2016 Legislative Session: Fifth Session, 40th Parliament
HANSARD

The following electronic version is for informational purposes only.

The printed version remains the official version.

official report of

Debates of the Legislative Assembly

(hansard)

Thursday, July 28, 2016

Afternoon Sitting

Volume 41, Number 3

ISSN 0709-1281 (Print)
ISSN 1499-2175 (Online)

THURSDAY, JULY 28, 2016

The House met at 1:33 p.m.

[Madame Speaker in the chair.]

Routine Business

Introductions by Members

M. Mungall: I’d like to take this opportunity to wish huge congratulations from everybody back home for John Gordon Perrin. He was born in Creston. He just tweeted earlier today that the Canadian Olympic volleyball team has arrived in Brazil. “Finally,” he said. They are ready for their pre-Olympic training camp. Everybody in the Kootenays is so thrilled that he’s part of this team. We wish him all the best. We’re looking forward to him bringing home gold, but, John, we still love you, just for being there.

C. James: I, as well, want to add my congratulations to athletes from the Victoria area. I think it’s no surprise, if you look at the fine facilities that we have around greater Victoria. Whether it’s PISE, the Pacific Institute for Sport Excellence, whether it’s the Elk Lake rowing group, whether it’s the Saanich Commonwealth Place, we have both the facilities and the athletes to send a good group off.

[1335]

I’d like to recognize Caileigh Filmer, who is a competitive rower from the greater Victoria area; Kirsten Sweetland, who is a triathlete competing in triathlon; Fred Winters, who is the captain of Canada’s volleyball team, from right here in greater Victoria; and Ryan Cochrane, who is a competitive swimmer who specializes in freestyle distance. I wish them all the best in the Olympics.

J. Wickens: I rise today to send congratulations to a good friend of mine, Natasha Wodak. Natasha is representing Canada in Rio in the 10,000-metre women’s running. Natasha and I know each other because, years ago, we worked in a restaurant together. I was always amazed at her training and how dedicated she was to running.

Natasha has won a number of races around the world. My favourite is our Sun Run. She has come first place for a number of years. My best memory of Natasha is running in the Sun Run with her where she completed it in 20 minutes, and I completed it in an hour and 20 minutes.

Congratulations, Natasha. You will make us proud. Have a great race.

M. Elmore: I’m very pleased to rise and wish the best of luck to one of our athletes heading to Rio. His name is Luke Ramsay, from Vancouver, and he is going to be competing in sailing.

It’s actually his second time at the Olympics. He made his Olympic debut in the 470 in London in 2012. He’s going to compete at Rio 2016 in a new Olympic boat class, the Nacra 17, alongside teammate Nikola Girke. The duo had a strong start to 2016. They qualified for Rio with their 15th-place finish at the Miami world cup. They also had another 15th-place finish at the Nacra 17 World Championships.

We are well represented by Luke and will be cheering for him, folks in Vancouver and across the country, wishing him well and the best of luck for a great race. He started sailing at the age of 12 and was drawn by his love of the ocean. He also has earned his bachelor of engineering from UBC and enjoys hiking and biking.

We’ll be glued to our television sets and wishing him the best, and all our athletes, in Rio.

Orders of the Day

Hon. M. de Jong: Committee stage of Bill 28.

Committee of the Whole House

BILL 28 — MISCELLANEOUS STATUTES
(HOUSING PRIORITY INITIATIVES)
AMENDMENT ACT, 2016

(continued)

The House in Committee of the Whole (Section B) on Bill 28; R. Lee in the chair.

The committee met at 1:38 p.m.

On section 3 (continued).

D. Eby: It’s a pleasure to continue asking questions of the minister about the proposed tax on what the government is calling foreign nationals buying real estate in Metro Vancouver.

It was interesting to me. During question period, I described a situation in my constituency — a student who bought a $31 million home, no apparent source of income whatever. The minister stood up in response and said: “Of course, in a situation as was described, the student would attract the additional property transfer tax. That 15 percent tax would apply.”

I mean, that was a surprise to me — that the tax would apply in that situation. Perhaps the minister can explain which section of the act would cause tax to apply to that student in my constituency.

[1340]

Hon. M. de Jong: If I caused confusion…. What I was trying to convey to the member is that someone in Canada on a student visa is, by virtue of the federal legislation and this legislation, considered a foreign national.

D. Eby: There is no retroactive effect. So this student will not, in fact, be paying this tax. Is that correct?
[ Page 13498 ]

Hon. M. de Jong: The member is correct. These provisions would not take effect until August 2.

D. Eby: There was another item that caught my attention. It was the Premier, yesterday, in the newspaper, saying that she had teams of auditors that were ready to start taking on the enforcement of this. I looked carefully through the act. I didn’t see a provision that talked about resourcing for auditors or numbers of auditors or so on. I noted that wasn’t in the act.

Then I saw this afternoon’s report that was tabled, unfortunately on the last day of session, after question period, which includes comments from the Auditor General about chronic understaffing for the last four years of auditors within the office of FICOM. FICOM, for those who aren’t familiar, is the office that’s responsible for regulating, among other things, the real estate industry.

One of the core issues that was identified was that the government has been clawing back money paid by industry for those auditors into general revenue and not hiring auditors. In many ways, that’s how we find ourselves here today, amending legislation. It’s because of the out-of-control state of the real estate industry in Metro Vancouver, due in no small part to an underfunded regulator, according to the superintendent of real estate herself, who issued a statement related to this new report.

My question is to the minister. Where in this act is there any kind of provision for teams of auditors? Where are these teams of auditors coming from? How are they being paid for? Clearly, there is going to be have to be some enforcement if this law is to be meaningful to anyone.

Hon. M. de Jong: Of course, the other provisions of the property transfer tax…. The powers of the administrator are contained within the main body of the legislation. You would not generally see enumerated in legislation of this sort the specifics around resourcing for enforcement, although admittedly, that is very important.

The member has referred to a report that was tabled today relating to FICOM. I suspect the member may have some additional questions around that when we come to the part of this bill which relates to the changes that are proposed to the real estate industry and the Real Estate Council.

In the case of the property transfer tax, of course, enforcement and auditing exist within the ministry itself, within the branch. We do foresee, as a result of this measure, taking on additional audit capacity in the initial stages. The member has, I think, in the past, in response to this, made comments about the significance of the step and the temptation that may exist for people to attempt to avoid making payments, avoid abiding by the provisions. We’re alive to that.

There is, obviously, a significant tax being imposed here, so having additional audit resources within the department is something that we believe is appropriate and will be necessary. But you would not, generally, and do not, in this case, include the specifics of that in the legislation creating the legal obligation around the tax.

D. Eby: In the absence of any provision specifically allocating a certain level of resource or the source of the resource for funding the auditors, I don’t have a ton of confidence that this government and their track record on enforcement in real estate is one that we should be trusting with ensuring adequate enforcement here, given that there has been chronic understaffing in the regulator responsible for pensions, for credit unions, for real estate, for insurance. I think we’re going on four years now that the Auditor General and the head of FICOM have been flagging this.

[1345]

I suppose the best we’ve got is trust. “You can trust the government. They will deal with it.”

This is another issue that has come up. I understand that this additional tax is based on the property transfer tax mechanism. The property transfer tax mechanism is what this new tax is based on.

In light of that, there were some very serious questions asked by myself and others about the assignment of presale condos. That’s where a developer is proposing to build a building and, before it’s constructed, enters into a contract with a prospective buyer, pledging to sell the unit if the buyer puts down a certain amount of money. Now, there has been a brisk trade in presale condo contracts between people who are speculating and buying them up and selling them to other people, like concert tickets or a scalper at a hockey game, hoping that they can get more money for the presale condo contract before the building actually opens.

We’ve had a similar issue with the assignment of contracts of sale. This is where you buy a home and it’s got a long closing period. The Vancouver real estate market has been so crazy that the house prices appreciated over the period of the closing such that the original buyer assigns the contract to somebody else, before the deal closes, and makes a profit. In that way, both in condos and in existing homes, presale condos, you can assign contracts and speculate and be involved in speculation in the property market.

Now, my question about this tax was: does this tax apply to those kinds of activities? Does it apply to speculation in presale condos? Does it apply to the assignment of contracts of sale? I understand the property transfer tax is never applied to either of these activities. My question to the minister is quite straightforward. Does this tax proposal tax the assignment of presale condos? Does it deem that to be a taxable transaction, for the purposes of this tax, or not?

Hon. M. de Jong: I forgot and neglected to introduce Hilary Harley, who has joined us since we began.
[ Page 13499 ]

Well, the question has kind of answered it. The property transfer tax has been, always has been and remains a tax that is triggered by registration, insofar as a contractual arrangement, preregistration, hasn’t attracted, and will continue not to attract, application of either the original property transfer tax or the additional tax.

Now, I would say, though, that to suggest that there isn’t an impact…. The member has described this in terms involving the scalping of tickets. It is not a clever analogy, I think. There is something of a difference, though, cropping up, insofar as the scalper, if you will, is now confronted by the reality that there is a time clock ticking. I think the member knows this, one of the reasons.

In addition to the fact that we have a property transfer tax built around the principle of registration of the interest…. In the case of condominiums, it is the completion of the building and the finalization and filing of the strata plan and the assignment of a parcel identifier number that actually, at that point, triggers the obligation for payment. If I can use the member’s analogy, the scalper, in this case, has got a time clock ticking that says if that assignment doesn’t occur and if it is a foreign national who has the interest, they’re on the hook. They are on the hook for that additional 15 percent. So the negotiating dynamic there changes.

[1350]

Insofar as there is the possibility that a foreign national — now confronted by the realization that this 15 percent tax is going to be applied to him or her once the building is completed and that obligation crystallizes — decides that they do not wish to pay that and chooses to assign their rights under that contract to a British Columbian, a permanent resident, a Canadian citizen, then I suppose the argument can be made, in part, mission accomplished, if the purpose was to dissuade foreign nationals from acquiring properties in favour of British Columbians.

I get the member’s analogy, but with respect to both the manner in which the tax has always operated and continues to operate, I think it’s also important that he acknowledge there is that additional element where the completion of the building and the obligation crystallizing to pay the additional tax adds a very interesting dimension to the discussion or the negotiation that might take place.

D. Eby: That was a very involved answer, and I appreciate the nuance. The bottom line is that an international investor could buy a presale condo, sell that contract — that agreement to buy the condo — before the building is completed, profit from that and not pay the tax.

The reason why this is….

Interjection.

D. Eby: I’ll just ask the minister to clarify, because he seems to have a concern about that.

Hon. M. de Jong: It’s a dimension to this that doesn’t often get talked about. In the case of the assignment example that we are dealing with, the suggestion that there isn’t applicable tax isn’t actually correct, because income derived from Canadian real property or the disposal of Canadian real property is taxable, and there is a withholding provision.

To be fair, I think I understand the member’s point about the additional tax. But I also want to make it clear on the record that the suggestion that that kind of transaction occurs tax-free is not correct, and there is a withholding obligation, as well, that ensures — that it is designed to ensure — that Canadians receive the appropriate level of collect on the tax that is payable.

D. Eby: An international speculator would have to pay GST on the cab ride on the way to the realtor’s office, but what we’re talking about is the bill that’s in front of us here today.

The reason why it’s significant is that a realtor sent out a message to his clients saying if you assign this presale condo before the closing date, you can still profit from this transaction and not have to pay the minister and the Premier’s new tax. In response to that email, the Premier recommended that this individual be reported to the Real Estate Council. Then the Real Estate Council issued a statement saying that if realtors talked about this, then they could potentially go to jail, that there was a two-year jail sentence for avoiding the tax or counselling clients to avoid it.

Now, I just want to make it clear on the record for realtors in fear of going to prison for telling their clients what the state of the law is. If an international investor buys a condo that is a presale condo directly from the developer and assigns it before the building is complete, that individual does not pay this tax that’s in front of this House, on the paper here today — does not pay that tax — and not only that, is entirely legally allowed to do that, because the property transfer tax has never applied to this kind of activity, and there’s nothing in this bill that changes that.

