On February 21, BC Minister of Finance Kevin Falcon released the 2012-2013 provincial budget.

With a theme of fiscal discipline, this budget doesn’t offer a lot of new spending. In addition to some hikes in fees for MSP and ICBC, the government plans to raise more than $700 million in the next three years by selling government-owned properties that aren’t needed now or in the foreseeable future. Minister Falcon projects budget surpluses for 2013-2014 ($154 million) and 2014-2015 ($250 million)—government forecasts continue to be conservative, with growth forecasts coming in below the consensus of the independent economic forecast council, of which BCREA Chief Economist Cameron Muir is a member. Jobs, health and education were emphasized throughout the minister’s speech.

Here are the new pieces relevant to the real estate sector:

• Property Transfer Tax

o BC First-Time New Home Buyers’ bonus – Pending approval by the legislature, a temporary (Feb. 21, 2012-Mar. 31, 2013), refundable income tax credit of up to $10,000 will be available to first-time buyers of newly-built homes. 

o Fact sheet: www.bcbudget.gov.bc.ca/2012/homebuyers/2012_First_Time_Home_Buyers_Fact_Sheet.pdf. 

o Web page:  www.sbr.gov.bc.ca/individuals/Income_Taxes/Personal_Income_Tax/tax_credits/fthb_bonus.htm 
This is a win for BCREA and member boards, and this measure should be considered with the HST relief measures announced on Feb. 17. While it’s difficult to determine the stimulus effect this bonus will have, and it remains to be seen whether financial institutions will create financing products that take the tax credit into account, this is an indication that the minister has heard organized real estate’s concerns.

o New General Refund Provision Introduced – Bill 21 (introduced on Feb. 21) proposes amending the Property Transfer Tax Act to provide the administrator with authority to refund an amount paid under the Act in circumstances where there was no legal obligation for the tax to be paid (in effect upon Royal Assent).

o Re-registration of Certain Life Estates Exempted – Bill 21 proposes amending the Property Transfer Tax Act to provide an exemption for the re-registration of a life estate following the registration of a mortgage. The exemption only applies if the re-registration of the life estate involves the same owner, the same life estate holder, the same property and the same terms as the initial life estate (in effect upon Royal Assent).

• Home Owner Grant Act

o Low-Income Veteran’s Supplement Introduced – Bill 21 proposes amendments to enact this measure, as announced on Nov. 10, 2011, effective for the 2012 and future tax years. This supplement is for qualifying low-income veterans under the age of 65 who have served in the Canadian Forces as officers or non-commissioned members. Tax Information Sheet:www.sbr.gov.bc.ca/documents_library/brochures/Info_Sheet_2012-01.pdf. 

o Home Owner Grant Extended for Individuals Moving into a Residential Facility – Effective for the 2012 and future tax years, the Act is amended to allow qualifying homeowners who have moved into a residential facility to apply for the Home Owner Grant for one additional year. The grant can only be claimed on the home that they continue to own and that qualified in the previous year. Tax Bulletin (see p. 7) :www.sbr.gov.bc.ca/documents_library/bulletins/hog_001.pdf. 


• BC Seniors’ Home Renovation Tax Credit – Pending approval by the legislature, effective for the 2012 and future tax years, the credit will be a new refundable personal income tax credit to assist with the cost of permanent home renovations that provide individuals age 65 and over with increased independence, allowing them the flexibility to remain in their own homes longer. The maximum credit will be $1,000 annually calculated as 10 per cent of eligible expenditures. The credit will be available to individuals who incur eligible expenditures on or after April 1, 2012. The credit can be claimed by seniors, whether they own their home or rent, and by individuals who share a home with a senior relative. Web page:www.sbr.gov.bc.ca/individuals/Income_Taxes/Personal_Income_Tax/tax_credits/seniors_home_reno.htm. 

• Taxation (Rural Area) Act

o Exemption for Property Held in Trust for a First Nation Clarified – Effective for the 2012 and future tax years, Bill 21 proposes amendments to the Act to clarify that the exemption for property held in trust for a First Nation only applies with respect to property held by the Crown.

• Land Tax Deferment Act

o Fire Insurance Requirement Removed for Homeowners with Sufficient Equity – Homeowners must have a minimum amount of equity in their property to be eligible to defer their property taxes under the province’s property tax deferment program. Currently, homeowners must also have fire insurance on their home to be eligible for the program. Effective for the 2012 and future tax years, the Act is amended to remove the fire insurance requirement and to replace it with a more general requirement. In calculating whether the homeowner has a minimum amount of equity in the property, the calculation will now exclude uninsured improvements to the property.

o Eligibility of Leaseholders to Defer Tax Clarified – The property tax deferment program is intended to apply to property owners who have sufficient equity in their property to secure the deferred taxes. Some leaseholders on Crown or municipal land have qualified to defer taxes in the past. The Act is amended to clarify that beginning in 2012 no new leaseholders will be eligible to defer taxes. Any leaseholders who currently defer taxes will be grandparented and will not be affected by this change.

o About the Property Tax Deferment program: www.sbr.gov.bc.ca/individuals/Property_Taxes/Property_Tax_Deferment/about.htm. 

