Archive for November, 2016

B.C. home prices expected to drop

Wednesday, November 30th, 2016

Industry association?s chief economist points to foreign buyer tax as one factor

DAN FUMANO
The Province

Following a year of double-digit increases, the B.C. Real Estate Association is predicting average home sales prices will drop by as much as 8.7 per cent next year in the Vancouver area and across B.C.

The prediction, included in the B.C. Real Estate Association’s newest quarterly Housing Forecast Update released Tuesday, marks the first time in five years the industry association for the province’s 20,000 realtors has predicted a year-overyear decrease in average Multiple Listing Service prices for Greater Vancouver and B.C.

The new forecast predicts the average MLS price of Greater Vancouver home sales will decrease by 8.7 per cent next year. That marks a 14.5 per cent drop from the association’s previous forecast for 2017 — the most recent quarterly update, published in late August, predicted Greater Vancouver would see a 5.8 per cent increase in average MLS price in 2017.

The provincewide average price prediction has dropped from a 5.2 per cent increase for 2017 (as predicted in late August) to a 6.4 per cent decrease for 2017 (in Tuesday’s forecast).

Cameron Muir, chief economist for the B.C. Real Estate Association (BCREA), said: “Home sales in Vancouver peaked in February this year and they’ve declined ever since, that’s been exacerbated by some of these policy measures, particularly the foreign buyer tax.”

Housing demand will still be above average in 2017, Muir said, adding: “We expect the downside of the foreign buyer tax, particularly in Vancouver, has largely run its course, and we can see in the data today, the proportion of foreign sales are actually starting to increase again.”

Average sale prices, which incorporate different kinds of dwellings, are affected by the changing mix of “products” in the transactions, Muir said, as detached homes make up a smaller proportion of sales in Vancouver.

BCREA does not make previous forecast reports available online, but Muir said the last time the association predicted year-over-year declines in average prices was 2011, when quarterly reports forecast decreases between roughly one and 3.5 per cent for 2012.

BCREA spokesman Damian Stathonikos did not reply before deadline to a request to see the 2011 forecasts.

The 14.5 per cent price-forecast adjustment between the last two BCREA forecasts marks “a pretty significant development,” said Andrey Pavlov, a professor of finance at the Simon Fraser University’s Beedie School of Business.

“We have to consider the source,” Pavlov said. “This is basically an industry group, and they have incentives to paint the real estate market in the best terms possible. With this in mind, if they’re forecasting a decline, then in my view things are probably pretty bad.”

© 2016 Postmedia Network Inc.

Vancouver’s Robson is 7th Priciest Retail Street in Americas

Tuesday, November 29th, 2016

Main Streets Across the World Report

Evan Duggan
The Vancouver Sun

In this year’s rankings, Robson Street trailed only the top streets in New York, Chicago, San Francisco, Miami, Toronto and Washington. NICK PROCAYLO / Vancouver Sun

Vancouver’s Robson Street has been named the seventh most expensive shopping street in the Americas in a new report by Cushman and Wakefield, but retail property experts say the fast-fashion street appears to be in a down-cycle as luxury brands seek nearby locations on Alberni and Burrard streets.

The annual Main Streets Across the World report tracked 462 of the top retail streets around the globe, ranking the most expensive in each country by their rental costs.

The report named New York’s Upper 5th Avenue as the most expensive street in the world, with average annual rents of $4,057 (Canadian) per square foot. Hong Kong’s Causeway Bay ranked second most expensive in the world at $3,892 per square foot a year. Rental rates decreased in both when compared to 2015.

Vancouver’s Robson Street ranked 7th on the Americas list, with annual average rents of $225 per square foot, dropping by $10 per sq. ft. from 2015’s ranking.

In the Americas, Robson trailed only the top streets in New York, Chicago, San Francisco, Miami, Toronto and Washington.

However, Vancouver’s premier shopping high street is no longer confined to Robson, with higher-end brands and costlier rents emerging on sections of Alberni and Burrard, said Alastair Fergusson, an associate vice-president with Cushman and Wakefield in Vancouver.

“Because of our physical constraints in this city, we’ve had to more or less let our main street move into different sub areas,” he said.

Vacancies have started to emerge along sections of Robson Street and rents have actually been dropping.

“A few years ago the high rents along Robson were $225 to $240, and in that range,” said Sherman Scott, an associate vice-president with Colliers International in Vancouver. “We’ve seen rents as low as $125 to $160 range,” he said. “The rents just range so dramatically from block to block.”

He said higher rents are shifting east toward Pacific Centre and onto Alberni and Burrard Streets. “Some of those landlords (on Robson) are doing shorter term deals with the hopes of landing an anchor tenant down the road and maybe do a renovation or redevelopment of their properties.”

He said notable closures in the area included Chapters’ 56,000 sq. ft. space at Robson and Howe. (Later replaced by a 4,000 sq. ft. Indigo store on Granville Street). French Connection and Mexx also closed.

But Robson isn’t dying. It’s just in transition, said Craig Patterson, a national retail consultant and editor-in-chief of Retail Insider. In March, the Paris-based bakery chain Laduree Boutique made its Canadian debut at 1141 Robson.

“That was a tremendous vote of confidence for Robson Street in general, but it is a bit concerning when you see rents on other streets going up,” he said.

Cushman and Wakefield’s report reveals that average annual rents on the top streets of New York, Toronto, Washington DC, Vancouver and Montreal all reduced compared to last year, with the 5th Avenue dropping the most dramatically, by $676 per sq. ft., per year.