Hon. M. de Jong: A couple of things derive from the member’s comment. We’ll get to it, I’m sure, in the conversation.

The anti-avoidance provisions of the bill, which are strong — I have to say and concede that they are very strong — relate to the purpose behind which a particular transaction might occur.

I think the member also knows with reference…. I watched the same transaction in the media that the member is referring to and the response from the Real Estate Council. The missive that the particular realtor sent out also spoke to other recommended courses of action to avoid the tax beyond what the member has referred to.

[1355]

I rather suspect, though I haven’t spoken to the Real Estate Council, that it was those additional comments and that additional advice being proffered by the realtor in that case that attracted their attention.

D. Eby: I didn’t hear the minister say it. I think it’s important that the minister say it. The chief head of this government said that what the realtor did was wrong, that he should be reported to the Real Estate Council, the regulator, and threatened a two-year jail sentence for realtors who counsel their clients to avoid the tax. So it’s really important to be clear about what the realtor did wrong and what the realtor didn’t do wrong.

On the point of advising clients that if they are international speculators and they buy presale condos and they sell them before the building is complete, then they don’t have to pay this tax that’s on the paper in front of us here today — yes or no? Does this tax apply to that activity, or are we in a new realm where the property transfer tax and this tax do apply to this activity?

Anti-avoidance only applies to a tax that you’re avoiding. There is no tax here in this law, as I read it in this bill, that taxes the buying and selling of presale condos by international speculators.

Hon. M. de Jong: I’ve said this before — maybe not to the member. I will never presume to tell him how to ask a question, and I hope he won’t try to tell me. He may not like my answers, but I hope he won’t try to tell me how to give them.

Interjection.

Hon. M. de Jong: Yes, I’m sure the member would.

I’m relying on a document that was given to me — and I hope it is accurate — relating to the commentary that the member has referred to, where, allegedly, a realtor, in a widely distributed document to clients, said, amongst other things: “It is possible in many cases to assign the presale purchase contract to a family member or a friend who is a Canadian citizen or resident.”

The anti-avoidance provisions make clear that if the sole purpose of that kind of a transaction is to avoid the tax, that’s a problem. That is problematic. So in that case, that would attract the attention — and did, apparently, attract the attention — of the Real Estate Council.

I’m not going to stand here — and never have — to offer definitive legal pronouncements. But the general proposition around the anti-avoidance provisions is that if someone engages in behaviour or a transaction merely to avoid what would otherwise be the applicable tax, then that is problematic. I think the Real Estate Council, I presume, saw that statement as coming perilously close or falling into that category.

D. Eby: Again, I want to clarify this for all the realtors in B.C. that are watching this very carefully. They are worried about complaints being made to the Real Estate Council. They are concerned about threats of jail. If they advise a client, an international speculator, that they do not have to pay this tax as long as they sell the presale condo before it is complete, before it is registered, are they incorrect? Or is that exactly, in fact, what this law is in front of us?

The fact that the minister is not answering the question is what leads to the concern. We need clarity about what the law says. The property transfer tax is never applied to assignment. Never. It doesn’t apply to assignment now. And it’s important that the minister says that so that realtors know what they can and can’t advise their clients.

Hon. M. de Jong: I hope the member will appreciate that I am in no way trying to evade his question, but the circumstances of a particular transaction are relevant to the answer.

[1400]

In a circumstance where a foreign national is advised, for example, “Well, just assign this contract. Have it registered at the time that obligation crystallizes and then have it transferred back, or have it held in trust and have it transferred back,” that original assignment can be problematic. I’m not endeavouring to evade. I think I have made it clear that the mechanism that triggers the obligation, in general terms, to pay the property transfer tax is registration. That has not changed.

The mechanism that triggers the obligation, in general terms, around the additional tax is registration. But there are circumstances one can contemplate, where someone will try to avoid payment of the additional tax through an assignment process, that are problematic, and realtors and professionals need to be cautious, in my view, about the nature of the advice they give.

D. Eby: I guess we’re getting somewhere. The minister said: “If the assignment is not a true assignment….” You assign it to somebody but then it’s held in trust, or you assign it to somebody with the agreement they’re going to transfer it back later. Okay. But that’s not what the minister read from that email.

What the minister read from that email is, “You can assign it to a friend or family member who is a Canadian citizen without paying the tax,” which is absolutely true. All of the legal obligations to buy the condo pass to that individual. Title passes to that person, who doesn’t have to pay the tax.

Again, if a realtor advises a client…. Here’s a scenario. I’m an international speculator and I set up a business of buying up presale condos and flipping them before completion date. This is my business. I’ve no intention of avoiding the tax. It’s just what I’m doing. That activity is entirely untaxed under this bill. Isn’t that correct?
[ Page 13501 ]

Hon. M. de Jong: Again, coming back to the example that the member has given and applying it in the context of the legislation before us, where the recommendation was to assign the presale purchase contract to a family member or friend…. In that context, the friend, the Canadian citizen or resident, would be obliged to confirm the circumstances of that assignment, and that would attract the additional tax. Maybe I’m missing something, but in that case, by virtue of their status as a trustee, the tax would apply.

D. Eby: I, as a Canadian citizen, buy a presale condo, lose my job. I’ve got my brother. I assign the contract to my brother to complete the contract. I don’t pay the property transfer tax. The property transfer tax isn’t engaged on the assignment. It’s only engaged when the condo is complete and my brother registers the title.

Why would it be the case in this bill that doesn’t change the property transfer tax, that’s totally based on the property transfer tax…? If a foreign national transfers the property to his or her brother who’s a Canadian citizen and who ultimately registers the title, why, suddenly, would the tax apply in that situation?

Hon. M. de Jong: Because in the amendments, there is a definition of a taxable trustee. Again, in the example that we’re talking about, in that specific circumstance, the additional tax would apply.

D. Eby: So the minister is adding another level where there’s a secret agreement between the foreign national and the family member. Your name is on the title, but it’s not actually your property. You’re acting as trustee for me. That’s what the minister is doing. He’s adding this extra level on. The email continues to go on about selling it to a third party for a profit, which is an entirely tax-free activity, as well, under the property transfer tax.

[1405]

I think it’s important, for all of the reasons that I said, to be really clear for the real estate community that is grappling with this. It came out of nowhere, right? They’re getting warned that if they give the wrong advice, they could go to jail or be fined more than $100,000.

I think it’s really important to be clear that in the absence of any other agreements or trust arrangements or anything else like that, if they advise a client that you can transfer, you can assign, a presale condo to a friend or family member or a third party tax-free, that advice is in fact correct advice under the legislation that’s been placed here. In the absence of any side deals or side arrangements or whatever, if it’s a true assignment, that happens tax-free, foreign national or not.

Hon. M. de Jong: I’m trying to dissect the member’s question. I think where I get hung up, admittedly, given the importance of the venue we have this conversation in, is speculating as to the nature of a particular transaction or assignment. We’ve zeroed in on one aspect of advice that someone purported to give.

By the way, I will say this. I think realtors should be very careful about giving tax advice. There is a group of professionals who are qualified to do so. I’m not sure realtors are. And by the way, in saying that, I understand that there is a short time frame associated with the implementation of this legislation. I’m cognizant of that as well. I don’t want to pretend otherwise.

The purpose for which an assignment takes place is relevant. In many ways, the risk accrues to the person receiving the assignment, if and when there is an audit to explore further what was taking place around that assignment.

I’ll go to the beginning of what the member has said, though, because it would be a shame to be rushing to agreement on this where I think there is perhaps agreement. The mechanism of the property transfer tax — the original tax, if we can call it that, around which this additional tax is attached to — is the principle of registration. I think he has made that point. I’ve tried to make that point.

I am obliged to point out some of the provisions around taxable trusteeship and the anti-avoidance mechanisms that apply, particularly with respect to the additional tax. But insofar as the member has emphasized — I think a number of times now — that the property transfer tax is generally triggered by registration, he is correct. I’m not arguing with him.

The Chair: Member on section 3.

D. Eby: I like this idea that there’s a team of auditors that are going to come around and ask people questions about their motivations behind the assignment. “Now, I just want to ask you, sir, when you transferred this property, what was your feeling about why you were doing that? Were you doing that to avoid the tax, or were you doing that to help out a family member?”

It’s such a joke, because we have the Wild West in our real estate market. We have FINTRAC saying we’re at risk of money laundering, particularly in Metro Vancouver. We’ve got a businessman from China who bought $8 million in properties, without any scrutiny from anybody, with stolen money from a Chinese bank. The only reason we found out is because they tracked him down here and sued him in the jurisdiction.

[1410]

We’ve got a report from the Auditor General that says the financial regulator has been understaffed for 3½ years. Yet the public is supposed to believe that officials from the Ministry of Finance are going to come and interview people who assigned a presale condo to ask exactly what they were thinking when they assigned that condo. It’s such a bizarre suggestion.
[ Page 13502 ]

The reality is that assignments of presale condos and assignment of homes will be tax-free in British Columbia because it’s not contained in the act. The minister keeps coming so close to saying that. I don’t know why he won’t say it, because the Ministry of Finance, I would assume, is obliged to provide basic information to the public about how to comply with the taxes that they introduced. That basic information would include the situation, if you assign a presale condo, whether or not you’re obliged to pay the tax.

In an aim to assist the minister, who desperately wants this tax to apply to presale condos and to the assignment of housing, I’m going to propose an amendment along those lines.

[SECTION 3 by adding the underlined text as shown

Additional tax imposed — anti-avoidance rule and data collection

2.04 (1) In this section:

(5) The purchase of a pre-sale housing unit is deemed to be a taxable transaction for the purposes of this Act on the date of purchase, not the date of registration of the interest at the land title office.

(6) The purchase or assignment of an agreement for sale is deemed to be a taxable transaction for the purposes of this Act on the date of purchase or assignment, not the date of registration of the interest at the land title office.

(7) For the purposes of detecting avoidance, and for the additional purposes of detecting and preventing money laundering in the real estate market, the Ministry of Finance must request Social Insurance Numbers from all property purchasers, and may use that data to confirm that worldwide income tax has been paid on all consideration in a taxable transaction.

(8) The Ministry of Finance must share, on request, raw anonymized data collected under subsection (7) if a written request that complies with requirements set by regulation is received by the Ministry from a researcher approved to issue such a request by the Board of Governors of a public university in British Columbia.]

On the amendment.

D. Eby: There are three things going on in this amendment. The minister is welcome to cherry-pick anything he likes out of this.

The first two sections make it crystal clear for realtors, for international speculators, for people speculating and buying and selling presale condos and homes that are in the middle of a transaction that the tax applies to you when you transfer — period. Really easy. Real straightforward for everybody to understand.

Then the last two provisions help us get a handle on money laundering in our real estate market — where did the money come from in this transaction? — and also give academics the information they need to provide the ministry the information they need to understand what’s happening in our housing market, where prices have absolutely no connection to local wages in Metro Vancouver.

Those are my proposed amendments for the minister.

[1415]

Hon. M. de Jong: I apologize. I wanted to take a moment to review it. I won’t be cute. I think it’s fairly unlikely that the government is going to be in a position to embrace or endorse the amendment as proposed by the member. But I’m curious enough to play a role reversal for a moment.

The amendment suggests that the Ministry of Finance would be under some obligation, for each property transaction that occurs in the province — and there are anticipated to be 110,000 or 120,000 this year — to cross-reference and conduct a review with a purchaser’s income tax information. I just want to make sure I understand that, if that’s at the heart of subsection (7).

D. Eby: I’m sure the minister knows…. I hope he knows. We’ve said it often enough in this place. I probably said it myself about 50 times. The importance of linking real estate transaction data to income tax data to detect tax evasion and to detect money laundering…. This is not the official opposition’s recommendation. This is the recommendation of 40-plus economists at the Sauder School of Business and SFU, who have recommended this approach — most notably, Tom Davidoff and Rhys Kesselman. It is one that has been adopted by the official opposition.

It is very good policy, given the advisory from FINTRAC that we are particularly vulnerable to money laundering in the Metro Vancouver real estate market and, in addition, that tax evasion is a very serious issue in Metro Vancouver, where you have people — who are not retirees, who are not house-rich seniors with low incomes, but who have poverty-level incomes — buying million-dollar homes disproportionally, compared with other areas.

