Private mortgage Quebec

Brace yourself investors. Quebec has passed new laws concerning zoning changes in municipalities and of course given permission to municipalities to increase the Land Transfer Tax (also known as the Welcome Tax)

As published in an Article by Elias Benhamou and Anthony Arquin - Davies Ward Phillips & Vineberg:

Adoption of Bill 122 and Its Impact on Real Estate Developments in Québec

Authors: Elias Benhamou and Anthony Arquin

June 19, 2017

On June 15, the Québec National Assembly adopted Bill 122, An Act mainly to recognize that municipalities are local governments and to increase their autonomy and powers (the “Act”). The government of Québec has described this omnibus law as “the greatest decentralization of powers to the municipalities in Québec history” [translation].

The highlights of the Act, which will have a major impact on real estate development projects in Québec, are as follows:

• exemption from the approval-by-referendum process for municipalities adopting a public participation policy;
• new contribution for parks prior to issuing a building permit to carry on new activities or intensify existing activities;
• transfer of land exceeding 10% of the surface area of the site, as a contribution for parks, if the land is located within a central sector of the municipality and if all or part of such land is green space;
• a municipality’s power to make the issuance of a building permit for residential units subject to an agreement with the developer to increase the supply of affordable, social or family housing;
• a municipality’s power to acquire, by agreement or expropriation, an immovable whose dilapidated state entails a risk for the health and safety of persons;
• increase in the duties on transfers of immovables; and
• starting in January 1, 2018, municipalities’ new general taxation power and power to charge regulatory dues.

The following is a more detailed analysis of these provisions.

Increase in the Duties on Transfers of Immovables

Municipalities may set a higher rate than that provided for in the Act respecting duties on transfers of immovables for the tax bracket exceeding $500,000. Until now, only the City of Montréal had the power to do so. The Act provides that this additional rate may not exceed 3%, except in the case of the City of Montréal.

In addition, each tax bracket will be increased annually on the basis of changes in the all-items Consumer Price Index for the Province of Québec .

The Municipalities’ General Taxation Power and the Power to Charge Regulatory Dues

Starting in January 1, 2018, each municipality may, by bylaw, impose new municipal taxes in its territory (provided that they are direct taxes) and charge regulatory dues.

This will especially hurt those investors purchasing income properties, as these properties are typically well over $500,000 in price. Conventional lenders often take an inordinate amount of time to approve a mortgage for these types of properties.

This is when a Private Lender can help.

A private lender has different lending parameters than a bank. Generally they are also quicker.  Interest rates are usually higher, however the flexibility offered by Private Lenders, and the conditions they offer are often superior to that of banks and other conventional lenders.

Terms are usually for one year.  You borrow the money for the purchase from the private lender and then go to a conventional bank knowing that you have secured the property so it matters little how long the bank takes. Since your private mortgage was repayable after 12 months your long term profit is maximized since you can repay the private mortgage without a big penalty.

Getting a private Mortgage in Quebec can be confusing, with all the different services being offered. Some will lock you in for the full 12 months or longer.  Some might have large exit fees. Yet others may not know how to properly evaluate your property.

Judging the value of a property is not a simple process. A strong knowledge of the market and of various property types is important.  You would need to see someone that understands the difference between an industrial property and a commercial one. Is an environmental report necessary?  Will you be able to obtain conventional financing at a future date?  The questions can be many and the complexity high or low.  Not all private lenders will be able to help, or will be unable to give you the necessary answers in a reasonable amount of time.  And yes there are situations where time is of the essence.

This is where a company like TempBridge can help. Their mortgage experts will help explain the best route to follow and will make it easy to understand the procedures.  TempBridge has been providing private mortgages in Quebec for over 15 years and their experts have decades of experience. A TempBridge loan can be repayable in as little as 6 months.