The rental values have decreased as brands balance the demands of physical and online presences, the report said.

The Americas region remained relatively healthy overall due to stable consumer spending, steady employment and lower energy prices, said Gene Spiegelman, Cushman & Wakefield’s head of retail services, North America.

“The larger question, for 2017 and beyond, will be the unrelenting rebalancing of sales origination,” he said in a release. “Bricks and mortar versus e-commerce.”

He said urban stores will continue to benefit from global brands seeking “tangible connections with consumers” while malls and high streets will feel pressure to improve their offerings to stay competitive with “bricks and clicks”.

Meanwhile, overall retail sales remain strong in Canada.

Most people seem to think that e-commerce is killing retail, said Paul Morassutti, the executive vice-president and executive managing director at CBRE Canada.

“That may be a nice headline — a catchy headline — but it really is an overly simplistic response to a phenomenon that is infinitely more complex and nuanced,” he said earlier this month at the Vancouver Real Estate Strategy and Leasing Conference.

He said the Canadian retail sector is indeed recalibrating and experienced 4.3-per-cent growth compared to last year. Mall sales have slowed but still remain well above the 10-year average, he said.

“Each retail format experienced decreases in vacancy, year-over-year, and retail rates outperformed most other sectors in 2015 and 2016,” he said. “It’s not all doom and gloom, but the retail sands are shifting and the retail sector continues to exhibit a profound bifurcation.”

© 2016 Postmedia Network Inc.

Downtown Vancouver retailers punching above weight class, but that could change fast

Monday, November 28th, 2016

Chuck Chiang
The Vancouver Sun

Downtown Vancouver’s retail market continues to be the strongest in Canada, but among the sea of strength may be pockets of weakness and a risk from increased competition.

According to the latest figures from Statistics Canada, B.C. retail sales grew 5.7 per cent in September compared with the number last year, more than double the national average growth of 2.5 per cent.

Craig Patterson, editor-in-chief of industry publication Retail Insider, said Vancouver has consistently “punched above its weight class” in retail sales, partly due to the large influx of wealthy immigrants from the China in the past decade.

But Patterson cautioned that because the luxury retail sector that flourished is also reliant on high-end tourism, there are risks that could change things quickly.

“About 50 per cent of all luxury sales globally are to wealthy tourists,” Patterson said. “Right now, places like Vancouver, Toronto or London (England) are where people want to buy luxury goods because of things like the Brexit leading to the pound sterling and the Canadian dollar being bargains.

“There are a lot of cities worldwide that are also adding luxury stores, and if the Canadian dollar rises suddenly, all luxury retailers here could be vulnerable because we would no longer be an attractive market.”

The demand for retail space downtown varies by location, said Sherman Scott, associate vice-president of Colliers in Vancouver. Scott noted the addition of the Nordstrom department store has pulled interest eastward, with the western end of Robson Street — a traditional retail haven — taking the brunt of the impact.

“The 1100 block of Robson has definitely suffered,” he said. “Demand on the 1000 block is still very strong … but there’s downward pressure on the rental rate in (the western end of) the area, and in my opinion, they really need an anchor store or some new development to kickstart business.”

On Alberni Street — Vancouver’s new luxury row — some stores said the sales pace has moderated recently. But real estate officials noted demand for retail space on the strip remains at an all-time high.

“I will note that in discussions with almost every retailer we have spoken with in this sector, the sales in Vancouver are significantly higher than in Toronto and rents in Toronto still far exceed Alberni Street rents,” said Mario Negris, executive vice-president of CBRE’s Retail group in Vancouver.

Negris added that a real estate tax (like the one B.C. imposed on foreign buyers in August) typically does not affect retail sales.

“I have not seen any indication of a softening of the luxury market. The demand we are seeing from luxury tenants seeking to enter the Vancouver market is unwavering. In actuality, the deals we are working on — and the rents which will be achieved — will signal a continuing strength in that sector.”

Patterson said one aspect to Vancouver’s upscale retail to watch is whether Pacific Centre’s swing towards luxury brands with the addition of Nordstrom and other high-end retailers would draw foot traffic from Alberni as it did with the western blocks of Robson.

The Pacific Centre mall — which already has a Holt Renfrew store — recently Berluti menswear, where a pair of shoes regularly exceed $2,000. According to Cadillac Fairview, Pacific Centre’s foot traffic has increased by about 30 per cent since Nordstrom opened.

“Downtown Vancouver really has two luxury nodes now, and they compete,” Patterson said. “It’s challenging because Pacific Centre — which is not an area you traditionally find luxury brands — all of a sudden has a wider selection than it has ever had in its history. It’s been explosive.”

It does not mean Alberni has been standing still. Saint Laurent Paris, formerly Yves Saint Laurent, opened its first Canadian store on the “luxury row” between the Moncler and Prada stores this year, with several brands, including Rolex, confirmed to be arriving soon.

On Friday, Chinese jewelry giant LFX flew in almost 300 pieces of imperial jade — which had never left China before — to its Vancouver store to boost visibility and brand recognition beyond its traditional base of Chinese-Canadians.

Shi Li-hua, general manager of Shanghai LFX Co. Ltd., said his company chose Vancouver over New York for the showing particularly because their belief in the city as a premier upscale/luxury goods market in North America — despite the Vancouver location having opened only one year ago.

“We’ve been very happy with the Vancouver market so far,” Shi said, noting the city’s high Chinese population as a key factor for optimism. “Vancouver is an affluent city, and these items require a consumer base with the corresponding resources. There’s a sizable number of consumers that fit that profile in Vancouver.”