So unless you link real estate transaction data with income tax data, you cannot flag those transactions. It’s very easy to knock the seniors out of that queue. It’s very easy to focus on high-risk transactions. Revenue Canada does this on a regular basis — uses algorithms to identify unusual transaction activity. I would hope that the Ministry of Finance uses similar algorithms. I’d be shocked if they didn’t. And if they don’t, they should be, to save time of auditors. That’s what the proposal is based on.

If the minister is suggesting that he thinks auditors should go through 150,000 transactions by hand, that is an unfortunate reality of how he has been running his department. But I hope they have computers over there and could quickly identify high-risk transactions.

Hon. M. de Jong: Well, I understand that the member has adopted and endorses an approach and a recommendation from a group of academics, but he is now purporting to recommend enshrining that in legal instruments, and he knows that. He presumably knows, as well, that information-sharing on the scale that he is
[ Page 13503 ]
proposing involves a tremendous amount of consultation, involves the Information and Privacy Commissioner.

We are engaged in work in other areas with the Information and Privacy Commissioner. And with respect to subsection (8), it would particularly involve the Privacy Commissioner and the negotiation of specific information-sharing instruments.

[1420]

Look, I understand. My purpose is not to prolong or filibuster the member’s suggestion. I understand that he and his colleagues have a preferred approach, and it is one that derives from a recommendation from a group of academics. We have studied that approach, and we have studied it from the view of its workability, the impact it would have and the ability to implement it. The impact it would have — the member advances that.

Again, my purpose is not to delay these proceedings by critiquing that proposal. I feel, I suppose, that I should offer something, because the member says: “Well, what is it that we’re hesitant about?”

There are a series of things that we’re hesitant about in that proposal. Where were we to decide to increase everyone’s property tax, and then on the basis of verifying with income tax records and another series of exemptions…. I think the proposal contemplates the need for exemptions, because it recognizes that the income tax offset would not work in every instance. There are instances where that would not work.

If I remember from the analysis on a $500,000 home — which, in Vancouver, is getting to be at the low end — the consequences could be a $7,500 increase in property taxation. If you’re a small business person and you are carrying forward losses, the income tax you pay in that circumstance is not going to offset that increased amount. Never mind the fact that you are going to be…. For all of the attractiveness of this approach in theory, the linkage, the direct linkage between the two for the purpose of calculating property tax becomes awfully problematic when we have a society as mobile as the one we have now.

The member has spent some time critiquing the proposal, the approach that we are taking here. He’s talked about people that will try to find loopholes and avoid tax. That is true of any taxation regime. It’s going to be awfully difficult, in a circumstance where people have claimed certain exemptions that they’re not entitled to, to have that revealed a year later by the Canada Revenue Agency and then try to collect on that long after the person has left the particular residence.

That is not to say that the proposal, theoretically, is without merit. It is to say, however, that at a practical level in terms of implementing it, it is extremely problematic.

I have said, perhaps more argumentatively than I should have — and I apologize to the member for that — or in a more partisan way than I should have….

If the purpose behind the additional tax measure contained within the legislation — or the idea that the member has — is to address and relieve the pressure being caused by foreign investment in our residential real estate market, I think it is legitimate to ask in the short term, particularly: what is likely to have the more direct impact? Is it a property tax increase that will kick in, for some, a year or a year and a half from now, after they have continued with their purchase? Or is it a 15 percent property transfer tax that begins to be levied next week and sends a direct and clear signal as to what our objectives are?

The government has decided it is the latter. But again, I want to say, with respect, to the member: the rationale, the concept, the objective behind what he has proposed, I do not find offensive. I want to assure him that we did examine, in detail, that approach. The workability from an implementation and enforceability mechanism, though, is very questionable.

[1425]

I accept that the member wishes to make the point through the amendment that he has tabled today. I think I’ve gone on long enough to point out some of the general rationale for why we didn’t take that approach and why we won’t support the proposed amendment.

Amendment negatived.

D. Eby: If the minister, by agreement, wants to do an amendment to clarify the act about presale condos or the assignment of existing agreement for sales, I think it would be a great service to the real estate industry. I think it would be a great service to homebuyers. It would provide certainty around a great deal of uncertainty. I hope he thinks about it.

Also, if he wants to set up joint meetings with the Privacy Commissioner to discuss any aspects of linking the real estate transaction data with the income tax data that his ministry has for the purposes of identifying fraud, tax evasion, money laundering, I would love to assist him in that discussion and let the Privacy Commissioner know that they would have the full support of this side of the House for such an endeavour.

I also note, just for the record, that there was no mention of any tax in that amendment.

I was reading through the bill, and I was looking…. One of the ways in which an individual can potentially lose control of a home, for example, or not have control of a home, is through borrowing against it as an asset. If a Canadian buys a home and then borrows international money against it using the home as an asset, or a company owns a home and that company is fully capitalized by international capital that it borrows against its sole asset, is there any prohibition in the legislation that deals with foreign borrowing in that manner that would essentially achieve the same result as a sale?

Hon. M. de Jong: We get into some relatively complicated areas of tax law, so I apologize. I’m going to read to
[ Page 13504 ]
the member some of what is, I think, directly relevant to the question that he has put.

I think the scenario he’s describing, where a Canadian investment company solicits the bulk of their financing capital offshore internationally…. I think that is the scenario that he is describing. I’m advised that that structure would be captured by two parts of the proposed amendments. The first mechanism that would capture it would be the definition of “controlled.” We are using the federal income tax definition of “controlled,” which includes de facto as well as de jure control and is, I’m told, broad enough to include indirect control.

Whether a person or group of persons has de facto control of a corporation depends on the exact factual situation. One of those factors that the federal income tax legislation definition examines is the ownership of the debt of the corporation. Other factors that I am told are looked at are side contracts, other commercial arrangements.

Secondly, again, coming back to the original theme, a transaction structured specifically to allow foreign purchasers to avoid the additional PTT would be an avoidance transaction. It would be caught by the general anti-avoidance rule. I think the member has heard me say that before. But it is the first part and the adoption of the federal definition of “control,” which includes an examination of debt structure, that would trigger capture.

[1430]

D. Eby: A Canadian sets up an investment fund whose sole assets are residential real estate property — homes in Metro Vancouver. It’s Dave’s Vancouver real estate index fund, and I sell shares in that fund to everybody around the world. They can buy into the great price escalation — 250 percent in a mere ten years in Vancouver real estate. Is my sale of shares in my investment fund to international buyers captured by this tax?

Hon. M. de Jong: A share sale is not, and the qualifier — a publicly listed corporation in Canada — is exempt in general terms.

D. Eby: Just to be clear, because I lost it, if there was a distinction there in the minister’s answer. My ability to sell shares in my investment fund to anybody around the world is not captured, but if I’m a publicly traded company, then it is captured? I wasn’t quite sure about the publicly traded aspect of it.

Hon. M. de Jong: I’ll do it in reverse order. A publicly listed company is exempt. A publicly listed company that makes a purchase of property within Metro Vancouver is exempt from the additional tax — period.

In the previous scenario that the member refers to, the sale of shares, a corporation with property holdings that is selling shares in that corporation…. The answer is, generally, yes. The qualifier is if the company was established purely for the purpose of avoiding the application of the additional tax. Then there would be an examination. If that is so, then it would be captured by the anti-avoidance provisions.

D. Eby: If the minister is successful in implementing this tax, I guess one of two things will happen. One is that there’ll be a significant decrease in foreign-national purchases. The other is a significant increase in tax revenues. Likely it’s going to be a combination of those things.

The question with any tax revenues, proceeds that come from this tax, is…. I noted that the city of Vancouver was required to invest the proceeds of their vacancy tax in “affordable housing,” although that wasn’t defined. In this act, I searched through. I didn’t see any provision about where the proceeds of this tax were going to go. Can the minister advise why there wasn’t a similar provision requiring this to go into affordable housing?

Hon. M. de Jong: Thanks to the member. I’ll get to the question. I am alive to the fact that there are some time issues.

[1435]

I’m quite content to go through in the matter and not quote section numbers, as long as we have something of an understanding that we are doing that and that I can refer to sections along the way. If we’re fine with that, on the basis that we have some time constraints, I am happy to oblige.

With that in mind, if I might take a moment and ensure that I’m referring to the correct section when I answer the member’s question.

I am now, in answering the member’s question, referring to section 43, which is that which amends the Special Accounts Appropriation and Control Act, which refers to the creation of that special account, the injection of the initial $75 million and then authorizing the transfer into that account proceeds from the property transfer tax, and further within that section, a description of the purposes for which that fund may be put to work.

There may be more questions, but I’ll stop there.

D. Eby: I’m very much in agreement and appreciative of the minister’s approach to look at this bill as a whole, because I think that’s how it was intended to be seen. I was following along, and then I think I lost the minister there for a second. So the proceeds, the entire proceeds of this tax, are going into this fund? Is that right?

Hon. M. de Jong: The government has indicated, and I have, that the proceeds from the additional property transfer tax will be transferred into the special account for the purposes laid out in 9.7(4).

D. Eby: The minister is aware — I know he’s aware, because he’s announced that he’s collecting data on this
[ Page 13505 ]
phenomenon — of an issue in the property transfer tax of something called the bare trust loophole. Essentially, this is where you create a trust, and the property is held in the trust. It’s like a company.

For those of you who aren’t familiar with trusts, for lack of a better comparator, you put the property into the trust, and then you don’t sell the property. You sell the benefit of the trust. You get all of the benefits of owning the property, but you don’t have to pay the property transfer tax.

One of the great proponents of this has been, in particular, the Finance Minister and my colleagues in the legal profession, who advise large commercial clients on purchase of property that this is an acceptable loophole in the property transfer tax.

Now, the minister has said that at the same time he was collecting information about international speculators in our housing market and, actually, what were foreign nationals buying property, he was also collecting data about bare trusts and the use of bare trusts. Yet in this bill, I looked through, and I didn’t see any mention of closing this bare trust loophole. Maybe I missed it.

Can the minister tell me whether there is anything about closing the bare trust loophole in this bill?

[1440]

Hon. M. de Jong: The member is correct. With respect to the general taxation, the property transfer tax provisions, we are collecting the data, analyzing it. This legislation doesn’t include changes that relate to the original property transfer tax. There’s a distinction, though. With respect to the additional tax, there are specific provisions that do deal with the creation of a trust and the implications of having a foreign national trustee or a foreign national beneficiary.

Ironically, with respect to the additional property transfer tax, there are new provisions that relate to that. But the member is correct. There are no changes in this bill with respect to the original property transfer tax amount.

D. Eby: It’s good to know that the government knows how to close the loophole. They’ve closed the loophole for foreign nationals, as they say, who are buying in our real estate market. They would be quite a simple matter. They’ve opened up the property transfer tax here in this legislation. It would be quite a simple matter to close the loophole for large commercial purchasers as well.

I cannot understand why everyday British Columbians have to pay the property transfer tax when they buy and sell property. The minister will say, with some notable exceptions that his government has brought in for first-time homebuyers…. I’ll acknowledge that that was done.

The wealthiest property buyers in our market don’t have to pay the property transfer tax, a loss to the treasury of tens of millions of dollars a year, given the frenzy in the commercial real estate market in the province, especially in Metro Vancouver. A phenomenon we’ve seen internationally as international capital moves into commercial real estate as well.

With that in mind, I’d like to introduce an amendment. I’d like to move an amendment to section 3, adding provisions. These are adopted in whole from Ontario, who closed this loophole some…. More than ten years ago they closed this loophole. It’s basically, word for word, the Ontario statute. I accept that the minister has expert advisers over there who have already closed the loophole in B.C. for what they call foreign nationals. I’d like to close the loophole for everybody and make sure that people who are buying large commercial properties pay their fair share of tax like everybody else.

It gets a bit technical here, and I apologize for that. I’m going to read it into the Hansard, because that’s what’s required.

