Poor advice about foreign buyers tax costs B.C. law firm $75K

Image Credit: SUBMITTED/B.C. Assessment

A B.C. real estate law firm is on the hook for $75,000 after it gave a Brazilian client shoddy advice about the foreign buyers tax.

In what the judge described as an "unfortunate sequence of events" Brazilian national Carolina Tellini was left to pay the foreign buyer tax because real estate law firm Bell Alliance failed to tell her about her options.

According to a March 26, B.C. Supreme Court decision, Tellini and her husband moved to Canada in 2015 and bought a house in North Vancouver prior to the foreign buyers tax coming into place.

However, the following year the couple separated and Tellini organized with her bank to have the mortgage and property ownership transferred solely into her name. She then contacted conveyancing firm Bell Alliance to help her with the transaction.

Bell Alliance, the company's owner Richard Bell and an employee are all defendants in the case.

The decision shows lengthy back and forth conversations between Tellini and the company regarding the real estate transaction.

In December 2016, only after Tellini had secured her mortgage to pay off her estranged husband did the solicitors realize she had yet become a permanent resident of Canada and therefore would have to pay the foreign buyer tax.

As Tellini had submitted her application for permanent residency she decided to hold off on the property transfer until she received her residency and then wouldn't have to pay the tax.

However, weeks later her 2017 property assessment arrived and her house had increased in assessed value from $772,000 to $996,000.

Worried this may now affect the transfer of the property, and whether she would have to pay more tax, Tellini contacted her solicitors on how to move forward.

The court documents give a lengthy play-by-play of conversations and correspondence between Tellini and the firm.

Eventually, Tellini borrowed $60,000 from a friend, paid the foreign buyers tax and completed the transfer.

However, as she became more aware of the rules of the foreign buyers tax, including the fact that she could get it refunded if she became a permanent resident within one year of paying it, she launched legal action against the firm.

B.C. Supreme Court Justice Lindsay Lyster found the firm made a series of errors when giving its Tellini advice.

"I have found that the defendants fell below the standard of a reasonably competent real estate solicitor, and thereby breached the standard of care," Justice Lyster said in the decision.

In its defence, the company says it did not want to coach someone to avoid taxes as the foreign buyers legislation prohibits it.

However, the Justice says as the anti-avoidance rules are broad and have not been tested through the courts, she refused to accept that argument.

"A reasonably competent real estate solicitor, faced with the prospect that their client was going to have to pay a significant amount of unanticipated taxes because they were not yet a permanent resident would have canvassed those issues with their client in order to be able to consider whether there was a way to restructure or reschedule the transfer," the Justice said.

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The Justice also highlights that the company left the work to be done by a solicitor that had only been called to the bar five months earlier.

"She was in over her head with this transaction," the Justice says.

Justice Lyster goes onto say that while the solicitor did not ask for help, her bosses also failed to reach out and provide her with the support that she needed.

Ultimately, the Justice laid the blame with the company.

"Ms. Tellini, while she had been a successful businesswoman in Brazil, was new to Canada, spoke English as a second language, and needed the assistance of a reasonably competent solicitor in dealing with the transfer of the Property. The defendants failed to provide that assistance," the Justice said.

While the company had hoped to make $800 in fees for the real estate transaction, the Justice ordered it to pay $74,700 to Tellini to cover the foreign buyers tax she had to pay. Tellini was also awarded costs for the court proceedings.

Tellini did later become a permanent resident.

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