He acknowledged that upscale retail faces many challenges, but added that the market has been on a consistent upward trend since the economic crisis of 2008. That trend is no different here in B.C., he said, and the key is to connect with the consumers in a more emotional, personal way.

“We’re not just trying to sell and to boost visibility for ourselves,” Shi said. “We decided to put our regional operations here. Through whatever efforts we make in business, we are also hoping to do our part in contributing to the Canadian and B.C. economy, to grow together.”

Patterson said that the competition between the two luxury clusters doesn’t necessarily mean they cannot coexist, although he did note that West Hastings and Granville — previously a potential cluster for high-end retail — has faded due to the strong draws of Alberni Street and the Pacific Centre.

He pointed to Toronto, where multiple zones of luxury retail thrive.

“I think that, with one outdoor strip and a shopping-centre strip, you will have customers patronizing all of them — as long as consumers know the stores are there,” Patterson said. “For Alberni, as long as they keep adding luxury retailers — which it is — they’ll be fine. … If tourism remains strong and wealthy locals continue to shop, I think Vancouver will continue to be a very strong retail environment.”

© 2016 Postmedia Network Inc.

Airbnb, New York settle suit on short-term sublet law

Monday, November 28th, 2016

Bob Van Voris
other

Airbnb Inc. settled its lawsuit against New York state over a new law restricting short-term rentals, with both sides agreeing that New York City, not the state, is responsible for enforcing it.

Airbnb and New York Attorney General Eric Schneiderman agreed in court papers filed Tuesday that the state would be dismissed from the suit. A lawyer for the city told U.S. District Judge Katherine Forrest in a letter on Friday that the parties are discussing a resolution of the case and will update her on their efforts by Dec. 2.

The new law prohibits advertising of short-term rentals — less than 30 days — with violators facing fines of as much as $7,500. Hours after Governor Andrew Cuomo signed the bill into law on Oct. 21, Airbnb sued the city and the state claiming the restrictions were unconstitutional and infringed its free-speech rights.

“We have long sought to work with leaders in New York on clear, fair rules for home sharing, and we’re continuing to do all we can to protect the thousands of middle-class families who depend on home sharing to earn a little extra money,” Airbnb spokesman Peter Schottenfels said in a statement Tuesday.

Legal Challenges

Airbnb is fighting local rental regulations throughout the U.S., driven by opposition from the hotel industry and cities, which stand to lose revenue from hotel occupancy taxes. The company faces a legal challenge in San Francisco, where it sued to block enforcement of a law that would penalize Airbnb for hosts who use the site to book rentals of unregistered units. After Airbnb lost an initial ruling, that case is on hold while both sides negotiate.

Both the state and city of New York said last month they would hold off enforcing the new law until Airbnb’s suit is resolved. New York is Airbnb’s largest U.S. market.

In response to the city’s letter on Friday promising a Dec. 2 update, Forrest wrote: “We are running out of runway and will get things moving forward shortly.”

Copyright © 2016 Key Media Pty Ltd

Triomphe 1904 Gilmore Avenue Burnaby 340 homes in a 46 storey tower by Millennium Development Group

Saturday, November 26th, 2016

?This is as close to Vancouver as you can get without paying Vancouver prices?

? SIMON BRIAULT
The Vancouver Sun

Triomphe

Project location: Gilmore Avenue and Halifax Street, Burnaby

Project size: 340 homes, one — four bedrooms (including three townhomes), 482 – 2,138 square feet.

Prices: from the $380,000 range

Developer: Millennium Development Group

Architect: Chris Dikeakos Architects Inc.

Interior designer: Mitchell Freedland Design

Sales centre: Unit B — 4247 Lougheed Highway, Burnaby

Hours: noon — 5 p.m., Sat — Thurs

Telephone: 604-828-1373

Website: http://www.triompheresidences.com

Occupancy: Spring 2020

Why pay extra for an apartment in Vancouver when you can get one that’s just a block outside the city and a one-minute walk from a SkyTrain station? That’s the thinking of the people behind Triomphe, a residential tower planned for the corner of Gilmore Avenue and Halifax Street in North Burnaby.

“One of the main attractions for first-time buyers is the proximity to Vancouver,” said George Wong, principal at Magnum Projects, which is marketing Triomphe on behalf of Millennium Development Group. “It’s going to be great for people who work in Vancouver when they can be at Waterfront Station in 20 minutes via rapid transit from Gilmore SkyTrain. It’s a short commute, but people will be saving easily $100,000 on the cost of an apartment. This is as close to Vancouver as you can get without paying Vancouver prices.”

Triomphe is a set to have a major presence in the community, rising 46 storeys and including a separate amenity building, three townhomes and a total of 340 homes ranging from 482 to 2,138 square feet.

“There’s been a lot of interest from buyers and we’ve already sold more than half of the homes on offer,” said Peter Malek, principal at Millennium Development Group. “We’ve got very well thought-out floor plans that are super efficient and functional in terms of space and they’re proving very popular with first-time buyers. At the same time, we’re offering balconies of more than 1,000 square feet in the larger homes and that is very unusual.”

Wong said that there has been a sizable number of North Burnaby residents purchasing units, often first-time buyers in their twenties and thirties who grew up in the area and want to stay there because of the liveability of the community.

