Bang On: President's Column

Little known capital gains tax rule could hit buyers

  • Written by Sue Wastell

As most of us know, the real estate market in Ontario has changed over the last few years with the arrival of more buyers and investors from outside of Canada.

Some of these buyers may split their time between living in Canada and another country or have family living in both Canada and another country, which can result in them being deemed as a non-resident for tax purposes. This status makes them subject to different taxation rules than residents.

If you’re a resident of Canada, you have to pay tax in Canada on your worldwide income — meaning any income earned either inside or outside Canada. Non-residents of Canada, however, are required to pay tax in Canada only on income that is earned from a Canadian source. Employment income, income earned from a business carried out in Canada and capital gains earned on Canadian real estate must be reported on a Canadian tax return and are subject to the payment of tax to the Canadian government.

This non-resident status becomes relevant to the purchaser of a resale home when the seller of the property is a non-resident who fails to pay the capital gains tax owed on sale of their Canadian property. When the Canadian government is unable to collect tax on the capital gains from a non-resident — perhaps because they have left the country — there is a special part of the legislation that allows the government to look to the purchaser to pay the capital gains tax that is owed.

While most buyers are likely not even aware of this rule, they need to learn about it because of the potentially significant financial impact it could make on their purchase.

The impact of this is only starting to become known as more non-residents of Canada start to sell properties they have purchased in Canada.

So how can a purchaser protect themselves and find out if the seller’s permanent residence is not in Canada? One red flag would be if on the agreement of purchase and sale, the contact address of the seller is outside of Canada or if there is any other indication on other documentation or even in conversation that this could be the case.

But the best advice is to ensure that you work with a qualified real estate lawyer when it comes time to do the paperwork on the purchase of your home.

The lawyer should ensure that the seller provides a declaration made under oath confirming they are not a non-resident. Or if the seller is a non-resident, your lawyer needs to obtain a clearance certificate from the seller, which clearly indicates that the Canada Revenue Agency and the non-resident have made appropriate arrangements to pay the tax on the capital gains made on the sale of the property.

Canada Revenue Agency puts the onus on the purchaser to take prudent measures to confirm the seller’s residence status. You and your lawyer should investigate any hint or question of residency prior to closing a real estate transaction. A partial holdback of payment by your lawyer on closing is one way to protect yourself if you have valid concerns.

Sue Wastell is the president of the London Home Builders' Association and Owner of Wastell Homes in London.     

Proper installation key to insulation success

  • Written by Sue Wastell

Despite what the market says is the most popular insulation material or method at any given moment, the truth is each project has its own set of circumstances that call for a recommended set of options. And within those options, the specifications and installation can have a massive impact on the result.

It’s important to understand insulation materials and how they work within your home’s construction and the environment in which you live. The product that is quickly becoming one of the most popular options in North America is spray polyurethane foam (SPF).

Spray polyurethane foam is a heat-activated polymer that is a foam insulation that is sprayed into place. It is made by mixing two ingredients onsite using special equipment. The mixture is sprayed through a heated hose onto the surface that needs to be insulated. As the chemical reaction between the two ingredients takes place and the substance heats up in the hose, the liquid turns foamy, expands and eventually hardens in place.

Open-cell SPF is lighter, less dense and  cheaper but has less insulating power (or a lower R-value). Closed-cell SPF is denser and more expensive, can provide a bit more rigid support to certain structures and can act as a water vapor barrier, because it is less permeable.

Why is SPF so popular? Spray foam has the potential to tackle air leakages better than many other insulation options. Because it is sprayed into place, the foam can fill the envelope. It can be applied to vertical or horizontal surfaces to act not only as thermal insulation, but also as an air barrier. It’s synthetic and does not attract rodents or insects. When applied properly, spray foam can contribute to a successful energy-efficiency strategy.

The relative ease of installation makes it a popular choice for contractors. Even though it can be expensive, its relatively high R-value per centimetre makes it a competitive option. It’s particularly helpful for renovation projects where traditional batt or board insulation may be difficult to insert. With spray foam it’s possible to inject the insulation into a wall cavity, for example, or apply it to a sloped surface.

As with many building solutions, the increasing popularity of a product or method means an increase in misuse and misunderstandings. It is common to find examples of spray-foam insulation that have been installed incorrectly.

The most common problems with spray-foam applications are:

  • The chemicals were not mixed correctly, and the foam starts to pull away from the neighbouring surfaces
  • The installers rush through the installation, leaving gaps and holes that reduce the efficiency of the product
  • A sufficient thickness either was not specified or was not executed as specified during installation
  • The local climate was not taken into consideration, and the temperatures or humidity levels were outside of the manufacturer’s specifications
  • In cold climates, a vapour barrier was not installed over the spray foam, sometimes causing roof rot.

