Kelowna realtor, lawyer lose court case after not telling U.K. couple about foreign buyer's tax

A Kelowna realtor and the lawyer that did the paperwork for a property sale are on the hook for $172,000 after they failed to tell their British clients that they'd have to pay the foreign buyers' tax.

According to a Feb. 7 B.C. Supreme Court decision, British citizens Robert Edward Shave and Kelly Jane Ashford migrated to Canada in January 2018 and signed up with Century 21 Assurance Realty realtor Dean Desrosiers as they were looking to buy a house.

While the couple had work visas, their permanent residency status – which would exempt them from paying the 20 per cent foreign buyer tax – had not been granted yet.

In the summer of 2018, the couple bought an $862,000 Kelowna home using Desrosiers as their realtor and hired Roy Sommerey as a solicitor to facilitate the paperwork.

However, 18 months later they received a bill for $172,400 for unpaid Foreign Buyers’ Tax.

The couple appealed the tax bill on the basis they were both now permanent residents but were unsuccessful.

They then took the realtor and the lawyer to court arguing they were both professionally negligent.

The couple said they would never have bought a house if they'd known about the foreign buyers' tax. The couple said they would have waited until becoming permanent residents.

"Reason tells me that people will choose to avoid paying tax if they can. Given the option between, 'pay tax' and 'don’t pay tax,' nobody in our society opts to pay tax," Justice Alan Ross said in the decision.

According to the decision, the couple declared they weren't residents on the paperwork for the sale of a house that fell through.

However, the paperwork done for the property they eventually purchased was changed and they initialled the box that declared they were permanent residents.

The couple admits to not reading the paperwork closely.

The realtor argued he thought the couple had become permanent residents because they'd told him they'd finalized their work permits.

The realtor also argued it went beyond a realtor's duty of care to provide advice about residency and taxation issues.

The Justice disagreed.

"Desrosiers had a clear and obvious duty to advise the (couple) about the existence of the Foreign Buyers’ Tax," Justice Ross said in the decision. "I find it contradictory for Mr. Desrosiers to argue that his contract excludes advice on residency, but in the same submission, argue that he was not negligent despite having changed the (couples') residency declaration based on his 'understanding' that their citizenship issues had been resolved."

In his defence, the solicitor argued the contract stated that the couple were either citizens or permanent residents.

However, the Justice points to two "red flags" the solicitor should have seen.

The Justice said an email saying 'Welcome to Canada' that Sommerey sent to the couple meant he knew they recent arrivals.

The Justice also pointed out the first real estate contract Sommerey had processed stated the couple weren't permanent residents, but the second contract said they were.

"That change, in combination with Mr. Sommerey’s “Welcome to Canada” email, created an obligation on Mr. Sommerey’s part to investigate the residency issue," the Justice said. "I find that Mr. Sommerey’s actual knowledge was a red flag that should have caused him to investigate the residency status of the (couple)."

After deciding that both the realtor and the solicitor were negligent, the Justice turned to the British couple.

"(They) must take some responsibility for the loss they suffered. The documents they were signing clearly had legal and contractual effect. They cannot be absolved of all responsibility to make truthful declarations regarding residency and tax-related matters," the decision said.

However, the Justice said their blame is "minor" compared to the realtor and the solicitor.

With that, he found the realtor 75 per cent to blame and the solicitor 20 per cent to blame.

While the Justice attributed five per cent of the blame on the couple, he left the $172,400 total cost of the foreign buyer tax to the defendants to pay, plus the $10,000 in interest it accrued having not been paid.

READ MORE: B.C. realtor fined for forging dead client's signature

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