“We’ve seen more than 1,200 people coming through the display suites and the top reason they say they’re interested is the location,” he added. “This neighbourhood is really beginning to hum – we have a Whole Foods, a Save-On-Foods, all kinds of restaurants, amenities and services. We’re also super close to both BCIT and Simon Fraser University, as well as the soon-to-be revitalized Brentwood Mall.”

That revitalization is part of the City of Burnaby’s long-term plan to develop a dense, walkable community hub around Brentwood Town Centre Station along the lines of Metrotown further south. The existing Brentwood Mall has more than 90 stores and services and it’s only an 11-minute walk from the Triomphe site.

“The design and the architecture of this development are proving very popular too,” said Wong. “It will be a stunning building and a real landmark in the community. Buyers are smart and they understand the value of a development that is designed to such high standards.”

All homes will have nine-foot-high ceilings (10 feet in the penthouse suites) and central air conditioning. Each unit comes with a parking spot and a storage locker and the building features fob-controlled access to the lobby, a concierge service and a car-charging station.

Kitchens feature two-tone, soft-close cabinetry, polished white quartz slab countertops and marble-inspired porcelain tile backsplashes. There are rectilinear stainless steel sinks with Riobel polished chrome professional kitchen faucets. The appliance packages are by Bosch and homes also feature stainless steel Panasonic microwaves and stacking Blomberg washers and dryers.

The spa-style bathrooms feature wall-hung European-style vanities with soft-close hardware, polished quartz countertops and above-counter vessel sinks with 
Grohe chrome faucets. You’ll find floating mirrors and back-lit medicine cabinets in the master bathrooms and environmentally friendly dual-flush toilets throughout. There are also large porcelain floor tiles in the tub/shower surrounds in all bathrooms.

“Most people choose a location, a building’s design and its amenities before they choose a suite,” said Wong. “But the amenities that are included in a new home development are becoming more and more important. When you buy a home at Triomphe, you’ll have private membership to a highly exclusive clubhouse right off our 40-foot-high grand lobby designed by Mitchell Freedland.”

The amenities at Triomphe come in the form of a deluxe three-storey pavilion and lobby with more than 13,000 square feet of indoor and outdoor features. There will be an outdoor rooftop pool, a hot tub, and a lounge area. There’s also a wellness centre with a gym, yoga/dance studio, and his-and-hers steam rooms. Elsewhere, there’s a great room for socializing with a fully equipped kitchen, a dining area, and a comfortable lounge with a big-screen TV. Triomphe Pavilion will also include a business centre/library, a games/music room and an expansive outdoor entertaining area with a barbecue and fire pit.

“When the development is complete, residents will enjoy beautiful views of downtown Vancouver and the North Shore mountains, some of it unobstructed,” said Malek of Millennium Development. “We purchased the land a few years back and we’ll begin excavation early next year with a view to completing the project in the first part of 2020.”

© 2016 Postmedia Network Inc

Connaught 3230 Connaught Crescent at Edgemont Village North Vancouver 23 townhomes and 59 condos by Grosvenor Developments

Thursday, November 24th, 2016

Connaught to take its place in North Vancouver?s charming Edgemont Village

Mary Frances Hill
The Province

Connaught

Project: Connaught

Where: 3230 Connaught Cr., Edgemont Village, North Van

What: 23 townhouses and 59 apartments

Residence sizes and prices: Homes still available range between 1,097 and 1,528 square feet and are priced at $1.38 million to $2.26 million.

Developer and builder: Grosvenor

Sales centre address: 3044 Edgemont Blvd., North Van

Hours: noon-5 p.m. daily (except Friday); as of Dec 1, open weekends noon-5 p.m. or by appointment

At Connaught, Grosvenor’s new-home project in North Vancouver’s Edgemont Village, the developer has partnered with interior designer Scott Trepp to create homes that balance the area’s natural surroundings and strong sense of community with a sense of privacy for residents.

The minimalist interior design calls attention to the oversized windows and clear indoor-outdoor living, with the large patios acting as a natural extension of the living room.

In many homes, French doors and massive windows create a seamless transition to the outdoor living areas so homeowners can create a yearround outdoor living room.

The homes feature spacious rooms, extra-large sinks, full-sized integrated appliances and custom-designed laundry areas.

While the exterior design and neighbourhood is laid out to encourage a sense of community and access to the natural world, privacy is preserved through roller shades, landscape planters and architectural privacy screens.

Visitors to the Connaught website will find the building’s architectural design places homes back from public view. Retailers will take up space on the ground level while residential floors are set back to offer outdoor living areas away from public view.

At the same time, Trepp Design Inc.’s palette in the display space’s interior decor touches on a universal appeal.

Kitchen finishes are high quality, with imported Italian wood cabinetry featuring soft-close doors and drawers. In dimmer light and in evenings, under-cabinet lighting casts a glow on polished quartz countertops and marble slab backsplashes.

The Italian influence carries into the bathrooms with imported wood vanities and oversized marble tile on the flooring, in the shower and tub surrounds.

As in the kitchen, countertops are polished quartz, enhancing the look of the master bedroom’s double vanity sinks.

The design team adds unique pieces that reflect the beauty of North Vancouver’s natural outdoors, such as an assortment of hanging pendants in the dining space that mimic birds in flight. In one bedroom, creams, whites and light taupe create a calming effect.

© 2016 Postmedia Network Inc.

What happens when there is a fire before the property completes

Thursday, November 24th, 2016

WHEN DISASTER STRIKES

Jennifer Clee
other

What happens when a property is damaged by fire before completion? Must the buyer complete or can the buyer walk? What if the buyer wants to complete with a price adjustment? A buyer’s options will depend upon a myriad of factors including the law, facts, contract terms and the parties’ conduct.