• The LiveSmart program was mentioned in the minister’s speech as a component of the Climate Action Plan that would continue to move forward, though details are lacking. The program supports homeowners making energy-efficient home renovations. Website:www.livesmartbc.ca.

Government budget documents are available online here: www.bcbudget.gov.bc.ca/2012.

Norma Miller
Policy Analyst
British Columbia Real Estate Association 
1420 – 701 Georgia Street West | PO Box 10123, Pacific Centre | Vancouver, BC  V7Y 1C6
604.742.2789 | nmiller@bcrea.bc.ca

Visit BCREA Online: www.bcrea.bc.ca | www.twitter.com/bcrea 

If you have a mortgage on your home, chances are good you also have mortgage insurance. The idea is that if you should become seriously ill or die before paying off the mortgage, the coverage will kick in and pay it off for you. It’s meant to offer peace of mind and to reassure you that your family will be able to stay in your home if anything should happen to you. 

The reality falls a little short of that. In this week’s Marketplace investigation, we meet two families who bought the coverage and thought they were protected, only to have their claims denied when they became sick or died. In each case, the insurer said the applicant person had lied on their initial application form. 

It turns out a routine test at the doctor could be reason to deny your claim, if you don't mention it. Had a cuff inflated on your bicep? That counts as being tested for high blood pressure. 

As Erica Johnson reports, the bank staffers selling mortgage insurance are unlicenced and rarely trained to explain the details and legalities of those insurance products. The result is people who pay premiums and think they are covered, only to realize later that they are not.

How to buy insurance that really will protect you

Be sure you qualify.

• There are many terms and exclusions associated with credit insurance policies. Learn what they mean and how they apply to you.
• Call the insurance company directly (NOT the bank that sold you the coverage) for clarification about pre-existing medical conditions.
• Call your doctor to clarify details of any pre-existing medical conditions you may be concerned about.

Know that you can get out.

• You usually have 10-30 days to review your policy after the initial purchase (this is known as a "cool-down" or "free look" period).
• If you have already purchased your credit insurance you can cancel anytime. Keep in mind, however, that you may lose premiums already paid.

Shop around.

• Consider buying from a licensed insurance broker who will explore any medical issues upfront.
• Consider buying or topping up an individual life insurance policy to cover your mortgage.

Know your coverage.

• You may already have adequate insurance coverage through your work or other policies. Insurance experts say it's better to buy one traditional insurance policy than purchase a number of small policies for a variety of products.

Be sure you need it.

• The purpose of credit life mortgage insurance is to protect your loved ones from making mortgage payments if something were to happen to you. This type of insurance may not be applicable if you do not have any dependents who would need to keep your home if something happened.

Alberta Insurance Council vs. the banks

Alberta is the only province in Canada that requires anyone selling credit insurance, including banks, to be licensed. Under the Alberta regulations, banks are required to follow set requirements for training staff and disclosure to customers. When the Alberta Insurance Council first implemented this regulation in 2001, the banks fought back, pursuing the matter all the way to the Supreme Court of Canada. In May 2007 the Supreme Court ruled against the banks and said the province of Alberta was within its rights to regulate the sale of this insurance and protect the consumer. 

A copy of the judgment in the case, Canadian Western Bank v. Alberta, is available online. 

To date, no other province requires banks selling insurance to be licensed. This page offers a list of the provincial and territorial regulators who would have that power, if enabling legislation were passed in their respective jurisdictions.

Mortgage life insurance vs. traditional individual life insurance

According to insurance and financial experts we spoke with, an individual life insurance policy may be preferable to a credit insurance policy. Here are the key differences between the two types of insurance. 

The application forms

The mortgage insurance application forms are similar across all the big five banks. In each, there are relatively few health questions, but each question covers a large range of medical conditions, as well as a wide range of situations (ranging from consulting a doctor, to receiving advice, to actual diagnosis.) 

Click on a bank's logo to see its mortgage insurance application form. (These will open in a new browser window.) 

Who to call

Several bureaus are set up to receive complaints from and offer advice to consumers about banking and insurance issues. 

The Canadian Life and Health Insurance OmbudService (CLHIO) is an independent service set up to assist consumers with concerns and complaints about life and health insurance products and services. 
www.clhio.ca 
1-888-295-8112 

The Ombudsman for Banking Services was set up to resolve disputes between participating banking services and investment firms and their customers if they can’t solve them on their own. 
www.obsi.ca 
1-888-422-2865 

The Financial Consumer Agency of Canada (FCAC) provides consumers with information about financial products and services, and informs Canadians of their rights and responsibilities when dealing with financial institutions. FCAC also ensures compliance with the federal consumer protection laws that apply to banks and federally incorporated trust, loan and insurance. If you are having difficulty finding out about your institution's complaint-handling process or if you are experiencing delays when using it, call FCAC. However, FCAC does not provide redress or compensation and does not get involved in individual disputes. 
www.fcac-acfc.gc.ca 
1-866-461-3222

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