[SECTION 3 by adding the underlined text as shown

Additional tax imposed and removal of bare trust loophole

2.02

(8) (a) In the case of a conveyance of land from a trustee (whether or not the trustee is so described in the conveyance) to a person to whom or for whose benefit any equitable or beneficial interest in the land has been transferred by a conveyance or conveyances that have not been registered, the fair market value is as determined as if the interest is registered in respect of the unregistered conveyances made to such person;

(b) in the case of a conveyance of land from a trustee to another trustee (whether or not either trustee is so described in the conveyance) where,

(i) the person to whom or for whose benefit any equitable or beneficial interest in the land is held is not the same person to whom or for whose benefit any equitable or beneficial interest in the land was held by the trustee making the conveyance when that trustee first acquired legal interest in the land, and

(ii) valuable consideration has been given by the transferee of an equitable or beneficial interest for the transfer of any equitable or beneficial interest in the land held by the trustee making the conveyance while that trustee was the holder of the legal interest in the land, the fair market value is the value ascertained at the time of the tender or submission for registration of the land to which the conveyance extends.

Disposition of beneficial interest in land

(9) (a) For the purposes of this section, a disposition of a beneficial interest in land includes,

(i) a sale, transfer or assignment, however effected, of any part of a beneficial interest in land; and

(ii) any change in entitlement to or any accretion to a beneficial interest in land,

but does not include,

(iii) a transfer of a beneficial interest in land which occurs by reason of the death of the owner of the interest, if the transfer is not required to be made under the terms of an agreement enforceable by or against the person legally or beneficially entitled to the interest immediately following the death of the owner;

[1445]

(iv) a transfer or assignment of a beneficial interest in the land by a debtor to a creditor for the purpose only of providing security for a debt or loan and a transfer or reassignment by the creditor to the debtor of the security;

(v) a lease of land or a transfer of the interest of a lessee under a lease of land if, at the time of the disposition, the unexpired term of the lease cannot exceed 50 years, including any renewals or extensions of the term provided
[ Page 13506 ]
for in the lease or in a separate option to lease or other document entered into as part of the arrangement relating to the lease (whether or not the lessee and the optionee or person named in the document are the same persons).

Tax on disposition of a beneficial interest

(b) If there is a disposition of a beneficial interest in land, tax at the rates otherwise determined under section 9 is payable on the thirtieth day after the date of the disposition as if the disposition were a conveyance of land tendered for registration.

By whom payable

(c) The tax under subsection (8) is payable by every person who acquires a beneficial interest in land or whose beneficial interest in land is increased as a result of the disposition.

Multiple interests

(d) If more than one person acquires a beneficial interest in land, or more than one person’s beneficial interest in land is increased as a result of the disposition, each of them is liable to pay only that percentage of the tax otherwise payable under this section that reflects their proportional share of the acquisition of or increase in beneficial interest.]

I hope the minister caught that, because I don’t want to read it again.

[R. Chouhan in the chair.]

On the amendment.

D. Eby: You can see the complexity in this legislation. The complexity is there because there have been repeated attempts in Ontario to evade, through very innovative corporate and trust structures, the payment of the property transfer tax. They haven’t had to do that in British Columbia because we’ve had a loophole you could drive a truck through for a decade now.

Will the minister endorse, if not this particular set of amendments, which would be well advised to take on because Ontario has had some experience closing this loophole…? If not this particular wording, will he commit to amending the legislation to close this loophole so that we have money for schools and hospitals and public services and so that all taxpayers fairly pay property transfer tax in British Columbia?

Hon. M. de Jong: Thanks to the member for his thoughtful submission.

I guess the first thing I would say is that my understanding, based on the work that has already taken place and the research I’ve done…. I don’t want to quibble about terminology. But the decision around bare trusts was, I am told, a very purposeful one.

It may be one that we now find dubious or disagree with, but I suppose one has to be a little bit careful about labelling as a loophole something that was deliberate. It was deliberate, apparently, at the time the Social Credit government of the day created the tax. It was deliberate through the 1990s, when the member’s party was in power, to exclude bare trusts. It has been deliberate since this government took power, to be fair.

We are undertaking work now around the question of whether or not that deliberate policy should deliberately change. The member has, I think, taken the time and made the effort to examine the approach that is now in place in Ontario and has been for some time. We are undertaking the work.

What I can’t do for the member is, on the floor of the Legislature, embrace a detailed amendment. But I do want to say to the member this. Unlike, perhaps, other conversations that we have had, this is less of an ideological or philosophical difference. It is one rooted in the knowledge that ours is a different act, a very different act, than the Ontario act. Whilst we are undertaking the work that we are, we simply can’t pluck out a provision from their act and stick it into ours without worrying that there may be some dire unintended — unintended by the member and unintended….

The member, again, has made his point, and I hope he will accept mine — that in this case it is less of a philosophical difference and more a question of wishing to complete the work and ensuring that the instrument, if and when it is presented, is fully compatible with the act that we have.

[1450]

D. Eby: I take the minister’s advice, and I eagerly await the day when everybody in B.C. pays the property transfer tax in the same way. I understand we’ll wait another day. If the minister wants to call us back for an emergency session to do this one, well, at least one MLA will be enthusiastic about that.

Now, there’s a technical question about the application of this so-called foreign national tax.

Hon. M. de Jong: Should we vote on the…?

D. Eby: Oh, on the amendment. Yes, thank you. I just took the question….

Amendment negatived on division.

D. Eby: A technical question about the application of the so-called foreign national tax. This is in relation to large rental buildings, so buildings of…. I’m not sure what the cutoff is. If there is a cutoff, the minister will advise me, but I believe it was six or more units. That may not fall within the definition of “residential property” for the purposes of this tax.

The concern is displacement of international capital into large rental buildings, potentially resulting in a spike in rent beyond the spikes we’ve already seen in Metro Vancouver. Can the minister advise whether the tax applies under the definition of “residential property” — whether that prescribed class of property includes large rental buildings, multiple-unit rental buildings?

Hon. M. de Jong: If I understood the member’s question correctly as it relates to larger rental accommodation,
[ Page 13507 ]
if the building is classified, I’m advised, class 1 under the assessment provisions and it is purchased by a foreign national — a foreign-controlled agency, entity — then the tax would apply subject only to any portion of the building that was not classified as such or was engaged in other commercial-type endeavours. Then there’s a formula for calculating that.

D. Eby: I did understand, just reading the definition of “residential property,” that any property that’s classified as class 1 would be captured by the tax. My question was: are these large rental buildings…? Are these class 1 properties or aren’t they? It’s not clear to me.

Hon. M. de Jong: My advice is that in most cases, they are.

D. Eby: Are there any exceptions that we should be aware of in potentially moving amendments to ensure that they’re captured? Certainly, it is a concern of renters if their buildings are suddenly the unintended targets of a significant wave of international money because they’re an untaxed building.

Hon. M. de Jong: My advice is: nobody is aware of any that are not class 1, but I would hesitate to say to the member, “They all are,” and then find out that there is one out there that is.

D. Eby: A very reasonable caution, likely born of fears in this kind of questioning session.

The decision was made not to include the south of Vancouver Island in this particular tax. There’s a lot of concern in south Vancouver Island that what this tax will do if it’s successful is displace the activity that’s sought to be targeted out of Metro Vancouver and into south Vancouver Island. Why was south Vancouver Island excluded from the tax’s application?

[1455]

Hon. M. de Jong: I have heard that concern, and I think it’s legitimate. I think that people, in the face of what arrived and surprised a lot of people…. The question now, legitimately, is: what is the impact? Will the sizeable amounts of foreign capital, foreign national purchases that have been centred in Metro Vancouver…? In the face of this tax, are they going to relocate elsewhere in British Columbia, outside of Metro Vancouver, or outside of British Columbia?

The most honest answer I can give is that we’re not certain. We are in a much better position today than a number of months ago, though, to track — that coupled with the data which showed relatively small, though not non-existent, participation of foreign nationals in the south Island, capital regional district, real estate market. Those two reasons combined.

I know the member is aware of this, but it is not by accident that we have included a specific regulatory power that would allow, by regulation, for the additional property transfer tax to be expanded outside of Metro Vancouver to other regions. One of the regions we are watching most closely is the south Vancouver Island capital region.

D. Eby: My colleague from Delta South might have a question about the application of the tax.

V. Huntington: In that regard, I wonder if the minister could describe whether his ministry gave any thought to applying the tax to foreign ownership and foreign purchases of agricultural land, ALR land, within Metro Vancouver. It’s facing some of the similar pressures that residential properties are, and the farming community is having trouble keeping up with the cost of the land.

I wondered if there was any consideration given to extending this tax to agricultural land purchases.

Hon. M. de Jong: Thanks to the member for articulating an aspect of this that actually did have some consideration.

What I can tell the member is that in the case of agricultural land, the tax, as it is presently contained within the bill, the additional tax, applies to the home — or sometimes there are a couple of homes — on a farm. We have asked the question about the degree to which foreign nationals are engaged in accumulating agricultural land. I will say that my colleague the Minister of Agriculture has been fairly diligent.

We’re trying to break out the data, which at this point, I must confess, is largely being done manually. I’m hoping there is a better system than that over time, but the 25,000 transactions that have taken place since we’ve started to collect the data are all being examined manually.

I think what I can perhaps offer to the member, as a first step, is to try to break out for her the data as to how much agricultural land is being purchased by…. I can’t give her that figure today, based on the five or six weeks of data, but we may be in a position to do so going forward.

[1500]

V. Huntington: I appreciate that. I don’t know. Again, the data is scarce, and I don’t know how much is there. But anecdotally, you hear about it a lot, especially in Delta, in the Lower Mainland, Richmond. Holding of agricultural lands as investment is putting the land out of reach of the local farmer. I think it’s something that the ministry should look at proactively.

Data is one thing, but preventing the obvious from happening is another — or, at least, slowing down the obvious and allowing your local citizens the opportunity to get back into the market. Unless you’re leasing land now, a farmer can’t afford to buy it anymore. It is being taken out of the local inventory of land ownership.
[ Page 13508 ]

It’s a serious situation. It’s happening across the province. Not necessarily being taken out of agriculture, but in the Lower Mainland, it’s often left to sit as an investment holding. Same with developers purchasing it as a commercial investment. It’s a situation I keep trying to bring up with your colleague, but it is a situation, I think, that your ministry needs to take a look at too. It’s significant.

If we’re going to have the ALR and if we want to protect that productivity on the ALR, then we have to enable it to remain in the hands of legitimate farmers. I think that a tax of this type is something that could pre-emptively avoid an even worse situation than we’re finding out there.

Hon. M. de Jong: Only to say to the member that I appreciate and understand her interest and concern, and this is very genuine. She has repeatedly expressed her concerns.

I will say — candidly, as I have occasionally — I’m not sure how many of us in this chamber actually live on a farm on ALR land. I am one of them. I’m very proud of it and very grateful for the privilege and opportunity. I think there is — I can assure the member of this — interest both on my part and on the part of my colleague to utilize the data we are now collecting to determine to what extent the pressure that the member has described in the past and, again, today is imposing itself.

Happily, we can do so with some particularity, because, of course, we can determine geographically where that pressure is greatest. It may be in the Metro area, and it may be in some of the other rich agricultural areas of the province as well.

V. Huntington: In respect to the “residential property” definition, (b)(ii), could the minister just give a larger description to me of how that definition of an area of land, not including improvements, that is classified as a farm only because the land is used for an owner’s dwelling…. Could the minister enlarge on the specific nature of what this section is trying to capture?

[1505]

Hon. M. de Jong: Not necessarily the clearest bit of statutory drafting. The objective is to ensure that the additional tax applies only to the house and what we might term — lay people would call — the yard around the house, which isn’t to exceed more than half an acre. It excludes, from the application of the bill and the additional tax, all of the remaining areas of the farm.

V. Huntington: Yes, I understood that.

I guess from a perspective of common sense, if what we’re looking at is foreign ownership of this dwelling on this agricultural land, obviously they’re owning the land too. We go back to the issue of land ownership within the ALR and to what extent that foreign ownership is prohibiting the activity from local residents. It just goes back to my earlier issue — that within the agricultural land area, I think the ministry needs to start looking at protecting the Canadian opportunity to purchase. That’s what I’m getting at.