In Gill v. Zhang,1 three days before completion, the buyers learned that the property they had contracted to buy had been damaged by fire and could not be repaired before completion. Despite the damage, the buyers still wanted to complete, but with a price adjustment.

The parties’ version of the events following discovery of the fire conflicted. The buyers maintained they remained willing to continue with the contract, subject to receiving information from the sellers about the fire and their insurance and negotiating a price adjustment. The sellers did not produce the requested information and refused to discuss any accommodations that would allow the contract to complete, maintaining that the buyers’ lawyer had told the sellers the sale would complete with no price change. The sellers advised the buyers to complete or alternatively, consider the contract terminated. The sale did not complete and the buyers sued the sellers for specific performance with abatement of the price.

The Court considered the following issues:

 

1)

Whether the sellers breached their obligation to deliver the property in the same condition as when viewed by the buyer (clause 8 of the Contract of Purchase and Sale);

 

2)

Whether the buyers breached their obligation to complete on the completion date (clause 12, which relates to time being of the essence); and

 

3)

Whether specific performance with an abatement of price was an appropriate remedy.

The Court found that the sellers breached the contract by their inability to deliver the property in accordance with clause 8 and by their failure to act reasonably to address the consequences of the fire.

With respect to the second issue, the Court cited the buyers’ options given the sellers’ breach: either to affirm the contract (in which case the contract remained in force with all its original terms) or to accept the sellers’ repudiation (in which case both parties were relieved of their contractual obligations). The Court acknowledged, as a general principle, the buyers’ right to a reasonable opportunity to assess their position and the damage before electing to affirm or to accept the sellers’ breach.

It was evident, from the correspondence between the buyers’ lawyer and sellers’ notary, that the buyers had not accepted the sellers’ repudiation, but rather wished to continue with and to affirm the contract subject to receiving more information and to negotiating a price adjustment.

The issue then was whether the buyers had affirmed the contract, rendering the buyers in breach of clause 12 when they did not complete. This issue turned on credibility, given the conflict in the parties’ evidence. The Court did not accept the sellers’ evidence, finding the buyers had not affirmed the contract, but rather had indicated their intention to affirm with a price adjustment. Consequently, the Court found the buyers had not breached their obligations under the contract and the sellers could not require payment of the balance of the purchase price in circumstances where they were unable to convey what they were required to under the contract.  

The Court granted the buyers’ application for an order for specific performance with an abatement of the purchase price after the Court accepted the property was sufficiently unique to the buyers.

As Gill illustrates, when a property has suffered damage before completion, a party’s conduct can significantly impact their legal rights. Accordingly, if a licensee learns, prior to completion, that a property has been damaged by fire, flood or by some other event, the licensee should immediately advise their client to seek legal advice.

Copyright © British Columbia Real Estate Association

What happens when there is a fire before the property completes

Thursday, November 24th, 2016

WHEN DISASTER STRIKES

Jennifer Clee
other

What happens when a property is damaged by fire before completion? Must the buyer complete or can the buyer walk? What if the buyer wants to complete with a price adjustment? A buyer’s options will depend upon a myriad of factors including the law, facts, contract terms and the parties’ conduct.

In Gill v. Zhang,1 three days before completion, the buyers learned that the property they had contracted to buy had been damaged by fire and could not be repaired before completion. Despite the damage, the buyers still wanted to complete, but with a price adjustment.

The parties’ version of the events following discovery of the fire conflicted. The buyers maintained they remained willing to continue with the contract, subject to receiving information from the sellers about the fire and their insurance and negotiating a price adjustment. The sellers did not produce the requested information and refused to discuss any accommodations that would allow the contract to complete, maintaining that the buyers’ lawyer had told the sellers the sale would complete with no price change. The sellers advised the buyers to complete or alternatively, consider the contract terminated. The sale did not complete and the buyers sued the sellers for specific performance with abatement of the price.

The Court considered the following issues:

 

1)

Whether the sellers breached their obligation to deliver the property in the same condition as when viewed by the buyer (clause 8 of the Contract of Purchase and Sale);

 

2)

Whether the buyers breached their obligation to complete on the completion date (clause 12, which relates to time being of the essence); and

 

3)

Whether specific performance with an abatement of price was an appropriate remedy.

The Court found that the sellers breached the contract by their inability to deliver the property in accordance with clause 8 and by their failure to act reasonably to address the consequences of the fire.

With respect to the second issue, the Court cited the buyers’ options given the sellers’ breach: either to affirm the contract (in which case the contract remained in force with all its original terms) or to accept the sellers’ repudiation (in which case both parties were relieved of their contractual obligations). The Court acknowledged, as a general principle, the buyers’ right to a reasonable opportunity to assess their position and the damage before electing to affirm or to accept the sellers’ breach.

It was evident, from the correspondence between the buyers’ lawyer and sellers’ notary, that the buyers had not accepted the sellers’ repudiation, but rather wished to continue with and to affirm the contract subject to receiving more information and to negotiating a price adjustment.

The issue then was whether the buyers had affirmed the contract, rendering the buyers in breach of clause 12 when they did not complete. This issue turned on credibility, given the conflict in the parties’ evidence. The Court did not accept the sellers’ evidence, finding the buyers had not affirmed the contract, but rather had indicated their intention to affirm with a price adjustment. Consequently, the Court found the buyers had not breached their obligations under the contract and the sellers could not require payment of the balance of the purchase price in circumstances where they were unable to convey what they were required to under the contract.  