Installation is a key factor with any kind of insulation and can be the difference between insulation that works or causes problems.

It is essential that anyone working on the construction or renovation of a home using SPF follow the recommended health guidelines. Please don’t think that you can install this in your shorts and T-shirt on the weekend. Consult a professional and do your research.

The good news is learning the pitfalls is just part of being more aware of the consequences of a certain decision. Every insulation material has advantages and disadvantages. SPF is a viable solution for certain homes and can offer substantial energy savings if installed correctly. You just need to be aware that, relative to other materials, the installation can be easier to execute but also easier to rush through. Knowing what questions to ask your installer can go a long way toward obtaining optimal results.  

Sue Wastell is the President of the London Home Builders’ Association and Owner of Wastell Homes in London.

Permeable pavers protect natural resources

  • Written by Sue Wastell

Have you ever stopped to think of what happens to the water running off your house and onto your driveway when it rains?

If your home is like most, the water probably travels down gutters, through downspouts and onto an asphalt driveway, picking up traces of pollutants such as petroleum and pesticides along the way. Down a street gutter it goes, eventually finding its way into a storm drain.

This may be as far as you can visibly follow the journey, but it doesn’t stop there. Much stormwater runoff finds its way into nearby rivers and lakes.

Redirecting stormwater into the ground is a much greener option. Microorganisms in the soil are able to digest the pollutants, purifying the water on its path back into the aquifer. Allowing the water to seep into the ground also helps prevent the erosion of nearby waterways by runoff.

By replacing your impervious asphalt or concrete driveway with a permeable surface, you’ll be supporting groundwater recharge while also visually softening your property.

The first step in installing a permeable driveway (sometimes referred to as a sustainable drainage system) is deciding which design will work best for you.

Open-cell pavers are simply concrete pavers with holes that can be filled with a previous material. Filling the cells with vegetation can soften the entire look and add a bit of green to your site.

What’s underneath the pavers is what really counts. A solid base is key to minimizing heaving and cracking. You will need a six-inch sub-base of 1½-inch clean rock topped with a four-inch base of ¾-inch clean rock, to make the driveway stable enough for cars to pass over it. The paver system goes on top of that. A polyurethane liner should be used near any foundation walls or concrete that needs to be protected from water flow-back.

Pervious pavers commonly have joints filled with aggregate to allow water to penetrate between the pavers. Tabs are formed into each paver, providing the correct joint width and making installation easier. As with open-cell pavers, a sturdy base is required.

Some ceramic pavers are porous themselves, allowing the water to pass through the surface directly, instead of through the gaps between. This means the gap can be narrower and doesn’t have to be refilled with aggregate as often — a common chore with other pervious paver systems. Due to the small size of the pavers, cracking or heaving is not an issue in cold climates.

Although in our climate with snow needing to be plowed, another option is a gravel driveway. It will also need a base underlayment to maximize its pervious nature. Usually this is a plastic mat made up of circular or honeycomb cells structured to provide load-bearing support. These cells are filled with gravel and help keep rainwater in the soil and out of sewers.

One consideration is the type of soil you have. It could range from sand (fast drainage time) to clay (longer drainage time).

The best time to do a project like this is late spring or summer, when the weather will co-operate. Construction during winter in colder climates is not recommended due to frost-depth issues.

By installing a permeable driveway, you’ll be directly protecting the integrity of our natural resources, supporting groundwater recharge and adding green space to help balance carbon dioxide levels.

Sue Wastell is the President of the London Home Builders’ Association and Owner of Wastell Homes in London.

Soundproofing can go both ways

  • Written by Sue Wastell

When a homeowner wants to talk about soundproofing, it usually is in response to a desire to keep noise out.

We can all relate to wanting a quiet space when you return home and want to unplug from technology and social interaction. Sometimes, it is  surprising what true silence is like because we have become immune to the electronic sounds of today’s lifestyles.

Of course, there are many ways to do this, starting with the exterior shell of the home. Increased insulation, use of brick or stone and triple glazed windows are effective barriers to typical sources of noise such as trains, highways or neighbours.

Within a home, there also are numerous methods and materials to mitigate or soften sound transmission, including:

  • Resilient channel (metal strips that separate drywall from wood studs)
  • Mineral wool sound insulation
  • Acoustic foam panels
  • Light-density spray foam
  • Sound dampening drywall
  • Solid versus hollow-core doors
  • Soft surfaces such as drapes, fabric wall hangings, rugs, carpet and plush furniture

Sound abatement has become a priority for manufacturers of refrigerators, dishwashers, washing machines and dryers. Appliances now include a noise rating among their specifications. Replacing old appliances with new ones can make a big difference in the noise level within your home.