D. Eby: We’re talking about this tax that’s going to apply to a group the government calls foreign nationals in the bill. There’s a number of different ways in which property can transfer from one person to another.

We’ll go through a list, and it may become obvious that these are all covered or that none of them are. We’ll start with default. If a Canadian or permanent resident borrows money for the purpose of purchasing a property from an international bank — maybe not a great example — or a private individual who qualifies as a foreign national, they default on the debt, and the foreign national takes possession of the property, is that a transfer captured by the tax?

Hon. M. de Jong: I’ll repeat what I thought was the example so I don’t incorrectly…. A situation in which a Canadian citizen or a permanent resident within British Columbia, right now within Metro Vancouver, finds them subject to — I don’t think the member used this term — a foreclosure provision, by way of example, by a foreign-controlled corporation within the meaning of the section, and that foreign agency sought to foreclose and take a final order and have themselves registered, yes, my advice is the tax would apply to that foreign agency.

D. Eby: If a Canadian holds a property and by court decision, whether it’s a civil dispute or a family dispute, the property is passed to a foreign national by court decision, does the tax cover that situation as well?

Hon. M. de Jong: My advice, and what I would have expected the advice to be, is that yes, it would apply — absent some sort of specific exemption for which we have not provided.

[1510]

D. Eby: In the case of a death of a Canadian citizen or permanent resident where the property passes by estate to a foreign national, as the government calls it, would that be captured by the tax? If the individual holding the property dies and, by will, passes it to a foreign national, does the tax apply?

Hon. M. de Jong: The advice I’ve been given…. I’ll again do it by way of an example, which I hope is consistent with what was in the member’s mind. A Canadian citizen or permanent resident owning a home in Metro Vancouver passes away and, in their will, leaves their home to someone, maybe a child, who is not a citizen, not a permanent resident. In those circumstances, the additional tax, I’m advised, would apply.
[ Page 13509 ]

D. Eby: While we’re going through these, when the minister says the tax would apply, is that by incorporating the definition of “taxable transaction” from the Property Transfer Tax Act? Or is it from something that’s in the bill in front of us here today that we know it applies?

Hon. M. de Jong: I believe it’s the existing provisions of the act.

D. Eby: In the case of a gift of property from a Canadian or permanent resident to, as the bill calls it, a foreign national, would that be captured by the tax?

Hon. M. de Jong: Assuming they wanted to register as owner, yes.

D. Eby: What about the situation where a property is purchased by a Canadian or a permanent resident and then a long-term lease is issued for the foreign national, as defined by the act here? Are long-term leases captured as taxable transactions?

Hon. M. de Jong: In the same way that leases are captured by the existing provisions of the property transfer tax — and the member knows it gets a little bit complicated — the intention is that the additional tax would apply in the same way to leases as the existing property transfer tax.

D. Eby: In section 2.02(6)(a), it talks about the situation for the purposes of calculating the taxable amount, and it talks about a situation where “…immediately after the registration of the taxable transaction, a foreign entity holds an interest in the residential property….”

I was curious about why there’s the qualifier “immediately after the registration.” Why wouldn’t it be just really that if, at any point after the registration, a foreign entity holds an interest in the residential property as a taxable trustee, this deeming provision would apply? Why was the word “immediately” used to qualify that and limit it?

[1515]

Hon. M. de Jong: I apologize to the member. It’s an interesting question about how the drafting was conducted to include the term. What I’m reminded…. There may not be as much magic in this as one might have thought. The purpose is to examine, with respect to a trustee, what the circumstance is at the point right after the registration and, in this case, immediately after the registration.

I was asking a question about what happens without that term in it but was reminded that, in the case of the trust relationship and the trustee, the point is what the circumstance is that is in place the moment after registration occurs. This is why the drafters thought it relevant to include the term “immediately.”

D. Eby: So then I’m not correct when I read that and I say: “Well, why wouldn’t you get rid of the word ‘immediately’ and have it apply immediately?” Or, if the situation changes down the road, then the deeming provision would deem that the transferee holds the interest as a taxable trustee. By removing the word “immediately,” my thought would be that you’re broadening the application of the section. But if I take the minister’s point here, he’s saying that’s an essential point of construction for the application of the tax. Is that right?

Hon. M. de Jong: Correct.

D. Eby: I was also a bit…. Well, I’m going to admit it. I was stymied by section 2.03, which is a formula by which the subject matter of a taxable transaction applies where it includes land that is not residential property. I’m picturing a scenario the minister described, where you’ve got residential property on top and perhaps a store or commercial space on the main floor. So there’s part of the property that’s commercial, part that’s residential. It’s all purchased by using the act’s definition of foreign national.

There’s a formula here. The formula has two different amounts: the amount that would be the taxable amount, then divided by the fee simple interest in the land that is the subject of the taxable transaction, times the value of the residential property.

I’m hoping that the minister can put this in some language that I understand a little bit better. For example, I would think you’d be looking at taking the price and the square footage and saying: “Okay, here’s how we apportion the value between the two, and you only pay the tax on the residential part.” I mean, this formula seems really to be something different. But maybe what’s that it says. I just don’t understand it.

[1520]

Hon. M. de Jong: This is probably one of those moments that occasionally come along when I am very drawn to the notion of changing our rules to authorize officials and draftspeople to be able to answer questions directly.

What I can tell the member is what has been done. This is relevant in the existing provisions of the act. For the existing property transfer tax, there is a similar ratio that is used to draw out residential value of land. This is, I am told, the same ratio. I can try to do a better job than that, but that is what I can tell the member right off the bat.

D. Eby: I can draw some assurance from the minister that this isn’t a brand-new formula, that it will be understandable to the people who need to understand it and that it’s understandable to industry. That’s a helpful thing.

What about the situation where you have a purchase of a property between a person who is a foreign national and a person who is a permanent resident or a Canadian, where they’re buying it together? It’s not unusual for
[ Page 13510 ]
people to buy property together or for people to have different citizenship status when they’re buying a property. How does this tax apply?

Hon. M. de Jong: Two circumstances. I want to make sure I try to answer completely.

In the case of tenants in common…. We’ll take the example of the member, where there are two parties — one a foreign national, the other a citizen or a permanent resident. In the case of tenants in common, their percentage interest in the property would drive the application of the additional tax. If the foreign national had a 25 percent interest, it would apply to 25 percent of the value. I think the member gets the point.

In a joint tenancy situation, I’m advised it is a 50-50 circumstance. So the tax would apply to 50 percent of the value if one of the two parties is a foreign national.

D. Eby: Under the definition of residential property, is it possible by regulation to include agricultural property? Or would we have to come back and add another section to the act, through a miscellaneous statute amendment, to add agricultural property or agricultural land reserve property?

[1525]

Hon. M. de Jong: This basket of legislation focuses on residential property. If we sought…. The member is referring to the conversation earlier with our colleague. If we were to take that step, that would involve a statutory amendment to these provisions.

D. Eby: I’m reluctant to try to do an amendment on the fly, with the wording required. This is the last matter I have in relation to section 3 of the act. We’ll be able to move on right after.

Do you mind just giving us five minutes, Mr. Chair? Is the minister amenable to that?

The Chair: The committee will be recessed for five minutes.

The committee recessed from 3:26 p.m. to 3:40 p.m.

[R. Chouhan in the chair.]

L. Popham: I would like to put forward an amendment to section 3. I’ll read that out.

Ms. Popham and Ms. Huntingdon to move, in Committee of the Whole on Bill (No. 28) intituled the Miscellaneous Statutes (Housing Priorities Initiatives) Amendment Act, to amend as follows:

[Section 3, by adding the text underlined

“residential property” means any of the following:

[…]

(c) any agricultural land reserve properties included in the Agricultural Land Commission Act [SBC 2002] Chapter 36;]

On the amendment.

L. Popham: I think this is quite important, and although….

The Chair: Member, could you please clarify that the motion is only being tabled by one member, not by both members. It would be in your name — only one.

L. Popham: Well, if it can only be in one member’s name, then I’ll put it in my name. I would like to just clarify why I attempted to put it in both of our names. I am the chair of the opposition standing committee for agriculture and food. The member for Delta South is the co-chair of that committee, and we have very strong feelings about protecting farmland in this province. It can just be in my name, if that’s the way it has to be.

One of the reasons why I thought this amendment was important is because…. I don’t think this legislation really addresses the problem that needs to be addressed as far as protecting farmland. I think we need to look at restricting, in some way, international speculation on agricultural land. We have a very small amount of that land in our province, and as food security becomes more and more important, it’s very important that we value it in the way it needs to be valued.

I think we’re quite a few steps behind, as a province, in doing that. We have other countries that are sourcing food-growing lands. They’re actively going out and finding food-producing lands to own, to help with their own food security plan. There is a country whose central government has secured $3 trillion to go out and buy food security, food-producing lands around the globe. I don’t think that’s a bad idea. I think they’re being extremely proactive in this way.

From our perspective in British Columbia, we don’t even know, at this point, who owns our farmland. We certainly are not taking steps to figure that out very quickly. I listened to the minister’s explanation earlier about having to go through records manually and how it would take quite some time. In fact, this situation on specifically corporate foreign ownership of our farmland came up in 2007.

There has been a long history of trying to alert the government to the situation going on. I find that as we draw closer to an election, we hear more and more concern about this.

[1545]

I think if there was actual authentic concern about what’s happening with our farmland, we would have at least started an inventory process quite a few years ago. In fact, even two years ago, when this was starting to become more and more relevant, with a company from the U.K., we talked a lot about at least starting with an inventory, and that still wasn’t done.

Although this bill doesn’t address what I think it should address as far as foreign investment in our food-
[ Page 13511 ]
producing lands, at least we could include farmland in the definition so that it would be taxed the same as other properties.

Hon. M. de Jong: Thanks to the member and to the member for Delta South. A couple of things. I will say, first of all, I don’t in any way doubt what is motivating the proposal, the amendment and the concern that’s been expressed.

The member may have heard the exchange earlier. I take a certain measure of pride in living on a small farm that I grew up on, and it’s in the ALR. So I have a certain affection and attachment in that regard. With respect to the amendment itself, I hope the member and our colleague from Delta South will not interpret my remarks as being hostile in that sense.

Technically, I will say there is a problem with the amendment insofar as the new sub (c) could not coexist with sub (b). That’s not a criticism. It’s awfully difficult to draft on the fly. If there’s a technical reason for having to say I can’t embrace the amendment, that is it.

We are trying to track the question of foreign involvement in farmland. During the break, the Minister of Agriculture provided me with a…. I can’t answer the methodology for how this was collected, but farmland price changes in 2014 and ’15 — I don’t have them for ’16 — indicated that farm prices were said to have gone up in 2014, in B.C., by 4.2 percent, and then in 2015, by 6.5 percent.

I don’t know if that is an average across the province. It may not speak to specific circumstances in parts of the province where there may be much larger increases. I come from a part of the Fraser Valley where my sense is there has been a fairly significant increase in the value of farmland, if not in the last two years then certainly in the last ten or 15 years.

The act before us, clearly, is intended to focus on residential properties and, to that extent, includes residences located on farms. We have not taken the additional step of including commercial property, commercial enterprises. The agrifood business, although it is unique, is a form of commercial enterprise that operates on the land base.

In advising the member and the committee of my inability to endorse the recommendation, I would say there are technical issues around that, but it is not because of a hostility to the members’ concern. I explained to the member for Delta South that we are beginning to track the question of…. I didn’t have and don’t have data around foreign national investment in farmland. We haven’t broken that out yet, but we are endeavouring to do so.

We will be in a better position to approach this from a fact-based perspective in the future. Whilst I appreciate the spirit of the amendment, I’m afraid I’m obliged to tell the member and our colleague that we’re not able to accept it.

L. Popham: If I could ask the minister a question, I’d like to know exactly how that ownership is being tracked, how that data is being collected.

[1550]

I would also like to state that if there was a political will to protect farmland, farmland would not have been left out. We have some very, very important farmland in the Lower Mainland. So that would have been a political decision to leave farmland out.