The Court granted the buyers’ application for an order for specific performance with an abatement of the purchase price after the Court accepted the property was sufficiently unique to the buyers.

As Gill illustrates, when a property has suffered damage before completion, a party’s conduct can significantly impact their legal rights. Accordingly, if a licensee learns, prior to completion, that a property has been damaged by fire, flood or by some other event, the licensee should immediately advise their client to seek legal advice.

Copyright © British Columbia Real Estate Association

Fifth Dimension – A comprehensive analysis of the multifamily real estate market in Metro Vancouver

Wednesday, November 23rd, 2016

Q3 Report

Fifth Avenue
other

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On B.C.’s farmland, mega-mansions and speculators reap the rewards of lucrative tax breaks

Wednesday, November 23rd, 2016

Investors and speculators are taking prime agricultural land out of production ? and sometimes erecting palatial mega-mansions on the landscape ? as the B.C. government?s outdated tax system allows them to exploit incentives intended only for those who fa

Kathy Tomlinson
The Globe and Mail

Construction equipment sits surrounded by dug-up blueberry bushes next to Mr. Fisher?s property. Mr. Fisher says the builders took out 1.5 acres from the 9.9-acre original farm to accommodate the building.

Mr. Fisher says it?s ?disgusting? how investors who he says aren?t interested in farming have used the land

One of investor Guo Tai Shi?s two mansions in Richmond. Wendy Liang, who runs Mr. Shi?s travel agency, says she plans to market the luxury accommodations next summer to visitors from China

Vancouver?s recent market frenzy has boosted value of Mr. Shi?s 13 properties, which have no mortgages

The smaller of Mr. Shi?s mansions is still under construction. He has invested millions to attract luxury agricultural tourism for visitors from China

A sprawling home in Richmond. Several realtors have ads highlighting the tax savings of building on farmland

Bob Fisher shakes his head as he looks over at the palatial new building next door to his beekeeping operation. It was supposed to be a single-family farmhouse – approved as such by city hall – built on some of Canada’s best farmland, in this suburb south of Vancouver.

Instead, it’s a 23,000-square-foot mega-mansion – with Roman columns, a grand marble entrance and luxurious guest suites. It sits empty, on what used to be a blueberry farm, partially hidden by a hedge, waiting to receive guests.

“They took out an acre and a half from the original [9.9-acre] farm in order to accommodate that building,” Mr. Fisher says.

“The government says we have to preserve farmland – and we are not preserving

anything,” he adds. “People are skirting around it, getting through the loopholes. I don’t know how they are doing it – but they are.”

Dozens of huge new mansions – some sitting empty – are changing the landscape of prime farmland in suburban Vancouver. Some are among the 122 agricultural properties in the area that changed hands for more than $2-million – apiece – between August, 2015, and last July.

These farms sold for a total of $449-million, while the province pegs their taxable value at just over one-tenth of that: $52-million. That is because, under provincial law, the value of farmland is judged by how good the soil is, not what an investor will pay for it.

As part of its ongoing investigation into the real-estate market in B.C’s Lower Mainland, The Globe and Mail has conducted a detailed analysis of those properties – their sales, tax, mortgage and ownership records. The results show that speculators and investors, not farmers, were behind at least 73 – almost 60 per cent – of the purchases.

The investigation also shows that those buyers enjoy huge tax breaks that are intended to support farming but, in effect, encourage speculation instead.

British Columbia law stipulates that agricultural properties with more than two acres can keep their farm status – and all their tax breaks – as long as they sell just $2,500 worth of farm products a year. That can include Christmas trees or hay to the neighbours. A recent report shows that a quarter of farms in suburban Vancouver meet only those minimum requirements.

The day The Globe visited Mr. Fisher, no one was around next door, except a heavy-equipment operator ripping out blueberry bushes. The property is owned by Wenli Shan and Liqiu Leng, an investor couple from China, who paid $3.4-million for it six years ago. No one responded when The Globe attempted to reach them.

Mr. Fisher says he has been inside the opulent building and talked to the contractors. He describes it as essentially a private luxury hotel where, he was told, the businessman owner will send special guests.

“He can say to his clients all around the world, ‘You want to come to Vancouver? Here is a place to stay.’”

Astonishing tax advantages

Prices for suburban farm properties have soared in tandem with Vancouver’s residential real-estate market, but without the public outcry. The Globe analysis shows that foreign and local buyers paid an average of $3.7-million for each of the 122 parcels. They are property managers, realtors, developers and wealthy business people, including a tech entrepreneur and the owner of a car dealership.

Several are holding the land and leasing it out – for piecemeal farming – while, in some cases, applying to have it rezoned or taken out of B.C.’s Agricultural Land Reserve (ALR), where it is protected from development. Others are building luxury mansions, then either not farming or keeping it to a minimum.

Metro Vancouver now estimates fully half of its agricultural land – ostensibly protected as such – is not being farmed at all. Half of that has rich, high-yield soil cherished by those who work the land. Even though B.C.’s Lower Mainland is heavily populated, the mild climate, quality soil and abundant precipitation make it one of the best places to farm in Canada.

The 122 properties have historically been used for fruit, vegetable, grain and livestock farming. Most of the land is in the ALR, where land use is severely restricted and taxes kept deliberately low.

As a result, the tax advantages the new investors enjoy are astonishing. The Globe discovered significant discrepancies between market prices for properties and the assessments set by a provincial agency that determines how much tax owners pay.

