Property transfer tax on pre-sold strata units

When you purchase a condo unit on the open market well in advance of the completion of the building, this is known as a pre-sold strata unit. You will generally pay property transfer tax on the total amount you paid to acquire the property.

The total amount includes any money paid for:

• Upgrade or additions, or
• Any other premium for assignment for a written assignment

A strata unit is pre-sold only when a person signs a written agreement to purchase or otherwise acquire a registerable interest in the unit before the developer deposits the strata plan at the land title office. Under the Strata Property Act, developers can only deposit a strata plan once the strata complex is complete enough for individual units to be surveyed. This usually occurs shortly before the building is ready to be occupied.

Note: This agreement must be in writing and clearly identify the transferee as the intended purchaser.

Most pre-sold strata units are transferred in an arm's length sale in the open market. For these types of transfers, tax is based on the total amount paid, which includes any money paid for upgrades, or any other premium for assignment of a written agreement.

By basing the tax on what you paid, rather than the potentially unknown fair market value at the time of registration, you can have more certainty over how much tax you will owe. This also allows you to be certain if you will qualify for exemptions, such as the first time home buyers' exemption.

This provision is made under section 1.4 "Proposed strata lots – determination of fair market value" of the Property Transfer Tax Act.

Assigning a right to purchase

If you assign that written agreement to purchase to someone at arm's length on the open market before the strata plan is deposited at the land title office, the tax due is calculated on the total amount paid by the transferee, who is the assignee. This includes all additional amounts paid to obtain the right to purchase. A valid written assignment is required.

If you transfer the assignment after the strata plan is deposited at the land title office, this is not considered a pre-sold strata unit. The regular rules of fair market value will apply.

Non-arm's length transactions

If an agreement or an assignment is a non-arm's length transaction, tax is based on the total consideration that would have been paid if the transaction had been between arm's length parties in the open market. The administrator will determine this amount for any non-arm's length transaction. Assignment to an affiliated corporation, a newly-formed corporation, or the purchaser's own corporation will often be considered non-arm's length.

A relationship at arm's length is one where neither party gains a business advantage from being in the relationship. Sometimes this depends on the details of the relationship, but family members are generally assumed to be not at arm's length.

Other information

Effective January 2019, information about pre-sold strata assignments is captured in the Condo and Strata Assignment Integrity Register (CSAIR). Developers are responsible for collecting and reporting information about each assignment in the register.

Any profits made from an assignment of a pre-sale condo or strata unit must be reported as capital gains or on income tax.