Family Transfers... How do they work?

Family Transfers are an occasional occurrence in my Practice as a Notary and as the name suggests involves transferring property within a family. A common occurrence is the young first time home buyer going on title with their parents as a means for qualifying for a sufficient mortgage. Eventually the child gets to the point where they qualify on their own and a family transfer occurs as they take the parents off Title. These family transfers have few key factors that must be considered before taking the step to have a transfer completed.

The first consideration is the mortgage. Generally the people appearing on Title to a property are the same people that must appear on the mortgage as borrowers. As a result, the bank must first grant approval in any case where someone is going to be placed on or removed from Title. Occasionally the bank will allow a Title transfer to occur via the Notary or Lawyer and will amend their own internal paperwork to reflect the new Title. Any person being added to a mortgage must go in and sign a personal covenant with a banker or a broker. More commonly in family transfers, the title amendment will happen along with a refinance and an entirely new mortgage will be issued to payout the old one with the transfer occurring concurrently.

The second major consideration is property transfer tax. In British Columbia, Property Tax is applicable on all transfers of real property with only a few exemptions. Property Transfer is calculated as 1% on the first $200,000 and 2% on the balance so the tax on a $300,000 transfer would be $4000. These exemptions can often apply in family transfers and as you can see from the calculation above can often save the transferee thousands of dollars. The detailed guidelines for PTT exemptions can get rather complex so it is wise to contact your Notary or Lawyer for a detailed analyses of your particular situation but there are some rules of thumb to help you out. It is key for the property to be the primary residence of either the transferee or the transferor for at least the 6 months leading up to the transaction. Rental properties are not applicable for family transfer PTT exemptions.

Secondly, the type of relative being transferred to is of the utmost importance. Under PTT guidelines, spouses, (including common law if it has been a full common law relationship for a minimum of 2 years), parents and parents in law also qualify, siblings, cousins, nieces and nephews do not qualify. Family transfers are not incredibly common but are sometimes an option when it comes to dealing with your property. As you may have gathered, there are many factors involved and you should always consult your Notary or Lawyer before considering any of these transactions. I hope this was a helpful peak into family transfers, a unique and interesting subset of property transactions in British Columbia.

Hassan El Masri B.Sc. M.A.(ALS)

Notary Public, W. Masri Notary Corporation

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