Real Property

See Also

Zellstoff Celgar Limited v. British Columbia, 2014 BCCA 279

pulp mill equipment was permanently annexed and for use of land

The machinery and equipment in a pulp mill purchased by the taxpayer was fixtures and, therefore subject to land transfer tax under the Property Transfer Tax Act (B.C.). Tysoe JA stated (at para. 45):

[T]he evidence established an intention of permanent affixation despite the fact that most of the equipment could be dismantled and sold in a secondary market. The objective intention was that, barring unforeseen circumstances, the equipment was to remain for its useful lifetime. Together with her consideration of the use of the land as a pulp mill, this finding informed the judge’s conclusion that the object of annexation was for the better use of the land and that the items of machinery and equipment had therefore become fixtures. In my view, she did not err in reaching this conclusion.

Ontario Hydro v. Ontario (Ministry of Revenue), [1996] O.J. No. 333, 60 A.C.W.S. (3d) 1080, aff’d on other grounds [1999] O.J. No. 1723, 44 O.R. (3d) 1, 120 O.A.C. 184, 88 A.C.W.S. (3d) 507

microwave equipment which did not improve a building was not fixtures

Borins J found that microwave telecommunications and power line carrier equipment which for the most part was attached by screws to metal racks which, in turn, were bolted to the floor in the Pickering nuclear facility of the taxpayer, were not fixtures, and instead were tangible personal property subject to Ontario retail sales tax. He stated (at paras. 7-8):

[T]he courts are more inclined to regard an item as a chattel if it is installed as part of its owner's business, as opposed to items installed to improve the freehold. For example, equipment installed in a factory to operate a business is usually found to be a chattel because it has nothing to do with improving the freehold. ...

In this case, the microwave equipment did not improve the building in which it was installed. It was installed to enable Hydro to carry out its business of producing and distributing electricity. Therefore, it constitutes a chattel. The retail sales tax was properly paid [thereon].

Words and Phrases
fixture

Turismo Industries Ltd. v. Kovacs, (1976), 72 D.L.R. (3d) 710 (B.C.C.A.)

equipment was annexed for manufacturing rather than realty use

Equipment, which was used to produce concrete blocks, was affixed to the plant floor by removable bolts. Following the holders of mortgages taking possession following foreclosure, the purchaser successfully claimed that they had converted the equipment because it retained its chattel nature. Taggart JA stated (at 714-15):

[R]elative to its size the degree of annexation was not great. While some time and effort would be required it would be quite feasible to remove the component parts of the manufacturing equipment and install them in another building. There was, however, a sufficient degree of annexation to satisfy the second principle referred to…in Stack v. T. Eaton Co… .

As to the object of the annexation…the evidence shows that such annexation as there was was for the better use of the equipment to manufacture concrete blocks and not for the better use of the realty.

La Salle Recreations Ltd. v. Canadian Camdex Investments Ltd., (1969), 4 D.L.R. (3d) 549 (B.C.C.A.)

“permanent” is less than forever

McFarlane J found that although the degree of annexation of wall-to-wall carpeting in a hotel was slight, the object of the annexation was the better and more effective use of the building as a hotel and not the better use of the goods as goods, with the result that the carpeting and accessories constituted fixtures. In commenting (at 554-55) on the use of the word “permanent” in Haggert v. Town of Brampton, he stated:

Special attention must be given to the use of the word “permanent” in this context. I note the word is used in contradistinction to “occasional”. When used with reference to affixing or annexing chattels to realty I cannot believe that “permanent”, a relative term, means remaining in the same state and place forever or even for an indefinitely long period of time. Especially must this be so where the chattels being considered are subject to wear and tear through use … In my opinion the word “permanent”, as used by King J. should be interpreted for the purposes of this appeal as indicating the object of having the carpeting remain where it is so long as it serves its purpose.

Words and Phrases
permanent

Re City of Ottawa v. Ottawa Electric Railway Co., [1922] O.J. No. 189, 52 O.L.R. 664 (Supreme Court, App. Div’n)

equipment intended for use as machines

The taxpayer, which operated a tramway system in Ottawa, was assessed for mujnicipal taxes on its plant used for producing electricity, transformers (in sub-stations) for converting alternating current into direct electricity, and other incidental equipment. In finding inter alia that the equipment was exempted as personal property, Rose J stated (at para. 21):

If the intention is to improve your land, or your house, which is part of it, as when you install a central heating plan, that is one thing; but, if the intention is to put the machine in a place where it can conveniently be used as a machine, that is quite another thing. The latter case is what we have here; and, in the absence of some authority establishing the contrary, it is my opinion that the pieces of apparatus in question have continued to be chattels.

Stack v. T. Eaton Co., [1902] O.J. No. 155 (Div. Ct.)

tests for a fixture

After reviewing the then-leading decisions (including Bain v. Brand (1876), 1 App. Cas. 762, Holland v. Hodgson (1872), L.R. 7 C.P. 328, Hobson v. Gorringe, [1897] 1 Ch. 182, and Haggert v. Town of Brampton, [1897] S.C.J. No. 73, Meredith CJ synthesized the governing principles and articulated the following five rules respecting when property was a fixture, which he characterized as "settled law":

(1) That articles not otherwise attached to the land than by their own weight are not to be considered as part of the land, unless the circumstances are such as shew that they were intended to be part of the land.

(2) That articles affixed to the land even slightly are to be considered part of the land unless the circumstances are such as to shew that they were intended to continue chattels.