Taxing just these 122 properties at full residential rates, based on their sales prices, would put roughly another $2-million in municipal coffers each year. Effectively, wealthy investors and speculators are receiving millions in tax breaks not meant for them.

Builders consulted by The Globe estimate that the facility next to Mr. Fisher’s bee farm likely cost as much as $8-million to construct – which, added to the $3.4-million purchase price, would make the property worth an estimated $12-million. But the land’s assessed value – excluding the mansion – is just $44,000. This year, the new building increased the tax bill to $11,000, but a property worth the same amount in an urban neighbourhood would pay five times that.

Back in July, a B.C. numbered company linked to a Hong Kong firm registered in the Cayman Islands snapped up a piece of vacant farmland in suburban Maple Ridge for $6-million – 33 times what the government pegs its value at. Five years ago, the same land sold for just $15,200.

The company has Tony Cai, son of a politically connected billionaire from China, as its director, and this year will pay about $5,300 in property tax, which includes a standard 50-per-cent break on school levies. By contrast, the tax bill for a residential property in the same municipality with the same market value would be roughly $77,000.

The Globe found dozens of similar examples. In another startling case, a local company, Rosemary Developments, paid $16.7-million for 10 acres of farmland east of Richmond in Surrey. Its tax bill this year: $400. If the tax were on its full market value, the levy would be 196 times that. The property has been bought and sold several times in recent years. Previous investors include a foreign student.

In addition, agricultural land around Vancouver has just become even more attractive to overseas investors. That’s because the province’s new 15-per-cent real-estate tax on foreign buyers applies only to the selling price of the farmhouse; the land is tax-free. B.C. is also the only Western province that, like Ontario, doesn’t restrict the amount of farmland foreign investors can buy. By contrast, Saskatchewan limits such purchases to 10 acres.

Guo Tai Shi is the type of investor who stands to benefit. He has built two mega-mansions on seven acres of farmland he owns in Richmond. One is 22,000 square feet and has five luxury suites. The other is half that size and still under construction. It will feature eight bathrooms, and at the rear, the rich soil is being removed to make room for a swimming pool.

Mr. Shi spends much of his time in China, but also owns companies in B.C., including Wonderful Hotel and Resort Management and Wonderful International Travel. Between 2009 and 2014, he spent $17.5-million on real estate in the province, including two downtown penthouses, coastal land on West Vancouver’s pricey Abode Island and Fox Island on the Sunshine Coast, as well as the two farmland parcels. The value of Mr. Shi’s 13 properties, which have no mortgages, shot up by millions more during Vancouver’s recent market frenzy.

Wendy Liang, who runs his travel agency, says that Mr. Shi’s 22,000-square-foot Richmond mansion has five large suites, with “massage Jacuzzis”; three of the suites, she says, are currently rented out. Next summer, Ms. Liang plans to market the luxury accommodations to visitors from China, who will be invited to pick blueberries from the bushes that remain.

“It will be a boutique hotel. It will provide accommodations in luxury for the guests – agriculture tourism,” she says. “People from China will like the authentic community experience. They want more about Canadian culture. It could be a special place for them to stay.”

Complaints but no fines

This is happening despite the fact that land-use bylaws don’t allow hotels on agricultural land. Mr. Shi’s facility was recently inspected by bylaw officers, who suspected the suites were being rented out, which is illegal. When they arrived – after giving their standard, 24-hour notice – they found no tenants, so the owner faced no penalty.

Richmond councillor Carol Day says the city has received complaints about illegal suites at several addresses, but has yet to issue any fines because owners have promised to comply with the bylaw. Ms. Day says the new single-family farmhouses – large as they are – were approved solely as residences for owners and their families.

“There is no licence for having a hotel on farmland. It’s not allowed. Period,” she insists. “You have to be on land that is zoned for it. So you are never going to get a licence for a hotel on farmland. Not going to happen.”

Mr. Shi’s last tax bill for the property where he’s building the eight-bathroom mansion was just $4,867. That land has no crops whatsoever. Under provincial law, owners of unfarmed land located in municipalities are supposed to pay taxes based on market values. Even these tax bills remain low, however, because the province considers land in protected agricultural areas of low value.

“The system is broken,” Ms. Day says. “It is not reflective of the market and, because of that, it is biased and unfair. You get [unpicked] blueberry bushes that are 12 feet tall. Cranberry fields that are not being maintained. This is good soil; it should be farmed.”

Even on farms considered active, homes are supposed to be assessed on the basis of market value if they’re in a municipality. However, the 23,000-square-foot mansion next door to Mr. Fisher is officially valued at just $2.9-million, less than half of what it cost to build. Mr. Shi’s blueberry farm “hotel” is also assessed at under $3-million – far below its value.

The agency that does property assessments has indicated to The Globe that those taxes will likely be higher next year, now that construction is finished.

“The regulatory process seems very lazy,” says Tsur Somerville, a real-estate analyst at UBC’s Sauder School of Business who has studied the issue. “Everybody gets mad when rich people aren’t paying their fair share. If we are screaming about money for education, this is money for education, left on the table.”

Emily Liu and her husband, a home builder, invested $3.38-million in a five-acre blueberry farm last year. The couple also has a multimillion-dollar Vancouver property whose taxes are $8,071. Ms. Liu says they plan to build on the farmland – and the $1,073 tax bill was a key attraction.

“It’s not so expensive, compared to Vancouver,” she says, adding: “We love blueberries.”

