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Proposed real estate project at Main and Cameron

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Hudson utilizes the SCAOPI process for the first time in order to deal with a new residential-commercial building proposed to be built on Main St.

Hudson’s town council got an earful from residents on Monday at a public consultation meeting about a request to allow project-specific zoning variances for a new residential-commercial building proposed to be built at the corner of Main St. and Cameron St.

The project at 426 Main St. is the local guinea pig for a new municipal process, called SCAOPI, that councillors hope will give citizens more opportunities to offer constructive feedback on real estate projects that don’t conform to existing zoning requirements. Public consultation is an essential part of the process. (While SCAOPI has been used in other towns in Quebec, this was the first project in Hudson to go through the process.)

SCAOPI is an acronym for the even-less-catchy “specific construction, alteration or occupancy proposal for an immovable.” In this case, the building as proposed is slightly taller and has slightly larger balconies than would normally be permitted. It also includes less green space and has two fewer parking spots than the zoning bylaws require.

Councillor Jim Duff said the SCAOPI process, which adds an extra $3,000 to the typical permit application fees, provides more opportunities for citizens to provide meaningful feedback on a proposed project, beyond simply accepting or rejecting it.

Opponents to a project can still rally fellow citizens to sign petitions to trigger a referendum, but SCAOPI allows developers the opportunity to come back with adjustments to a proposed project to try and improve its appeal to the community.

 “In my view the best thing you can do in a municipality is to find ways to say yes. You have to find a compromise most people can live with,” Duff said. “The developers are super keen to work with us on this, and they are open to adjusting their plans.”

Duff noted that the town can’t refuse development on the site if it conforms to existing bylaws, and it can’t block a project just because some people don’t personally like it. It also can’t change the rules mid-way through a project.

So what did Hudsonites think of the proposed project at Main and Cameron? Some said the 20-unit residential building (with one street-level commercial space) was too big. Others called the design ugly. Many complained that it would remove much-needed green space in the centre of town. A few spoke in favour, noting that it would add to the town’s tax base and provide more options for those who prefer apartment living.

While some citizens disliked the idea of bending zoning rules for a specific project, Mayor Jamie Nicholls pointed out that variances are not uncommon in other cities and towns. And as it turns out, it was actually the developer’s willingness to accommodate the town’s preference to maintain an unbroken chain of storefronts on Main St. that triggered the need for a zoning exception. A purely residential project would have required less parking and green space, and could have been easily adjusted to conform to the existing guidelines.

Councillor Helen Kurgansky said although she is personally not in favour of this particular project, the benefit of the SCAOPI process is that it opens the door to discussion with citizens.

“That’s democracy. You discuss and you exchange, and let’s see how it all moves forward. What’s wonderful about this is that the citizens will have a chance to voice their concerns or their interests,” she said.

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Home Sales Climbed Higher In July

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Canadian home sale rose in July in broad gains as markets start to recover from the stress test tightening last year, though economists say global concerns raise some uncertainties for the future.

The Canadian Real Estate Association reported last week that home sales rose 12.6 per cent in July from a year earlier, and were up 3.5 per cent seasonally adjusted from June.

“Sales are starting to rebound in places where they dropped when the mortgage stress test took effect at the beginning of 2018, but activity there remains well below levels recorded prior to its introduction,” said CREA president Jason Stephen in the report.

“Sales activity is strong in New Brunswick where I do business, but it’s a very different story in B.C., Alberta and Saskatchewan. All real estate is local. Nobody knows that better than a professional [realtor], who is your best source for information and guidance when negotiating the sale or purchase of a home,” said Stephen.

The increase came as sales were up in markets like Moncton, B.C.’s Lower Mainland, Calgary, Edmonton, Greater Toronto Area, Hamilton−Burlington, Ottawa and Montreal. Sales were down in Regina, Saskatoon, and Windsor−Essex.

The broad rise in sales put them at their best level since the stress tests kicked on at the start of last year, said BMO chief economist Douglas Porter in a note.

“After a challenging 18 months, the Canadian housing market is showing widespread signs of, not just stabilizing, but firming again.”

The federal government updated mortgage qualification rules at the start of last year to require more would−be borrowers to prove they could manage if interest rates rose.

The national sales−to−new listings ratio tightened to 59.8 per cent last month from 57.6 per cent recorded in June to the upper end of what’s considered a balanced market, he said.

The rise in sales, which came as the number of newly listed homes edged back by 0.4 per cent in July, put some pressure on prices, said Porter.

“With sales regaining some momentum broadly, and the market tightening in many regions, it’s little surprise that prices are starting to turn the corner again.”

The national average price of a home sold in July was just under $499,000, up 3.9 per cent from the same month last year and a seasonally adjusted 2.6 per cent from June.

Double−digit price gains in several Ontario communities including Ottawa and Kitchener−Waterloo helped drive up the overall average, while cities in Western Canada generally saw prices drop.

Porter said global uncertainties are already driving borrowing costs lower, which could further boost the Canadian market, but if economic declines prove serious then interest rates will be secondary.

