The Empty Home Tax (EHT) is a tax that applies to residential properties within the City of Vancouver. It is not the same as the Province’s Speculation and Vacancy Tax. As if this is not confusing enough, some call the EHT, the Vacancy Tax as well. Argh!!!
The purpose of the EHT was to incentivize people to offer their empty properties as long-term rentals. So to be exempt from the tax you either need to live in it or rent it out for at least 6 months out of the year. Additionally, if it is rented out, it must be in blocks of 30 days or more. There are specific situations that will allow for an exemption to this, but for most people, the reason they do not have to pay is that they live there or they have rented out the property long term.
When you buy a house, you should make sure that there is a declaration made that the EHT are paid if owed. However, the City of Vancouver can do an audit 1 to 2 years later. At that point, if it was found that the previous owner owes EHT from previous years, it will be added to the property tax account of your property. Considering that the tax is now 3% of the value of the home, that can be tens of thousands of dollars.
This is an evolving area that the legal and real estate community has not fully worked out. Doesn’t seem fair to me that an innocent party ends up responsible for a tax the government fails to collect.
Currently, buying a homeowner title insurance policy will cover your liabilities should an audit find the previous owner owes EHT. Discuss this with your solicitor when it is time for you to buy your home as there may be new better solutions.
