax Deferment
For seniors (55 or older), widows/widowers, and persons with disabilities, owners may be able to defer the payment of their annual property taxes (at a low interest rate).
To qualify for this program, you must:
1) Be a Canadian citizen or permanent resident of Canada
2) Be a registered owner of the property
3) Have lived in B.C. for at least one year prior to applying
4) Pay property taxes for the residence to a municipality or the province
5) Have paid all previous years’ property taxes, utility user fees, penalties and interest
Furthermore, you must be either
1) age 55 or older this year (only one spouse must be 55 or older any time during the current calendar year), or
2) a surviving spouse of any age who isn’t currently the spouse of another person, or
3) designated as a person with disabilities under the Employment and Assistance for Persons with Disabilities Act, or
4) a person with disabilities and in the opinion of a physician, your severe mental or physical impairment: i) is likely to continue for at least two years, and ii) directly and significantly restricts your ability to perform daily living activities, either continuously or periodically for extended periods, and iii) as a result of those restrictions, requires you to have an assistive device, the significant help or supervision of another person, or the services of an assistance animal to perform those activities
Your eligible property must:
1) Be your principal residence
2) Be classified as residential (class 1) or residential and farm (class 1 and 9)
You must have and maintain a minimum equity of 25% of the property’s assessed value. This means that all charges registered against your property plus the amount of taxes you want to defer can’t be more than 75% of the BC Assessment value of your property in the year you apply.
If you have applied to have your property taxes deferred and the application was accepted, a restrictive lien will be registered against your home. When you sell your home, you will have to pay the outstanding property taxes in order to clear that lien. If you intend to refinance (i.e. get a new mortgage), the mortgage will likely require that you pay the outstanding property taxes in order to clear that lien.
Covid-19
Due to Covid-19 causing financial strain on so many homeowners across the province, some municipalities have pushed the due dates for the payment of property taxes and/or utilities without penalty. But these extensions are not uniform—contact your local municipality for details.
If you are refinancing, the mortgage lender will normally want the property taxes and utilities paid off even if the due dates have been extended.
If you have any questions about this post, please contact Lewis Nguyen at lewis@dbmlaw.ca or 604-937-6373.