“The downside is that if “global uncertainties” morph into something much more serious for the domestic economy, interest rates will be playing a second fiddle.”

TD senior economist James Marple said the housing market looked robust for the month, supported by strong population growth, solid job growth and lower mortgage rates.

“This can only be described as a solid month for the Canadian housing market…with most markets in balanced territory or better, the immediate downside risk to home prices have diminished considerably.”

He said there is some uncertainty as to where rates will go, since domestically the economy looks strong while there are considerable international challenges as global economic growth looks even softer than previously thought.

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Why you need to be on top of real estate Tax rules

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Advisors have been urged to brush up on their real estate tax knowledge, with the CRA throwing more auditors at the issue.

Mistakes in tax returns appear to have left millions of dollars out there and, with many transactions of this nature of high value, the agency is redoubling its efforts to recoup money.

Mariska Loeppky, director, tax and estate planning for IG Wealth Management, believes investors are often making innocent errors because of the relatively new adminstrative change to reporting your principal residence exemption disposition.

From the 2016 tax year, residents are required to report basic information, like date of acquisition, proceeds of disposition and description of the property, on income tax and benefit returns, when they sell their principal residence residence.

An example, explained Loeppky, could be when someone owns land and a few years later builds a house on it. She added: “You can’t claim a principal residence exemption for that property while it’s just land until you live in that home.

“So, when you go and report that disposition, you probably think, ‘that’s always been my house or I have always lived in that house’. But really, you owned that property for a few years before you could claim it as your principal residence.

“People don’t understand how that calculation works, and how that exemption works. Another example is that people are flipping properties and they’ve taken the position that they can claim their principal residence exemption.

“But the CRA says, ‘hey, you’ve actually sold quite a few homes in the last little while so you are in the business of flipping homes’. They would treat that as business income, not a capital gain.”

Some advisors, she added, have been caught out by clients gifting properties at less than the fair market value. You are, in fact, deemed to disposition the property at fair market value rather than gift it to avoid tax or probate fees upon death. Renting is another example and represents a change of use for the property, which should be reported to the CRA.

Loeppky said: “Advisors must make sure they know what the reporting obligations are. If you are in doubt, hire a professional accountant to help you with your tax return. Most of the tax preparers that I see packages from, they’re asking the questions: did you sell your home? Did you start renting it out?

“These could have tax implications. Just knowing that, while the principal residence exemption is there to protect you, you have to report it and there are significant penalties for not doing so. If you forget to disclose that you sold your home on your tax return, it’s a penalty of $100 a month, up to a maximum of $8,000.

“Even though you’ve got a tax free transaction, or what you think is a tax free transaction, not reporting it in theory could land you with an $8,000 penalty, which is pretty steep.”

There is also the issue of foreign property, with Canadians required to report their worldwide income, which includes gains on these sales. The CRA will likely find out where the proceeds are – and they need to be disclosed – whether they are sitting in a foreign bank account or a Canadian one.

She said: “There’s lots of ways for the CRA to find out that you sold something, so it’s a case of knowing that a transaction has to be reported. Renting out a foreign property also has to be reported on your Canadian return – and then knowing that you can claim a foreign tax credit to offset the double tax that you paid to the other country. These are things you need to navigate.”

Buying property from a non-resident raises the requirement of holding 25% of the proceeds unless there is documentation from the seller that this has been waived. If it’s not, it’s up to the non-resident to file a tax return to get some of that back.

Loeppky added: “Advisors should be aware of the rules when it comes to real estate transactions and knowing the principal residence exemption, how it works, and when you can claim it. It’s also about helping the client realize that you need to take advantage of that principal residence exemption to the best of their ability.

“Normally, they’d want to shelter that gain so helping clients make that determination is really important when they have a choice between two different properties that they could claim as a principal residence exemption.”

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Appeal court withdraws real estate decision

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Justice Richard Lococo’s decision in the Superior Court case, Hilson v. 1336365 Alberta Ltd., 2018 ONSC 1836, was appealed. But, a May 27 judgment on the appeal was released “in error,” the court now says.

After considering written submissions, Associate Chief Justice Alexandra Hoy and Justices Kathryn Feldman and Grant Huscroft wrote on Aug. 13 that a previously released May 27 decision” is not a judgment of the court” and “is of no force or effect.”

“One of the members of the panel that heard the appeal, Justice [Grant] Huscroft, was not provided with either the draft judgment for review or the final judgment for signature. The judgment was signed, in error, by another justice who was not a member of the panel that heard the appeal,” the judges wrote in Hilson v. 1336365 Alberta Ltd., 2019 ONCA 653, released Aug. 13.

Hoy, Feldman and Huscroft rejected a proposal that Huscroft review the May 27 judgment “and either assent to or dissent from a judgment that he had no role in making.”

“The panel of judges that rendered judgment was not the same panel that heard the appeal…. This cannot now be corrected,” they wrote. “The decision-making process has been compromised and this panel cannot render a judgment.”

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