Condominium Act, Municipal Act, Social Service Tax Act #98
CATEGORY: Legally Speaking
TAGS: Canada Mortgage and Housing Corporation (CMHC) Condominium Act Land Title Office Mortgages Municipal Act Social Services Tax Act Taxes
By Gerry Neely
These three Acts proclaimed by the Legislature in Victoria may contain a number of booby traps waiting to explode in the face of the unwary, but each contains at least one. Anyone purchasing a condominium knows that the legal description includes an interest in the common property. And certainly a mortgagee advancing funds to the owner of a strata lot would find that his mortgage states that it charges the owner's interest in the common property. The mortgagee could reasonably assume that the mortgage gives him the some protection as does a mortgage charging non-strata title property.
That is not the case, at least if the manner in which the Victoria Land Title Office deals with the subdivision of common property is consistent throughout the Province. A strata corporation has the power, if approved by a special resolution of the owners, to sell all or part of the common property. If approved, the subdivision plan carving off a portion of the common property does not need the consent or the signature of any mortgagee whose mortgage was registered after the strata plan was created. Why, since a subdivision of property normally requires the mortgagee's consent? The reason - no endorsement of the mortgagee's name is made on the page that refers to dealing with the common property, and only those persons whose names appear on this page are required to consent.
A mortgagee might find to his dismay that, without his knowledge, his security has been reduced because the swimming pool and tennis courts that once formed part of the common property are now owned by a health spa. This is unlikely to happen where there are a large number of owners, but it could happen if there is only one owner of either a strata corporation as small as a strata lot duplex, or as large as a sixty unit condominium that didn't sell in 1981. This is not a problem that will disturb the sleep of very many borrowers, but it might make C.M.H.C. and other lenders want to have a talk with the Director of Land Titles.
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Generally, governments give themselves an edge in trying to collect taxes, and the Municipal Act is no exception in aiding a municipality to recover unpaid taxes. Suppose you are renting commercial premises and, to carry on your business, you have goods and chattels in your possession in your leased premises. Your lease requires you to pay your share of taxes to the landlord, who receives them but fails to remit them to the municipality.
Section 449 of the Municipal Act gives the municipality the right to seize your goods and chattels to pay the taxes owed by the landlord, if, under the terms of your lease with the landlord, the landlord had the right to seize your goods and chattels to cover any arrears of rent owed to the landlord. Since most commercial leases give the landlord the power to levy distress for arrears, your goods and chattels are subject to seizure by the municipality.
This was the unfortunate experience of a sublessee in North Vancouver whose landlord owed the municipality unpaid taxes in excess of $117,500.00. The municipality was successful in obtaining an order preventing the sublessee from moving or dealing with any of its goods or chattels other than to deliver them to the municipality.
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We used to have a Sales of Goods in Bulk Act which was nothing but a nuisance to solicitors acting for a purchaser of a business. It was repealed, but a part of it moved into the Social Service Tax Act. As you are aware, a vendor selling tangible personal property is required to collect and to remit retail sales tax to the Province. If, however, that vendor decides to sell his stock through a sale in bulk, he is required to obtain a certificate, in duplicate, from the Commissioner that all taxes collected by the vendor have been paid. A sale in bulk is defined as a sale by a vendor of tangible personal property out of the usual course of the vendor's business; or a sale of substantially the entire stock of the tangible personal property of the vendor; or a sale of an interest in the business of the vendor.
The problem for the purchaser who buys the stock through a sale in bulk is that if he fails to ask the vendor to deliver up the duplicate copy of the certificate, then that purchaser is responsible for payment of all sales tax collected by the vendor but unpaid. While the purchaser has a right to sue the vendor, that may be an empty right if the vendor has disappeared.
Perhaps you have other examples of booby traps that you'd like to share with your fellow licensees.
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