Montreal tenant forced to pay his landlord’s taxes offers advice to other renters

David Siscoe has some advice for fellow renters across the country: get proof that your landlord is paying their taxes, or at least make sure you’ve got a property manager who’s responsible.

Mr. Siscoe is the Montreal tenant who was audited and assessed by Canada Revenue Agency in 2018 and ordered to pay six years’ worth of his non-resident landlord’s withholding taxes, as reported recently by the Globe and Mail. Mr. Siscoe says he did not know his landlady was a non-resident.

He also didn’t know that tenants renting from a non-resident are required to withhold and remit 25 per cent of their rent to CRA each month, unless they have a property manager doing it for them, or if the non-resident has made alternate arrangements to pay their taxes.

“How is there no onus on the CRA to make sure that tenants are aware of this?” he asks. “I didn’t have a clue.”

The CRA had been unable to collect from his overseas landlord. He was then assessed for the unpaid withholding taxes, as well as compounded interest and penalties that added up to about $80,000, he says. In March, 2023, he took the Minister of National Revenue to Tax Court and lost.

Foreign landlord fails to pay taxes, CRA goes after tenant

The only break he was given was a reduction in the number of years he owed for, from six to three. He says he now owes around $43,000, although he believes more interest and penalties have since accrued. And he’s already paid nearly double that amount in accounting and legal fees.

Mr. Siscoe and his wife were paying nearly $3,000 a month in rent at 501-4175 Rue Sainte Catherine ouest, in Westmount, Que., an enclave of Montreal. Mr. Siscoe is a 1988 Canadian Olympic athlete and two-time taekwondo world champion who owns a gym.

The 61-year-old said he still hasn’t settled his debt with CRA, and his lawyer told him that it’s unlikely they’ll be willing to negotiate.

“They were acting like a dog on a bone,” he says of his initial communications with the tax agency. “They proceeded to suggest that we were knowingly paying a non-Canadian resident money, and I was a little flabbergasted.”

“I said, ‘You are trying to suggest I knowingly paid her 100 per cent of the rent because I wanted to be burdened with her tax implications? Is that what you are trying to suggest?’ I felt like this is a joke somehow.” Mr. Siscoe explained that he had rented unit 501 for more than 20 years, going back to 1996. He says that in 2010, the landlord told him to start making the rent payments to his sister. The new lease agreement had a Montreal address on it, and he hadn’t paid attention to the fact that the new landlady had signed the document in Italy, he says. Mr. Siscoe said she visited the apartment a few times over the years, and it was only after he got audited that he discovered she was living in Italy. After he realized he was on the hook for her tax bill, he and his wife and their kids moved out of the unit a few months later.

Mr. Siscoe did not want to share his landlady’s contact information for this story, on advice of counsel.

After the Siscoe family moved out, they learned that the former landlady had put the condo on the market, and Mr. Siscoe notified the CRA that they had an opportunity to collect the taxes she owed. He never found out if they tried.

In court documents, Mr. Siscoe argued that his landlord had given a Canadian address on the deed of sale when she purchased the unit; she had a Canadian social insurance number; and his rent cheques were going to a TD Canada account in Montreal.

Also in court documents, the CRA provided evidence that showed the landlord hadn’t filed income tax returns; she didn’t have any links to property in Canada other than the rental unit; her phone number on the lease was an Italian phone number; she had used an Italian e-mail address to correspond with Mr. Siscoe; and she had told the CRA auditor she lived in Italy.

The withholding tax has been around for decades. The problem for tenants arises when a non-resident landlord doesn’t pay it. And non-resident owned properties represent a substantial share of the secondary rental market in Canada.

Considering the risk to tenants – amid a housing crisis – Mr. Siscoe wonders why CRA didn’t put a lien against the rental property, or at least act to collect on the debt when the property sold.

Mr. Siscoe’s lawyer, Mr. Luu, says that all the CRA must do is establish liability to collect on the debt, and he said there doesn’t appear to be a guideline on how they do that.

“Whether the CRA could have collected the rent in some other way does not impact his liability under the law. The CRA and the Tax Court have to apply the law as it is written.

“That’s why if we want any meaningful change, we need to change the law and it’s for the Department of Finance to intervene.”

In an e-mail response, Caroline Theriault, deputy spokesperson and media relations manager for the Department of Finance, said that the requirement for renters helps to ensure that CRA obtains information on rental income non-residents might be earning in Canada. It also “helps facilitate collection of the resulting tax,” she said.

“This does not cost renters anything,” said Ms. Thériault, adding that it is standard practice.

A CRA spokesperson said in an e-mail that they encourage non-resident landlords to hire property managers. Otherwise, tenants are required to withhold the amount and fill out a Form NR4.

“If the non-resident fails to remit, the tenant is responsible for the full amount,” said the statement.

CRA’s practice is to “make every effort” to assess the non-resident owner rather than the individual tenant.

The agency pointed to a legal website that offered tips on ways renters can protect themselves, including a land title search on the landlord, asking the landlord for a certificate of residency, writing an indemnity clause into the lease agreement, and being on the lookout for any requests to redirect rent payment to someone else.

Adam Chambers, Conservative shadow Minister for National Revenue, which oversees the CRA, took issue with the policy and called the CRA’s reaction “cruel measures in the tax code that unfairly punish renters who have done no wrong.”

Real estate lawyer Ron Usher, who is general counsel for the Society of Notaries Public of B.C., where a non-resident owns one in 10 new condos, says that for every sale by a nontax resident, a clearance certificate from CRA must be obtained.

“Until CRA provides it, the notary will retain the amount in trust.”

To prevent Mr. Siscoe’s situation, he suggests a system whereby CRA is notified of any non-tax-resident real estate purchases. At that point, CRA would send the purchaser notice of tax obligations and issue an individual tax number if they don’t qualify for a social insurance number.

Mr. Siscoe said he is doing his best not to dwell on the situation. But he wants Canadian renters to beware.

“Don’t get me wrong. If me being angry could change the outcome, yes, I would be angry. But I’m not going to let them take more from me than they’ve taken,” he says.

“As an athlete, I spent my career travelling around the world, holding my country’s flag … but your own country can say, ‘Let’s screw him over.’”

He and his wife are renting another place, but it’s different this time.

“Right away I said [to the landlord], ‘I need to know you are paying your Canadian taxes, and I need it in writing.’”

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