There are a number of expenses an owner should anticipate when selling their apartment building.  It is important to note that each owner will have variations with respect to their tax consequences based on the initial purchase price, capital cost allowance taken throughout the years of ownership and their personal tax situations.  It is best to consult with an accountant familiar with the property to determine  the specific tax consequences of a sale. 

Below is a list of expenses and or documents required in order to complete the sale process:

A new Certificate of Location. The cost will vary depending on the number and size of the building(s) sold.

The Notarial Acquittance. This is paid by the seller to the notary to remediate any lien’s in place. Fees will vary depending on the number and complexity of lien’s in place.

In the event that there is a current loan in place that a buyer is not prepared to assume, a loan penalty generally equivalent to the interest the bank would earn over the remaining term would be required to cancel the loan.  Best to check with your bank/lender for the exact amount.

Capital Gains Tax – 50% of all gains in Quebec are taxed at a 50% rate therefore typically, the capital gain tax will be approximately 25% of the total gain. 

Recapture  - this represents the total amount of deprecation that has been used throughout the years of ownership in reducing the taxable net income of the property.  In the event that the sales price is higher than the depreciated capital cost, the total amount of recapture will be taxable at your given tax rate.

The Broker’s Commission – it is important to note that all commissions paid will ultimately reduce the net proceeds received from a sale and therefore also reduce the capital gains.

The Adjustments done during the notarial closing. These adjustments are done by the notary to account for any monies that have been prematurely collected and/or paid by the owner.  These items typically include rents collected in advance, security deposits, and municipal and school taxes paid in advance.  These amounts are adjusted on a pro-rata basis as per the day of closing.