(3) That the circumstances necessary to be shewn to alter the primâ facie character of the articles are circumstances which shew the degree of annexation and object of such annexation, which are patent to all to see.

(4) That the intention of the person affixing the article to the soil is material only so far as it can be presumed from the degree and object of the annexation.

(5) That, even in the case of tenants' fixtures put in for the purposes of trade, they form part of the freehold, with the right, however, to the tenant, as between him and his landlord, to bring them back to the state of chattels again by severing them from the soil, and that they pass by a conveyance of the land as part of it, subject to this right of the tenant.

Words and Phrases
fixture

Haggert v. Town of Brampton (1987), 28 S.C.R. 174, 1897 CanLII 14

objects permanently affixed to enhance the premises are fixtures

The Town of Brampton sought to recover under a mortgage held by it. The articles in question were pieces of machinery and other items located in a factory used for the manufacture of engines, threshing machines and agricultural implements. The items that were not annexed to the realty remained chattels and those that had been annexed were fixtures. King J stated (at 182):

In passing upon the object of the annexation, the purposes to which the premises are applied may be regarded; and if the object of setting up the articles is to enhance the value of the premises or improve its usefulness for the purposes for which it is used, and if they are affixed to the freehold even in a slight way, but such as is appropriate to the use of the articles, and showing an intention not of occasional but of permanent affixing, then, both as to the degree of annexation and as to the object of it, it may very well be concluded that the articles are become part of the realty, at least in questions as between mortgagor and mortgagee.

Administrative Policy

23 March 2017 CBA Commodity Taxes Roundtable, Q.20

purchase contract was real property

In an appreciating housing market, an individual purchaser (Mr. X), whose plans have changed, assigns his purchase contract back to the builder for an amount based on the appreciation to date. CRA stated:

Generally, when a purchaser, such as Mr. X, enters into an agreement of purchase of sale for the acquisition of a newly constructed house, the purchaser, Mr. X, is acquiring an interest in real property, namely an interest in a residential complex. If Mr. X subsequently receives consideration to transfer that interest to builder (the Vendor), Mr. X would be considered to be making a sale of the interest in the residential complex.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule V - Part I - Section 2 no GST/HST should be charged on a cancellation fee paid by a new home builder to the purchaser 298
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Builder individual is a builder on assignment of new house purchase contract if original purpose was to resell house 123
Tax Topics - Excise Tax Act - Section 221 - Subsection 221(2) s. 221(2) exclusion can apply to an interest in a purchase agreement 186

GST Memorandum (New Series), 19.5 "Land and Associated Real Property

Real estate options and air rights are real property, whereas supplies of density rights are not supplies of real property.

20 February 1996 Interpretation File No. 11870-1

real property includes licences and restrictive covenants

In the course of concluding that arrangements for the use of seniors of units in a multi-unit residential complex were licences rather than leases, CRA stated:

At law, the categories of estates and other rights to real property include

  • freeholds (fee simple, fee tail, life estates),
  • leaseholds, and
  • rights that are not estates in property (easements, licences, profits à prendre, restrictive covenants and particular rights such as those pertaining to water, minerals, air space etc.).

18 January 1995 Headquarters Letter No. 11634-2

leasehold interest is real property

Before going on to find that a lease surrender by the tenant was a "sale" of real property, CRA stated:

[F]or GST purposes a leasehold interest in land is real property, unlike the position at common law, by virtue of both the definition of real property and subsection 136(1).

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Sale lease surrender is a sale 54

26 July 1994 Headquarters Letter RITS 11950-1

Before indicating that a payment by a developer to a municipality in consideration for the municipality agreeing to pass a by-law allowing an increase in the height and density of the building to be located on a property represented consideration for an exempt supply under paragraph 20(c) of Part VI of Schedule V, the Directorate indicated that "Legal Services has provided their opinion that the granting of density rights does not constitute a supply of the underlying real property, but rather is a supply of a right to do something".

GST M 300-2 "Taxable Supplies" under "Supply"

The term real property includes the right under a lease or licence to use or take possession of land, and a right or option to purchase land under a contract. Definitions of tangible personal property and intangible personal property are included.

Articles

Terry G. Barnett, "The 'Dirt' on Residential Real Estate", September 2011 CICA Commodity Tax Symposium Papers

The paper includes a discussion of the assignment of a condominium purchase contract:

Equitable interest of purchaser (p.2)

Under general legal principles, once a vendor enters into an agreement for the sale of real property, the purchaser has acquired an equitable interest in the property. The purchaser is entitled to register the contract of purchase and sale against the property, and similarly, can sue the vendor for specific performance of the contract if the vendor refuses to complete the sale. ...

Disclaimer of equitable interest (p. 2)

The equitable interest that normally arises on the signing of a purchase agreement, however, is subject to the laws of contract. By contract, the vendor and purchaser may disclaim the transfer of the equitable interest that the purchaser would otherwise have in the land. Indeed, this is a common practice in many new condominium developments. An equitable interest gives a purchaser the ability to register the interest on title. In the case of a condominium building under development, financing and other commercial arrangements could be confounded by the potential registration of interests by hundreds of buyers. For this reason, in many new developments the parties contract out of the general law and disclaim any interest in real property... .If the contract contains a valid and binding disclaimer of interest in realty, what is assigned therefore is better characterized as a bundle of contractual rights, i.e. an intangible.