An element of the 2015 Alberta budget which will affect home buyers is the scheduled increase in registration fees at the Land Titles Office for registration of Transfers of Land (“Transfers”) and mortgages. The increased fees will have significant impact on the cost of closing a real estate purchase.
For context, the fees for registration of Transfers and mortgages are based on a sliding scale formula, relative to the declared value of the purchased land (and buildings) and the amount of the mortgage (or line of credit) to be registered against the title of the land.
Currently, and prior to July 1, 2015, the Land Titles Office registration fees for both Transfers and mortgages are calculated as follows:
$50.00 plus $1.00 for each $5,000.00 of the declared value of the land and the amount of the mortgage.
For example, if a purchaser pays $500,000.00 for the land and buildings and provides a mortgage for a loan of $400,000.00, the Land Titles registration fees will be calculated as follows:
Transfer: $50.00 + $100.00 = $150.00
Mortgage: $50.00 + $80.00 = $80.00
For land transfers and mortgages registered at the Land Titles Office after July 1, 2015, the fees will be increased dramatically, as set out in the recent provincial budget. The calculations will still be based on a sliding scale, but as follows:
$75.00 plus $6.00 for each $5,000.00 of the declared value of the land and the amount of the mortgage.
Using the same purchase example as above, the registration fees after July 1, 2015, will be calculated as follows:
Transfer: $75.00 + $600.00 = $675.00
Mortgage: $75.00 + $480.00 = $555.00
It is important to note that these increased fees will only affect purchasers, as the current standard real estate purchase contract requires the purchaser of real property to pay the costs of registering the Transfer and mortgage. Sellers of real property will not be affected by this increase in registration fees.
The result of these increased fees may have a number of impacts on purchasers.
First, some lenders require a purchaser to show that they have sufficient financial resources to meet the closing costs of a purchase. This may be a factor for some purchasers, especially when CMHC, or other mortgage insurance providers, are factored into the equation. This may have an negative impact on mortgage lenders approving financing, and prospective purchasers are advised to ensure that they include a financing condition in their purchase offers.
Secondly, there will be a perception that law firms are dramatically increasing the costs of closing purchase transactions. This will be true, but the increased “cost” to the purchaser will reflect the increased Land Titles registration fees. Those costs are paid by real estate law offices, upon registration, and recovered from purchase clients when the file has been finalized.
Cameron Horne Law Office does not intend to increase our legal fees (the fees paid to our office to prepare the purchase documents) for the foreseeable future, but the funds our clients will be requested to bring in for closing will increase due to the additional Land Titles registration costs.
While of little consolation to purchasers of real property in Alberta, the increased registration costs still remain the lowest in western Canada and Ontario. The attached chart shows the registration costs for the same hypothetical transaction as discussed above ($500,000 purchase price, $400,000 mortgage) for all provinces from BC to Ontario. As a reminder, the “new” Alberta registration costs will be $1,230.00. Registration costs in other provinces range from $1,650.00 in Saskatchewan to $12,200.00 in the City of Toronto.
A solution could include negotiating a provision into the purchase contract whereby the seller will contribute to the registration fees by reducing the purchase price by an amount that will lower the registration costs to assist the purchaser.
COMPARITIVE LAND REGISTRATION FEES / TAX
Purchase of $500,000.00 house with $400,000.00 mortgage
|Transfer:||$75 plus $6.00 / $5,000.00 declared value||$ 675.00|
|Mortgage:||$75 plus $6.00 / $5,000.00 declared value||$ 555.00|
|Transfer:||1.0% on first $200,000.00||$2,000.00|
|2.0% on the balance||$6,000.00|
|Transfer:||$3.00 / $1,000.00 declared value||$1,500.00|
|Mortgage:||$150.00 flat rate for up to 4 titles||$ 150.00|
|Transfer:||0.0% on first $30,000.00||$ 0.00|
|0.5% from $30,000.00 to $90,000.00||$ 300.00|
|1.0% from $90,000.00 to $150,000.00||$ 600.00|
|1.5% from $150,000.00 to $200,000.00||$ 750.00|
|2.0% over $200,000.00||$6,000.00|
|PLUS $70.00 flat fee||$ 70.00|
|Ontario (outside Toronto)|
|Transfer:||0.5% on first $55,000.00||$ 275.00|
|1.0% from $55,000.00 to $250,000.00||$ 1950.00|
|1.5% from $250,000.00 to $400,000.00||$2,250.00|
|2.0% over $400,000.00||$2,000.00|
|Toronto (Ontario base charge PLUS):|
|Transfer:||0.5% on first $55,000.00||$ 275.00|
|1.0% from $55,000.00 to $400,000.00||$ 3,450.00|
|2.0% over $400,000.00||$ 2,000.00|