Selling a Burlington Rental When One Sibling Owner Lives Abroad

The situation

Quang and Cristina inherited a small rental property in Burlington from their parents several years ago and had co-owned it since, splitting the modest rental income and the property tax bills down the middle. Cristina, an early childhood educator, still lived in Ontario. Quang, a personal support worker, had moved overseas a few years earlier to be closer to extended family and had not lived or worked in Canada since. Neither sibling had thought much about what that move meant for how a future sale of the property would be taxed — until they agreed to list it and accepted an offer of roughly $390,000 from a buyer named Grace.

The siblings retained our firm to act on the sale. During the initial intake call, our team asked a routine question that turned out to matter more than either sibling expected: was each of them a resident of Canada for tax purposes as of the closing date? Cristina's answer was straightforward. Quang's was not.

The problem

Residency for tax purposes is not the same as citizenship or immigration status, and it is not determined by where a person happens to be born or where their family lives. It turns on where someone actually lives, works and keeps their ongoing ties — home, spouse, bank accounts, health coverage. Quang had been living and working abroad full-time for years, with no Canadian residence to return to, which made him a non-resident of Canada for tax purposes even though he remained a Canadian citizen and still co-owned Canadian property.

That distinction matters enormously when a non-resident sells Canadian real estate. Under the Income Tax Act, when a non-resident disposes of taxable Canadian property, the buyer — not the seller — can become liable to withhold a significant portion of the purchase price and remit it to the Canada Revenue Agency, unless the seller has obtained a clearance certificate confirming that any tax owing on the sale has been addressed. The rule exists to stop non-residents from selling Canadian property and taking the proceeds out of the country before CRA can collect any capital gains tax owing. If the buyer fails to withhold when required, CRA can pursue the buyer directly for the amount that should have been withheld.

When the buyer's lawyer ran their own residency check ahead of closing and learned that Quang was a non-resident, they raised the issue immediately and reasonably: their client, Grace, could not safely release Quang's full share of the purchase price at closing without exposing herself to that withholding liability. The buyer's lawyer proposed holding back a substantial portion of Quang's share of the proceeds in trust until a clearance certificate was produced. Left unmanaged, that holdback could have dragged on indefinitely, tied up money the siblings needed, and put a closing date at risk that both sides wanted to keep.

It is a common misunderstanding that this kind of withholding only applies to large commercial sales or to non-residents who have never set foot in Canada. It applies equally to a modest inherited rental property split between siblings, and it applies whether the non-resident owner left Canada five years ago or five months ago. The trigger is the seller's residency status on closing, not the size of the deal or the seller's history with the property. Because Quang had never sold Canadian real estate before, he had no reason to know the rule existed until it appeared as a real obstacle in the middle of his transaction.

What we did

1. Confirmed residency status early, before it could surprise anyone at closing. Because our intake process asks every seller about tax residency at the outset, the issue surfaced weeks before closing rather than in the final days, giving everyone time to plan rather than scramble.
2. Explained the clearance certificate process to both siblings in plain terms. We walked Quang through what CRA would need: a request package identifying the property, the sale price, his cost in the property, and supporting documents, filed with CRA either before the sale closed or within the required window afterward. We were clear that this is a federal tax filing process with its own processing time — typically several months — and that no lawyer can accelerate CRA's internal review.
3. Coordinated with an accountant on Quang's behalf. Calculating the correct withholding exposure requires knowing Quang's actual gain on the property, not just the sale price, since withholding is calculated differently depending on when the clearance application is filed relative to closing. We referred Quang to an accountant experienced in non-resident dispositions to prepare the certificate application and the underlying gain calculation.
4. Negotiated a defined holdback with the buyer's lawyer instead of an open-ended one. Rather than leaving the arrangement vague, we agreed in writing on the exact amount to be held in the buyer's lawyer's trust account, the conditions for releasing it, and what would happen if the clearance certificate took longer than expected. This protected Grace from withholding liability while giving Quang certainty about what he would eventually receive.
5. Kept Cristina's portion of the sale unaffected. Because the withholding obligation is specific to a non-resident seller's own interest in the property, we confirmed with the buyer's lawyer that only Quang's roughly half-share needed to be held back. Cristina, as a resident co-owner, received her full share of the proceeds at closing in the ordinary way.
6. Followed up after closing until the certificate came through and the holdback was released. Once CRA issued the clearance certificate confirming the tax position was resolved, we provided it to the buyer's lawyer and arranged for the held-back funds to be released to Quang, months after the deal had otherwise closed.

The outcome

The sale closed on the scheduled date for both siblings. Cristina received her share of the roughly $390,000 sale price at closing, with no delay caused by her brother's residency status. Grace, the buyer, closed on time with no withholding exposure, because the holdback protected her position while the clearance certificate was pending. Quang's portion — held in the buyer's lawyer's trust account — was released to him several months later once CRA confirmed the tax position, at which point he received the balance of his share in full, less the tax ultimately determined to be owing on his gain.

Nobody in the transaction was surprised at the closing table, because the residency issue had been identified and planned around from the start. The buyer's lawyer's caution was not an obstacle to work around — it reflected a real legal exposure for their client, and treating it that way, with a clear written holdback agreement rather than an informal promise, is what let both sides close on time despite the complication.

For Cristina, the sale was essentially uneventful: an ordinary closing, funds in hand the same week. For Quang, the experience was a longer tail — a closing that felt complete on paper but left a portion of his money sitting in someone else's trust account for months while a federal agency worked through a routine application. That gap is real and worth planning for financially, but it is a predictable, bounded delay rather than an open-ended risk, and it did not cost him any of the sale proceeds beyond the tax he would have owed regardless of who held the funds in the meantime.

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