But what if the objective is to not to keep sound out? What if a family wants a media or theatre room for relaxed private viewing? Or what if the family includes one or more budding artists and what they need is a dual space to nurture and show off those talents?

While the same construction methods and materials could be used, there also would be other considerations specific to the location within the home. Decor elements, lighting and design all need to work together to support the artist and create an atmosphere that lets his or her performance shine.

Acoustics becomes the first element of importance on which the size and configuration of the space are a big influence. The more space or physical volume, the better. Vaulted ceilings in an attic or garage or other room are preferable to one with a consistent flat ceiling. Choosing a basement might seem convenient, but it will provide much more of a challenge to prevent sound from bouncing off the walls and ceiling and creating an echo. Specialized acoustic panels will need to be carefully positioned.

Lighting also plays a critical role in creating the right atmosphere. Placement of a combination of pot and spot lights needs to be compiled into a fully designed system. The choice of light bulb, exterior light from windows or skylights, and the use of blinds or drapes all need to be considered as well as dimmers to be able to take the space from lower light for viewing to higher energy for performances.

Draping the sides ends of a stage can make for a more intimate performance. Placing the stage in front of the movie wall can allow for special effects with backgrounds aligned to the type of performance.

Lastly, the audience needs to be comfortable. Typically this means padded reclining theatre-style chairs or couches, either set in rows or groupings. But since we are talking about artists and a creative pursuit, this is where a little more thought could stretch the use of the space and its atmosphere. What about putting casters on the chairs to allow them to be moved to a more casual arrangement. Or what about a combination of bistro tables and chairs with a bar behind, for a full cabaret experience?

Use your imagination to enhance the enjoyment of your home.

Sue Wastell is the president of the London Home Builders' Association and Owner of Wastell Homes in London.     

Functionality found in the details

  • Written by Sue Wastell

Builders invest considerable energy and funds into constructing and furnishing model homes, knowing that home buyers need to be able to see the size of rooms and traffic flow. Visualizing a home from a blueprint can be challenging even for experienced builders, let alone for people looking to build their dream home.

A model home with an open concept floor plan will allow you to stand at the stove and the sink, both common standing spots in real life, and see a true picture of how much you will be able to oversee behaviour in the family room — or the line of sight to the TV for your own viewing pleasure while you are busy creating gastronomic masterpieces in the kitchen.

It will also show the pattern of movement required to clean up the table afterward and load the dishwasher and even the path from the dishwasher to the appropriate cabinet.

A colleague recently confided that she missed this last point in a home she had built. She didn’t realize until too late, that the dishwasher was at the wrong end of the island; resulting in her trying to lessen trips back and forth by carrying bigger piles of heavy dishes in each trip. Functionality is truly in the details and models give you the opportunity to test drive a layout!

Model homes are also used to display a variety of finishing and decor options. Where better to see of line of pot lights in the ceiling, or types of flooring and cabinets, shelving and pull-outs, sinks, faucets and showers or countertop and backsplash options etc.

When you’re starting your search for a home, make it one of your first steps to see as many model homes as you can — not just those in the area where you want to live and not just ones that are the size you think you want or in the price range that want to spend. Checking all manner of model homes will help you to really get a sense of the size of home you need or want, layout of rooms that will best fit your family’s lifestyle, and a vast array of features that you can consider. And if you haven’t already selected your builder, checking model homes will give you a visual of the level and quality of finish you could expect in your own home if you choose that builder.

A quick check of the LHBA website – https://www.lhba.on.ca/en/buying-new-item/where-are-we-building will help you plan your route. The builders’ map provides a summary of the model homes of various builders throughout the city and area as well as links to their websites.

It is also a good idea to do a little preparation:

Take measurements of your existing rooms so that you can make meaningful comparisons and consider the design strengths and weaknesses of each model Make a list of your current home’s room sizes or layout that need changes as well as areas or features that work well and you would like to have again.

When visiting multiple model homes there is a great deal of information to digest. Taking notes is wise — model prices, features, layout, colours and finishes and what you liked and didn’t like.

Use your time in a model to actually walk through your normal day — from the ring of your morning alarm to when your family have finally retired and you get to relax on the sofa. Doing this will either highlight the benefits of that model home layout or let you know how it doesn’t work.

Touring model homes is definitely a fun way to check out the latest colour palettes and decor trends, but there’s much more to be gained. The reward for being well prepared and informed will be a new home that is a perfect fit for your family. Think of it as fun homework!

Sue Wastell is the president of the London Home Builders' Association and Owner of Wastell Homes in London.     

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