This government, in my view, is not in the business of protecting farmland. Now, as it stands, what the government has stated is that farmland is still up for grabs. “Go for it. We might be keeping track of it. It’s going to happen sometime in the future that we’re going to have the data available.” I don’t know what that means. The future? I’d like that data right now. If there is some, I’d like it right now.

The government is claiming to bring in this legislation in the middle of the summer because it’s a housing crisis. Well, as far as I’m concerned, we have a food security crisis going on as well. I’m not sure why that doesn’t warrant some time in a summer session.

Maybe the minister, besides my rant, could address the idea of how that is being collected.

Hon. M. de Jong: I’ll try to, if I can remember the series of questions or assertions. With respect to the data set that we are now working with, the new data set is that which derives from the property transfer tax, where foreign nationals are obliged to identify themselves and we are able, on the basis of classifications, to determine, break out, residential properties and therefore would be in a position to break out, I presume, agricultural land as well.

I don’t have that breakout yet. I mentioned earlier that much of this work is taking place manually. I have indicated to the committee my interest and the Agriculture Minister’s interest in so doing.

My sense, though, of the member’s position on this is that it extends beyond a measure that would discourage foreign investment in agricultural land and perhaps extends as far as an outright ban. I don’t want to put words in the member’s mouth, and if that is incorrect, she can indicate as such. This was not a piece of legislation intended to accomplish that.

I will agree with the member to this extent. There is an issue that has been at the forefront of the public discourse and the debate in this Legislature over the past year almost. The government chose to ask members to come back to address that issue specifically as it related to residential premises.

That is not to suggest that there isn’t merit in exploring and analyzing the issue that the member has articulated. I will point out that on the data I was provided with a few moments ago by my colleague, the same price pressures, at least on average, do not appear to have visited upon
[ Page 13512 ]
agricultural land. That does not mean there are not other pressures or not other issues.

I’ve tried to be candid in saying to the member that I appreciate her concern, that we’re in a better position today to track foreign acquisition of farmland than we were even a couple of months ago. As that data becomes available, I’m happy to share it and share it in a very public way.

L. Popham: Just so the minister knows…. He might not know, because he’s been a resident on his farm, his piece of ALR land, for so many years, but the biggest barrier for young people going into farming is the cost of land. A crisis is an understatement as far as young farmers are concerned.

The minister didn’t want to put words in my mouth, but he implied that I’m talking about banning purchases. I’m just wondering, getting back to the minister’s legislation: what is the intent of his legislation?

[1555]

Hon. M. de Jong: We’ve discussed this in other parts of the debate, but I’m happy to repeat for the member. We have decided to apply an additional tax measure that is significant and designed to discourage foreign nationals from purchasing residential property within Metro Vancouver.

Our objective is to provide an opportunity in the face of significant demand pressures — domestic demand pressures added to by foreign demand pressures — to provide our communities and our builders with an opportunity to increase the supply of housing to address that demand. In providing an opportunity for that to happen quickly, in the meantime, to reduce the added demand pressure that foreign involvement in our residential market has created — that is the express purpose of that measure which is included within this legislation.

L. Popham: That’s interesting, because I would think that the same sort of taxation would apply to farmland, then, in the Lower Mainland, and the intent would be exactly what the minister just said in his own words: to discourage foreign nationals from purchasing. I don’t understand the difference, because….

Well, there is actually a difference, and it may actually make the farmland situation even more pressing. We can’t make any more farmland. The minister must know that. We can build more houses, but we cannot invent or build any more farmland. What we have is what we have. So it’s even more pressing, I think, to protect this land. Since the minister is a farmer, I would expect him to understand this.

Can the minister tell me exactly the difference between the intent of this legislation to discourage foreign nationals from purchasing homes and residential property and the difference between discouraging foreign nationals from purchasing farmland? I don’t understand the difference.

Hon. M. de Jong: I’m not asking the member to agree with me. I’m simply asking her to understand that the focus of this legislation was to address pressures in the residential housing sector where, we are told and have seen, prices increase at a dramatic rate and, candidly, at rates far in excess of the price escalation we have seen with respect to agricultural land.

The member makes the point that she is concerned about price escalation and the ability for people to get into farming. I will say, with, actually, a little bit of experience in this area: depending on what the nature of the agricultural activity is, in many cases, the far greater impediment is the cost associated with acquiring the quota necessary to practise a particular type of farming.

So there are a multitude of pressures that visit upon people, the price of land being one of them. I am not in any way arguing with the member about how that pressure visits, particularly upon young producers or people who want to be young agrifood producers.

But the purpose behind this legislation was to address a specific issue, and that is access to affordable housing, both from the perspective of purchasing and rental accommodation. That’s why the legislation is drafted and presented in the way that it is.

L. Popham: Well, I certainly see where the minister is coming from if he thinks that the biggest barrier is the cost of quota. That’s in the supply management system, and there is a vast array of different ways of doing agriculture outside of supply management. I can tell you from being on the ground that the cost of farmland is one of the biggest barriers for young people getting on the land.

The minister mentioned the increase in land prices — not too alarmed about that on the farmland side. But I can tell you that because of the underfunding of the Agricultural Land Commission over the last decade, and the neglect of it, we have seen what should have been the mandate of the Agricultural Land Commission, which is highest and best use farming, be highest and best use development. So we have seen an escalation of farmland prices, and what farms are often being sold for is their development potential. I believe that’s the fault of this government.

[1600]

If we want to take a realistic look at what farmland should cost and what farmers can make on that land, I’d say we do have a farmland price crisis. I would ask the minister, in the most respectful way possible, to disregard my amendment proposal because of the many things that are wrong with it in the minister’s mind — including, and I will give him credit, the technical side of it; fair enough — and to please consider putting forward his own amendment which includes farmland because we cannot make any more of that land.
[ Page 13513 ]

Hon. M. de Jong: I accept and appreciate the member’s passion for the topic and her stated desire. I will make this confession. I would not presume to be any better equipped than her to draft an amendment, even if we were so inclined, on the fly.

I think the member, to be fair, has articulated in clear terms her view that there should be limitations placed on the access that foreigners — foreign nationals, foreign capital — have to B.C.’s finite supply of farmland. I accept that that is something that she wishes to see pursued.

I have undertaken that. We are examining the issue, both in terms of the extent of foreign investment in agricultural land and with respect to tracking the pricing.

I’m not in a position today to either endorse the specific amendment that is before the committee today nor to substitute one of my own that would accomplish the member’s objective. But I do appreciate the fact that she has brought the issue to the committee’s attention and again to my attention.

L. Popham: I understand the minister may not be able to draft an amendment any better or worse than I did. But maybe the minister would consider having a recess so that he could take that to his staff, and they could consider drafting a more appropriate amendment.

Hon. M. de Jong: Look, I am sorely tempted to take the member up on her offer, but I think it would be disingenuous, because the government is not prepared today to take that additional step that I understand the member wishes to take. I think it would be dishonest of me to say, “Well, let’s take a recess,” to prepare something that I am not actually inclined to advance before the committee.

I say again that I understand the member’s interest, and she has made her point. But the legislation before us today relates to residential property, residential premises — including residential premises on farms, by the way — and is designed to address that specific purpose.

Amendment negatived on division.

Sections 3 to 13 inclusive approved.

On section 14.

D. Eby: This is the penalty provision for people who attempt to evade this proposed tax by the government on foreign nationals buying residential real estate in Metro Vancouver. The penalties are a maximum of $200,000 in relation to the tax, and for some properties, that will just be the cost of doing business.

[1605]

My question to the minister is: how does the penalty reflect the seriousness of tax evasion here?

Hon. M. de Jong: Maybe I can begin the conversation on this by offering a scenario that the member can critique, then. The way this is intended to work, and this is not uncommon in these kinds of statutes…. In a situation where someone is found to have not paid their tax, let’s say, in the amount of $500,000, the first thing they’re obliged to do is pay their tax.

Secondly, a fine equal to that amount is applied — another $500,000. Then there is a discretionary amount that is contained under this that can be added on top of that. That’s the mechanism by which the fines and penalty amounts add up. In those circumstances, this was thought to be a reasonable amount.

Section 14 approved.

On section 15.

D. Eby: Section 15 is interesting, because it talks about “an information or complaint” being laid in relation to an offence related to this tax. It’s a limitation period, which means you have to do it before this time passes. The limitation period is…. It has to happen “within 6 years after the date that the matter of the information or complaint arose.” So “within 6 years after the date” — the wording is unusual to me; I am curious about the meaning of it — “that the matter of the information or complaint arose.”

There are two ways you can do a limitation period. One is from the date that you discover that the alleged offence took place, or you can do it from the date that the actual offence took place.

To illustrate, if I evaded the tax on January 1, 2010, and it’s January 2, 2016, then the six-year period, plus a day, from the date of the offence is the limitation period. But if it was just discovered in December of 2016, then the limitation period could start at the date of the discovery of the offence.

When I read this, it’s not clear to me whether the limitation period starts at the date of the actual offence or the date that an auditor or an investigator…. Or there’s a complaint that comes forward that reveals that that happened, and it’s discovered. Can the minister clarify about which of the two it is?

Hon. M. de Jong: I’m glad the member noticed this. The first thing I’ll tell him is this an extension by a significant amount of the usual limitation period of one year to six years. I thought that was appropriate for a number of reasons, given the amounts that can be involved and given the sometimes complicated nature of the transactions and by definition, I suppose, the international dimension to the transactions.

There are different circumstances that could trigger the limitation period. The obvious one would be at registration, where someone has filled out inaccurate or improper material, but I was reminded that the wording
[ Page 13514 ]
derives from the fact that there are other circumstances that could trigger an offence.

[1610]

Where, for example, an audit has been commenced following registration and someone lies to the auditor, that would be a separate incident, a separate matter that would trigger a potentially separate limitation date. But the member has, I think, astutely pointed out that it is a longer limitation period than is generally the case.

D. Eby: I can see the policy reason for why you would have a limitation period from the date that the government is made aware of the offence. The reason why you do a limitation period then is that it encourages the government not to dawdle, to do your investigation and get going on the prosecution — to do it within two years or do it within a year after discovery.

What I don’t understand is why, essentially, the provision would reward someone who does a really good job of hiding it. So it’s not discovered until six years and a day afterward. Then it’s discovered, but it’s too late. You’re after the limitation period. Why, as a matter of policy, would you choose to do it from the date of the offence instead of from the date of discovering that an offence took place?

Hon. M. de Jong: I have the member’s point. I think the trade-off here was that we gave the Crown a longer limitation period but opted for that limitation period to begin from the time of the event giving rise to the offence, the information and the complaint. The longer limitation period, as I said, is reflecting our view that some of these transactions may be quite complex and may involve extensive investigative work. That’s the rationale for the choice that was made in the trade-off between the longer limitation period and the triggering event.

Section 15 approved.

On section 16.

D. Eby: Under section 16(b), at sub (a) there’s a regulatory power that permits the prescription of “land or improvements, or both.” Basically it gives the ability to exempt land or buildings from the definition of “residential property.” Why was this power included? Why would you want to exclude residential property, as defined under the definitions section?

Then there’s a similar power, actually, in subsection (b) that allows areas of Metro Vancouver to be excluded as well. I don’t want us to be in a situation where we go through all this and then, by regulation, large swaths or significant buildings are excluded from this tax.

[1615]

Hon. M. de Jong: This is a case, I believe, where we are endeavouring to take account of circumstances, not all of which can be fully anticipated. An example where this might be applicable is residential premises where, for example, a daycare is being operated. Is that portion of the residential premises that operates as a daycare…? Is it fair to include that in the calculation of residential property? That’s one example. There may be others as well.

[R. Lee in the chair.]

It’s often the ones we can’t anticipate that cause the most challenge. So creating that mechanism by which, in unique circumstances, activities that are contained within residential premises but are not, by way of reasonable definition, residential in nature…. This would provide the mechanism for backing the value of that portion of the property out.

D. Eby: Subsection (e) sets out the rate of tax for this tax. It says it should not be less than 10 percent and not greater than 20 percent. Is there a reason for restricting the flexibility in terms of the tax level that’s applied? If the market collapses as a result of this initiative, wouldn’t you want to be able to reduce the tax lower than 10 percent? If it has no effect at all, wouldn’t you want to be able to put a tax that’s higher than 20 percent?