Several investor-owned properties like hers are being farmed, but only marginally. According to a report produced with little fanfare by Metro Vancouver in September, 24 per cent of all active area farms meet only the bare minimum income requirements.

“Agricultural land is increasingly threatened from non-farm land uses,” reads the report, which urges the province to overhaul the entire tax system. “Today in Metro Vancouver [which includes 21 municipalities], there are more non-farm property owners in the ALR than there are farmers.”

The report suggests that only farms earning significant income should merit full tax breaks. It also proposes that owners who don’t farm the land at all should be taxed the same as anyone in the city. “Tax reform will send a clear signal that the tax benefits afforded to landowners in the ALR are intended only for actively farmed land.”

Avoiding transfer taxes and foreign-buyer levies

Realtors play a significant role in promoting the advantages that exist, particularly to foreign buyers. Several have ads highlighting tax savings on farmland.

One on Edojia.com, a Chinese-language website, translates as, “Sellers have established farm status, growing organic garlic, and planted a grove of nut trees, creating a lower property-tax rate.” According to another, “Property grows hay and has farm status with minimal taxes.”

A pitch on Vanfun.com urges prospective buyers: “Build your dream mansion here. Great location … Annual taxes just $651.56.”

Richmond city councillor Harold Steves says that one local agent made a “tremendous” fuss when the city recently tried to limit rental suites on farmland.

“I was phoned by the realtor selling these properties who called me a racist,” he says. “I have been told that our staff were called racists as well.”

Layla Yang, a high-profile Vancouver-area realtor with Re/Max, recently advertised a large farm property for sale, tax-free. Through her ad, The Globe discovered yet another way investors in farmland can benefit: by avoiding property-transfer taxes.

A Globe representative who speaks Mandarin called Ms. Yang’s assistant, Molly Tao, who explained that the $5.68-million farm parcel in question belongs to a numbered company, set up to hold the property in what is called a bare trust.

Ms. Tao said a buyer would simply purchase the shares in the numbered company. Because the company name on the property title wouldn’t change, no sale would be registered. That way, the buyer would avoid $112,000 in provincial transfer tax, as well as the 15-per-cent foreign-buyer levy, on the value of the old farmhouse.

“The land is under the name of the company,” Ms. Tao said. “Which means the [foreign buyer] tax will also be gone because [the residential property] is included in the business.”

However, the B.C. finance ministry says the foreign-buyer levy would still apply, and it is trying to catch transactions such as this by flagging properties registered in bare trusts and then auditing any subsequent sales, to look for foreign buyers. It also says it may disallow tax-free property transfers through numbered companies altogether, a promise Finance Minister Mike de Jong first made more than a year ago.

Ten of the 122 farm parcels sold last year for more than $2-million were bought by numbered companies set up at the time of purchase, indicating they may also be bare trusts.

Buyers, beware

The Globe also found scores of ads aimed at speculators – marketing farm properties as hot commodities ripe for development, in a region that desperately needs more housing.

“Potential for future development,” reads one ad, for a $7.5-million farm.

“Good holding property and great potential for future development,” says another.

“Great holding property with income … as development heads your way,” promises another.

John Gaskin recently sold his family farm in Richmond to a foreign investor he believes is hoping to cash in on future development. He says he had no intention of leaving his home of 46 years until a realtor knocked on the door, saying a buyer was willing to pay $3.5-million: “I wasn’t in a hurry to sell, but the price was good.”

But Mr. Gaskin also thinks realtors should warn foreign clients how hard it is to have Canadian farmland rezoned. If not, they are in for a nasty surprise.

His own buyers, for example, “don’t know what they got themselves into. I wanted to build another house and [the authorities] wouldn’t let me,” he says. “They are going to be in for big problems.”

This summer, Richmond said no to a farmland owner who wanted to build what the city called a “hotel or multifamily building” that would have been 41,000 square feet, with a swimming pool, Ping-Pong gazebo and badminton court. Councillor Steves says it was the first time the city had ever refused such a permit.

Richmond then fired off a letter to the provincial minister of agriculture, asking for a law to restrict the size of farmhouses, similar to local bylaws already in place in Surrey and neighbouring Delta.

Brent Mansfield of the B.C. Food Systems Network says that his organization, which advocates for preserving farmland, is pushing for restrictions as well.

“The further this goes, the harder it’s going to be to turn it around. If you pave a farm and clear topsoil – it’s gone,” he says. “We need drastic action by policymakers to insure our food security into the future.”

Richard Bullock blames the B.C. government for the whole situation, which he says is out of control and benefits no one – not even the investors, who can’t do as they please with their land. Last year, the province fired Mr. Bullock from his post as chair of the Agriculture Land Commission, after he rejected almost all applications for farmland to be removed from the ALR for development.

“I got pushback from the government constantly. That is why I am gone,” he says. “It’s great politics for people in government to have these wealthy folks come in and buy land.”

In the year since he left, three farm-declassification applications have been approved – as many as have been rejected. Mr. Bullock says he is particularly upset with realtors, whom he believes are misleading their clients about what can be done with the land.

“They are bloody lying,” he argues. “There are so many of them that are false-advertising.”

Mr. Bullock also supports tax reform, but says he’d rather see the province throw cold water on speculative investment altogether, by simply banning development on farmable land, unless it’s required for public use.

“It needs serious updating,” he says. “Somebody in government has got to stand up and say, ‘When you buy farmland, that is what you are buying.’”

Copyright 2016 The Globe and Mail Inc.