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I live near Toronto, Canada, and the foreign buyer's 15% tax passed last week in British Columbia (only applicable to Vancouver) is generating very heated debate. Its effectiveness aside, I believe that there are some elements of the new tax law that are not compatible with contract law, correct me if anyone can link to the relevant acts.

See here, a CBC report describes an American who signed a contract to buy property in Vancouver before the law even existed, and now, he is stuck between a rock and a hard place: he can either abandon the deal and lose his deposit (which, at a minimum, is $25, 000--could be a lot more). But, if he buys, he will be subject to the tax (even though the contract was signed before the law took effect, it's just that the house was not closed before August 2). So, can he appeal this tax to the Court of Appeals, arguing that the contract was signed before the law took effect, and therefore the government had changed his side of the contract by imposing a previously non-existent tax?

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The contract doesn't promise that the government wouldn't create a new tax.

The buyer and seller could have agreed to make the contract conditional on tax regulations not changing. But, if they didn't make this agreement conditional on unchanging tax regulations, they are stuck with the effects of the Government's decision.

This is like a noisy neighbour moving in, or the city planning a new subway adjacent to the property, etc.

  • Ahh...looks like when the time comes to buy a home, I will need to try to think about every possible way that this could go wrong and add all kinds of conditions--although I have the advantage of not requiring financing as a condition. So I will add "this contract is conditional on the premise that no government, whether municipal, provincial or federal, enacts a new tax on either party before closing". Anyways, this guy may really just need to go to a tribunal and claim a NAFTA violation. – user2213307 Aug 5 '16 at 2:24
  • Better is that you have the other party pay the tax. A zero rate tax is nothing, but if it suddenly goes up, you're not losing anything. Similarly, you can discount a price by X% with the same condition, and if the tax becomes (X+10)% then you're not on hook for that extra 10%. – Nij Aug 5 '16 at 21:48
  • I will be careful if I decide to buy, but that is not going to happen in 5 years as even the Toronto market is out of control. Anyways, I will add such a clause in the contract, so if a government adds a new tax, the deal falls apart. – user2213307 Aug 7 '16 at 15:54

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