I’m curious about whether I’m reading this section properly as creating a regulatory power to set the tax rate for this. But the tax rate band is between 10 and 20 percent only.

Hon. M. de Jong: Two things. To answer what I think was the member’s question, the intent of the subsection we’re dealing with was to create a regulatory authority by which the Lieutenant-Governor in Council, via the government, could adjust the rate of the additional tax from where it is today, at 15 percent, to as low as 10 percent and as high as 20 percent. I’m happy, if the member wishes, to advise why we thought it prudent to include that mechanism within the legislation.

D. Eby: I don’t have any advice for the minister on that. I was just curious about why he did it.

Sections 16 and 17 approved.

On section 18.

[1620]

Hon. M. de Jong: We need to do a little shuffle, a change of lines here.

The Chair: A five-minute recess.

Interjection.

The Chair: Okay, no recess.

[1625-1630]

D. Eby: I just noted, while the minister was away…. I don’t know whether it’s an indictment of him or of me or of both of us, but we have a bigger audience when we’re in recess than we do when we’re going through the bill here. Welcome, everybody, to the people’s House of British Columbia. Thank you for waiting through the recess. I hope that we can entertain.

This section of the bill, first of all, is an elimination of self-governance for realtors in British Columbia. It’s a rewriting of a number of rules relating to the conduct of realtors in the province of British Columbia. The context of this is a report done by a group that calls themselves the independent advisory group for the Real Estate Council, which did a review of real estate practice in British Columbia.

How we got here, in my opinion, is that we had a system where a regulator was badly underfunded — FICOM and the superintendent of real estate — because the government was clawing back money that should have been spent on auditors and accountants and investigators and instead went into general revenue. There was a report tabled just today in the Legislature about that. They weren’t able to oversee what was happening at the Real Estate Council to the degree that was obviously necessary. They weren’t able to rein in the unauthorized practise of real estate, and we find ourselves here with a significant reform.

Just to preface my remarks by saying that I hope that this new regulator will be adequately funded, that it will be funded at arm’s length from government and that it will be run in a way that is adequately staffed with auditors, investigators, and so on, to ensure that all of these amendments actually see some realization. In my opinion, much of what went on and much of what is going on, unfortunately, with some of the bad apples in the real estate market is a lack of policing of the existing rules, a lack of enforcement of the existing rules.

There was a schedule of recommendations to the report by the independent advisory group about what was happening in real estate in British Columbia, especially in Metro Vancouver. They made 28 separate recommendations. The government moved the posts a little bit by removing self-regulation, so some of the recommendations are no longer relevant, but some are highly relevant. I’d like to canvass those recommendations with the minister to determine whether or not they’re present here in the legislation that’s in front of us.

The first recommendation required the Real Estate Council to create a comprehensive code of ethics and professional conduct and required licensees to affirm their compliance with that code. Is there a provision here that requires the superintendent to take on that role of establishing a code of ethics and professional conduct?

Hon. M. de Jong: Yes, the legislation speaks specifically to that issue. It is contained in what is section 37 of the bill, which adds part 6.1 and relates generally to the powers of the superintendent.

[1635]

In the section that the member will see referred to as 89.2(3)(c) is a reference to the specific power created for the superintendent.

D. Eby: I noticed that with this power and with others…. This is an enabling piece of legislation that gives the superintendent the ability to establish a code of ethics for licensees but does not mandate that. Why was that decision made not to mandate that the superintendent “must do this” rather than “may make a rule like this”?

Hon. M. de Jong: Sorry. I neglected to mention that I am consulting with, in addition to the deputy minister, Heather Wood, to my left, Chris Dawkins, Jon Vandall and Tara Richards. That’s who’s in the House with us.

To answer the member’s question, though, in the construct that would be created by this legislation, there is, of course, an ongoing role for the Real Estate Council in its newly reconfigured form. What we wanted to ensure is that it was clear that there is an overriding and specific authority on the part of the superintendent to ensure that there is a code of ethics.

Some of this, too — I think the member will know — relates to some of the confusion that seems to have arisen within the real estate sector between the role of the council, now the role of the superintendent, and the role of local real estate boards. In the conversations that, perhaps, the member has had and certainly the ones that I have had…. I believe, on the basis of the report, what the council itself found is that in many cases realtors were looking to the wrong body and looking to the wrong agency for where that code of ethics needed to derive from.

This makes it clear. It gives the superintendent the power. I expect there will be some work and consultation between the newly reconfigured Real Estate Council and the superintendent. But the superintendent is specifically authorized to ensure that there is a code of ethics in place.

D. Eby: The second recommendation was an important one and a significant one and one I’m sure the minister has heard about as well as I have. The second recommendation is that the Real Estate Council “no longer permit licensees engaged in trading services to offer dual agency.” Both the minister and I are members of the bar, and it’s an unusual scenario for us to imagine acting for both sides of a business deal as solicitors. This eliminates the possibility of a realtor acting for both the buyer and the seller in the same transaction.

[1640]

I looked through the bill, and I did not see here…. I saw an empowerment of the superintendent to regulate this kind of conduct, but I did not see a prohibition on
[ Page 13516 ]
dual agency in the act. I’m wondering why that prohibition was not put right into the act.

Hon. M. de Jong: No, the member did not miss it. That provision is not in the act, and the intention is to do so by regulation — rule-making authority by a specific OIC.

By the way, I agree with the member. It has, I think, struck members of the legal profession as odd for some time that you could purport to act on both sides of a transaction. I suppose I would say, as someone who did a little bit of that work in my days as a lawyer, that in certain circumstances, in a stable market, in perhaps a smaller community, it was not necessarily fraught with huge problems. But there is an issue, and that issue revealed itself clearly in the kind of market that has been in place.

The intention is to take that step via order-in-council. The member might say, “Well, when?” and I would say in a matter of weeks to have that dealt with. I will say candidly, as well, that amongst realtors and real estate boards, having made our intention clear on this point, they have expressed some concerns. I would say in more rural parts of the province, particularly, I believe there are ways to address those concerns.

I also believe this, and based on his initial comments, I expect the member believes this as well. Clients deserve to know that the advice they are getting is based on their hired professional protecting their interests and not finding themselves in some kind of a conflict where they are offering advice that might be tainted by duties they owe to another client. That will be at the heart of the regulation when it is finalized and instituted.

D. Eby: Recommendation 9 in the report was a significant one as well. I don’t know if the minister has seen letters on this, but I know that certainly my office has.

A significant complaint from people is when they feel that they haven’t seen all the offers for their property, that the realtor prefers one offer. Or there are allegations involving a couple of these bad-apple real estate firms, where they prefer listings from their own agency, recommend those to a client and hide other offers — these kinds of things. Or, at least, there was fear on the part of the clients that that was happening.

This recommendation is that the Real Estate Council “require that all offers received by a seller’s agent…be promptly filed with…the managing broker and be retained at the brokerage for review by the Real Estate Council on demand.” Then there was additional wording that suggested that in the long term, the Real Estate Council actually maintain some sort of an inspection opportunity for clients to come in and look at all those offers that were put forward.

Can the minister advise where in the legislation the provisions are that deal with this particular recommendation?

[1645]

Hon. M. de Jong: The member refers to the recommendation correctly. I can refer him again, in the section we’re on, to 89.2(3)(h), which refers to a registry of information.

D. Eby: I definitely see that there’s mention there of “a registry of information respecting real estate sales data.”

How does that relate to the requirement of filing offers and ultimately preparing, if not a public registry of those offers, at least a registry available for clients to inspect? I’m having trouble connecting a registry of information respecting real estate sales data. It’s different, to me, than records.

Hon. M. de Jong: We are dealing in 89.2(3) with the rule-making authority of the superintendent. I can tell the member that (h) was included specifically to ensure that the superintendent has the rule-making authority to create the rule requiring the establishment of the data…. It would provide the superintendent with the authority to ensure that that registry is created at the brokerage for sales data and offer data. That was the intention behind sub (h).

D. Eby: I look at all these recommendations — maintain an offer directory, apply more stringent suitability assessment criteria to become a realtor, establish a whistle-blower program for industry and the public, increase proactive detection and deterrence, increase the focus on licensee conduct examinations and fully overhaul the licensing, education and testing requirements.

These are all pretty expensive things. Now that government is assuming responsibility for this and, in particular, the reform, and that the superintendent is an arm of government and self-regulation has ended, how does this bill propose to pay for all these initiatives? Who will be paying for them, and where is that included in the legislation?

Hon. M. de Jong: Two things. Of course, the member knows we have undertaken and are in the process of securing a superintendent who is dedicated full-time to this task. The superintendent will require additional support resources. I think it’s going to involve an increase in the budget.

We haven’t finalized what that amount will be or the degree to which the cost associated with that will be borne entirely by taxpayers via the government or shared with the real estate industry itself, which will continue, of course, to make a contribution and fund the Real Estate Council.

[1650]

There will be a need for additional resources to support the increased responsibilities here and the work with the reconstituted real estate board. I can’t tell the member what that finalized amount will be or to what degree it will be funded exclusively by government or shared with the real estate sector.
[ Page 13517 ]

D. Eby: I wonder if the minister can clarify the policy decision for why this entire regime would not be paid for by industry? The regulation is to benefit all realtors. It’s the regulation of the industry. Why is the full cost of this not being passed on to the industry?

Hon. M. de Jong: The member is not going to get a lot of strenuous argument from me to his proposition. I was just checking to verify the degree to which the present superintendent’s operation is funded by industry. I’m told it is self-funded by the industry, and I think there’s a very compelling case to be made for that continuing, with the additional resources that’ll be required.

D. Eby: One last question. One of the issues identified in today’s Auditor General report was the salary cap restricting the ability to hire auditors and not being competitive. Is there a provision in the bill that allows the superintendent to hire auditors based on the cost necessary to hire the auditors?

Hon. M. de Jong: There’s not a provision in the…. Well, the superintendent is certainly in a position to hire auditors, but I think the member’s question relates to the issue of remuneration.

He’s referred to…. I haven’t read the entire report. I saw a quick summary between breaks. Yes, there has been an issue, and I think it would be fair to point out that the wage freeze that the government and I imposed contributed to some of that challenge.

In the public accounts — the member may not have heard or seen my comments around this — I pointed out specifically some of the pressures that that has created in various branches of government and agencies associated with government. This is one of them. Ensuring that the new superintendent and the new office of the superintendent are in a position to hire the people they need, with the experience that is required, will be a priority.

It’s a challenge, because at the same time that you’re trying to hold the line on public expenditures and respect the taxpayer in that regard, there is this competition. It’s not just competition with the private sector; there’s competition within and amongst branches of government. This is an area where that has revealed itself and where we will have to pay particular attention to ensure that the expertise is obtained and retained to allow the superintendent to act upon the powers that are created here.

Sections 18 to 22 inclusive approved.

On section 23.

D. Eby: Actually, while I think of it, I want to thank the minister’s staff — both those that are here right now and those that have cycled through. They took me through an extensive briefing and discussion around the provisions of the bill. They were very helpful. I appreciate their efforts in that regard, and also the minister, for making them available for that purpose.

[1655]

Section 23, in our conversation, puzzled me, because the recommendation of the independent advisory group was…. If a realtor engages in fraud and rips off a family during a real estate transaction, the proposal in the independent advisory group report is that they should have to give up the money. They shouldn’t be able to keep the money that they make. They shouldn’t be able to keep the commission, and they shouldn’t be able to keep the money they obtained by fraud.

That’s kind of what is here in section 23, but not really. What this does is…. They have to pay a penalty equivalent to the money that they made by the bad conduct that they engaged in, but they don’t give it back to the family. They give it to the real estate council, to the superintendent’s office — however we’re describing it after this legislation passes.

Before we continue, I just want to clarify that subsection (c) — and then it will be subsection 24(c) as well — requires not payment to the person that was damaged by the bad conduct, but payment to the real estate council or the superintendent’s office itself.

Hon. M. de Jong: I apologize for the delay. If I think back on what the member said in characterizing the section about the penalties and additional penalties being paid not to the client or the victim, that is correct.

I was casting my mind back to other cases of professional regulatory bodies and professional misconduct — in the case of the benchers, for example, in the Law Society — and whether or not there was, in that case, the imposition of penalties, a mechanism by which to….

Interjection.

Hon. M. de Jong: The member has pointed out insurance.

The challenge of that, of course, is it requires the client, the victim, to commence a claim or action. There is that mechanism, and there is that mechanism here as well for a client.

[1700]

But I can also point the member to section 40 of this bill, which amends section 130(2). It provides a specific power that would allow for the creation of a specific regulation to direct where money that is received by the real estate council or the superintendent on account of an additional penalty may be directed to.

One of the options would be, I suppose, in certain circumstances, having those penalties, or those moneys collected, directed to the victim, to the client. The aggrieved client, I guess, is maybe a better term. But the member’s correct. In the main provision that we’re deal-
[ Page 13518 ]
ing with, the fine amounts are paid to the council and/or superintendent.

D. Eby: I appreciate that there is a rule-making power that could allow the right thing to be done here. I think it’s important, though, that the Legislature send a strong message to the superintendent and to the Real Estate Council that if a family is taken advantage of by a realtor who is seeking to enrich him- or herself at the expense of that family by being dishonest, that money should very clearly be returned to the family. There shouldn’t be any debate or question or discretion. The money should be returned to the family.

Therefore, I would like to move the following amendment:

[Section 23 by adding the underlined text as shown:

(c) in subsection (2) by adding the following paragraph:

(e) Require the person to pay an additional penalty up to the amount of the remuneration accepted by the person for the real estate services in respect of which the contravention occurred which penalty if collected must be remitted to the client affected by the contravention to the extent necessary to reimburse the client as far as possible for any costs or damages suffered by the client. Where more than one client is affected, the penalty should be split between the clients in the proportion of their actual losses if the penalty is insufficient to reimburse the entire losses all affected clients.]

On the amendment.

D. Eby: The point of this is to send a very strong message that a family shouldn’t have to go to B.C. Supreme Court to sue the realtor to try to recover, and not only that, but have to compete with the government for penalty money. So the penalty will come much faster than any B.C. Supreme Court judgment.

The realtor could easily be bankrupted, given the values of real estate and the penalties involved, or rendered too poor to pay, and the family find themselves in a situation where they can’t collect on a judgment because the penalty has already been paid by the realtor to the government. I think we should make it very, very clear that the money collected must go to the client that had the money taken from them. This amendment does that.

[1705]

Hon. M. de Jong: I actually have a certain measure of sympathy for what the member is purporting to advance here. In the case where a realtor is found to have engaged in improper conduct, there is the provision for the imposition of a fine. The advisory commission, in its report, said in addition to that…. I think the term is “disgorge” the commission payable. It may be a product of adhering very slavishly to the recommendations.

My recollection is that the recommendation called for that amount to be repaid to the commission and for government to study whether it was appropriate to redirect those amounts somewhere, including the aggrieved client.

I actually think the member’s idea has merit. As is frequently the case, the dilemma lies with the question of drafting. The fact that the regulatory authority exists to do this, I hope, will give the member some measure of comfort that we are thinking about this and contemplating this.

In saying that I can’t accept or I have difficulty accepting the wording has more to do with the usual constraints we are under to ensure that there are not unanticipated consequences associated with the wording. But I think the spirit of what is being proposed here has merit and is something that we’ve contemplated by the inclusion of the regulatory power.

Amendment negatived.

Sections 23 to 41 inclusive approved.

On section 42.

D. Eby: Section 42 talks about what we are going to do with the former directors, the council, the Real Estate Council. These are the folks who were sitting on the council previously. As I read it, if you were elected by realtors, you’re removed, and if you were appointed by government, you get to keep your job.

First of all, I wonder if the minister could share whether that is, in fact, a correct reading of section 42.

Hon. M. de Jong: Two different groups. The member is correct. One is the larger body that are elected members of council. They arrived there under the previous regime by a certain process, and we wanted it to be clear that they will not be continuing.

[1710]

It might be a good chance for me, very quickly, to alert the committee and the member that in making the change, I have communicated to the council that whilst they have undoubtedly endeavoured to discharge their duties to the best of their ability, the government has clearly, on the strength of the report that they actually commissioned, decided to proceed in a different way to end the self-regulation that has existed for the past decade. I’ve thanked them for their service that they have rendered. That’s the portion that are elected.

The reason for the distinction is…. I believe it’s three appointed members. The mechanism for them arriving there is by OIC. So the mechanism for them not to continue is different.

To the ultimate question — who, if anyone, will continue? — I haven’t made a final decision around that. I think there may, ultimately, be merit in seeing a small amount of continuity. I haven’t decided who from amongst the existing council might continue. It won’t
[ Page 13519 ]
be a great many. I think it’s time to start afresh and start anew. But it is entirely possible that several of the existing members would be asked to continue on the newly reconstituted council. That could be an elected member or an appointed member. No final decision. But it will be a small number and, certainly, not a majority.

D. Eby: As I read the legislation, the former elected council members cease to hold office. “The council members of the former council who were appointed under section 74 (1) (b)” by government — and added those words, “by government” — “continue to hold office under section 74 (1).”

I guess the issue in my mind, and if the minister is looking for feedback…. This has been a crisis of confidence in the real estate industry, an unprecedented loss of self-regulation, a stunning and scandalous report about issues in the industry that were not being policed, public confidence shaken, a series of terrible news stories about rogue real estate agencies, frankly — including the largest real estate agency in Vancouver, New Coast — operating with impunity.

It may be that the council members who get to keep their jobs under this act were the lone voices speaking out and saying: “We need to do something. This isn’t okay.” But from the public perspective and from mine, this happened on their watch. The idea that they get to continue in these roles is, to me, bizarre.

I wonder whether the minister would consider forwarding his own amendment. I won’t do it from my side, but I’d invite him to do it — to insert the words “do not continue to hold office” for these people who were on watch during what is probably one of the largest real estate scandals in Canada, certainly in recent times. They were on the board when this happened. I don’t think they should continue to hold office. I think it’s unfortunate if they were the ones saying, “Hey, we need to fix this,” and they were ignored. I think that’s unfortunate, but from the public perspective, I think we need to start fresh.

Hon. M. de Jong: I understand the submission of the member. I understand the rationale behind his making it and will say only that I anticipate the appointment of an entirely…. Well, I anticipate the appointment of a new Real Estate Council that will represent a fresh start under a new legal regime and an opportunity for the industry to begin the process of re-establishing itself as a professional, well-run organization worthy of the public’s trust.

[1715]

I believe that the vast majority of realtors…. I think probably the member shares this. The vast majority of those who practise the vocation of real estate are deserving of respect. They understand the concepts of duty to client and of conflicts. But I will agree with the member that over the course of the past period of time, much of that confidence has eroded.

Section 42 approved.

On section 43.

D. Eby: This is the section relating to the government establishing a fund for housing, funded in part by a one-time payment of $75 million and by money, I’m told, from what they’re calling the foreign-national tax, when foreign nationals — the term the government is using — purchase residential real estate in Metro Vancouver.

There’s only one question I really have here, which is in relation to subsection 9.7(4), subs (a) through (i). This is the section that prescribes the uses to which this fund can be put, and it talks about construction of housing, maintenance of housing, acquiring land for housing, and so on. But there’s a word that’s conspicuously missing from this, which is one that was not missed in the direction for the city of Vancouver of how they’re supposed to use their vacancy tax. That’s the word “affordable.”

Now, I don’t think that there’s some big, secret conspiracy of the government to use this money to build luxury housing. I think that would be a very bizarre thing, and I’m sure they wouldn’t do that. But I just wonder why on earth you wouldn’t put the words “affordable housing” in front of each of the times you use the word “housing” here, to ensure that this money is used to actually construct affordable housing, just like they did for the city of Vancouver provisions earlier.

Hon. M. de Jong: Thanks to the member. I was just cross-referencing. My recollection of the provision that the member discussed with my colleague in 616(4) is that the wording in that derived from conversations with the city.

The member is correct. It is not the intention, and it would be counterintuitive, for these proceeds to divert to areas outside of what we are concerned with.

[1720]

But I am reminded that the partnerships that may develop here with the city, with the private sector, may involve development that is mixed use, that has market housing, that has supportive housing and affordable housing.

I understand the member’s query and can assure him that the objective here is to take these proceeds — we don’t know how much the proceeds will be — and apply them in a broad range of ways to assist individuals, to increase the housing supply, to assist people who are looking to enter the housing market and to assist people to locate rental accommodation for those for whom rental accommodation is the more appropriate avenue.

D. Eby: There’s no limitation that I read on this money going to either a for-profit company, a non-profit company,
[ Page 13520 ]
municipalities, and so on. Am I correct in reading that this money could go to any of those entities or to individuals?

Hon. M. de Jong: I think that I am going to agree with the member to this extent: the kind of partnerships that one contemplates, that we are contemplating, could be with local government, could be with non-profit societies, could be with the private sector and could be, in some cases, with individuals. We are exploring a range of options.

In fairness, the extent of this will be influenced somewhat by the extent of the revenue that is collected, but I would not want to leave the impression that we have ruled out various forms of partnership that could be advanced. Nor do I want to leave the impression that we have conclusively decided what those partnerships will be.

There’s ongoing work with the city of Vancouver and other municipalities and other agencies. We think this will create a positive mechanism, depending on the effect of the tax we have spent the last week talking about. We’ll see how much additional resource is available. It may turn out to be a sizeable amount.

We’ll see. And we will endeavour to be responsible in the work we do with partners, putting those additional resources to work on behalf of British Columbians.

Sections 43 and 44 approved.

Title approved.

Hon. M. de Jong: I move the committee rise and report the bill complete without amendment.

Motion approved.

The committee rose at 5:23 p.m.

The House resumed; Madame Speaker in the chair.

[1725-1730]

Report and
Third Reading of Bills

BILL 28 — MISCELLANEOUS STATUTES
(HOUSING PRIORITY INITIATIVES)
AMENDMENT ACT, 2016

Bill 28, Miscellaneous Statutes (Housing Priority Initiatives) Amendment Act, 2016, reported complete without amendment, read a third time and passed unanimously on a division. [See Votes and Proceedings.]

Madame Speaker: Hon. Members, I am advised the Lieutenant-Governor is in the precinct. If you’d be so kind as to keep your seats.

Her Honour the Lieutenant-Governor requested to attend the House, was admitted to the chamber and took her seat on the throne.

[1735]

Royal Assent to Bills

Hon. J. Guichon (Lieutenant-Governor): Pray be seated.

Deputy Clerk:

Human Rights Code Amendment Act, 2016

Miscellaneous Statutes (Housing Priority Initiatives) Amendment Act, 2016

In Her Majesty’s name, Her Honour the Lieutenant-Governor doth assent to these acts.

Hon. J. Guichon (Lieutenant-Governor): Thank you for meeting in the middle of summer and coming back to pass this important legislation. Thank you for your service once again.

Her Honour the Lieutenant-Governor retired from the chamber.

[Madame Speaker in the chair.]

Hon. M. de Jong: I move that the House, at its rising, do stand adjourned until it appears to the satisfaction of the Speaker, after consultation with the government, that the public interest requires that the House shall meet or until the Speaker may be advised by the government that it is desired to prorogue the fifth session of the 40th parliament of the province of British Columbia. The Speaker may give notice that she is so satisfied or has been so advised, and thereupon the House shall meet at the time stated in such notice and, as the case may be, may transact its business as if it had been duly adjourned to that time and date. And in the event of the Speaker being unable to act, owing to illness or other cause, the Deputy Speaker shall act in her stead for the purpose of this order.

Madame Speaker: This House, at its rising, stands adjourned until further notice. Safe travels to your families and to your constituencies. See you in the fall.

Hon. M. de Jong: I think protocol requires I move the House now be adjourned.

Hon. M. de Jong moved adjournment of the House.

Motion approved.

Madame Speaker: Until we meet again.

The House adjourned at 5:39 p.m.

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