Selling A Brampton Rental With One Non-Resident Owner

The situation

Raymond and Wilson had owned a small rental property in Brampton for years — a modest bungalow bought as an investment while Raymond worked as a transit operator and Wilson drove long-haul routes. The two also ran a small trucking corporation together, with Wilson handling dispatch and Raymond helping out between shifts. When Raymond accepted a two-year contract working on a transit system overseas, the couple decided the rental had become more trouble than it was worth to manage from a distance, and agreed it was a good time to sell.

They listed the property, accepted an offer from a buyer named Nirosha at roughly $300,000, and expected the sale to close the way their previous property sales always had: proceeds split evenly between them, minus the usual closing costs. Their real estate agent flagged, almost as an afterthought, that Raymond's time abroad might matter for tax purposes and suggested they call a lawyer before firming up the closing date. That call came about six weeks before closing.

The tax problem

Once Raymond stopped living in Canada and organizing his life here — no home to return to, work based abroad, most of his time spent overseas — he was at real risk of being treated as a non-resident of Canada for tax purposes, regardless of his citizenship or the fact he still owned property here. Residency for tax purposes is about the facts of where a person actually lives and keeps their ties, not about a passport or a plan to come back eventually.

That distinction matters enormously when a non-resident sells Canadian real estate. Under the Income Tax Act, a rental property is taxable Canadian property, and when a non-resident disposes of it, the purchaser can become personally liable to the tax authority for a share of the seller's tax if it isn't properly secured at closing. To protect themselves, purchasers' lawyers routinely require the non-resident seller to either obtain a clearance certificate from the tax authority before closing, confirming the tax on the sale has been addressed, or accept that a significant portion of the sale proceeds attributable to the non-resident will be withheld and remitted instead of paid out at closing.

Nirosha's lawyer, on hearing that one of the two sellers was working outside Canada, insisted on protection before agreeing to close. That put Raymond and Wilson in an unfamiliar spot: their own sale, on their own schedule, now depended on paperwork with the tax authority that neither of them had ever had to file.

The complication ran deeper than a simple withholding calculation. Because the property was jointly owned, only Raymond's half interest was affected by his non-resident status — Wilson, who had never left Canada, was not subject to non-resident withholding on his share at all. Sellers and even some purchaser's lawyers unfamiliar with joint ownership sometimes default to withholding against the entire sale price rather than just the non-resident co-owner's portion, which would have tied up money that was never at risk in the first place.

What we did

1. Confirmed the ownership split on title. The property was registered to Raymond and Wilson as equal joint owners, which meant the withholding exposure applied only to Raymond's 50% interest — about $150,000 of the roughly $300,000 sale price — not to the full amount. Getting this on the record early kept the negotiation with the buyer's lawyer grounded in the actual exposure rather than the worst-case one.
2. Filed the clearance certificate application before closing. A non-resident seller can apply to the tax authority for a certificate confirming the tax on the disposition has been dealt with, based on the actual gain rather than a blanket percentage of the sale price. We prepared and filed Raymond's application as soon as the sale was firm, well ahead of the closing date, because processing routinely takes several months and rarely finishes before an ordinary residential closing.
3. Negotiated an escrow arrangement instead of an outright remittance. Because the certificate would not arrive in time, the buyer's lawyer wanted the required amount withheld and sent to the tax authority immediately at closing. We proposed instead that a holdback of roughly $37,500 — the standard withholding tied to Raymond's share of the price — be held in escrow by the buyer's lawyer under a signed agreement, to be released once the certificate was issued, rather than remitted outright. This protected the buyer exactly as much as an immediate remittance would have, while keeping the door open for Raymond to recover any part of the holdback that exceeded his actual tax once the certificate confirmed the real figure.
4. Kept Wilson's share out of the holdback entirely. We confirmed in writing with the buyer's lawyer that Wilson's half of the proceeds, roughly $150,000, was not subject to any withholding or escrow, since he remained a resident of Canada throughout. Without that clarification, some purchaser's lawyers err on the side of withholding against the whole price to be safe.
5. Followed up with the tax authority through the sale season. Applications for non-resident clearance certificates can stall for missing documentation or require follow-up on the reported cost of the property when it was originally purchased. We tracked the file and responded to the tax authority's requests for supporting records so the application didn't sit idle.

The outcome

The sale closed on the date Raymond and Wilson had originally agreed to. Wilson received his full half of the proceeds at closing, with no delay and no withholding. Raymond received his half minus the roughly $37,500 held back in escrow by the buyer's lawyer, pending the clearance certificate.

The certificate took a little over four months to arrive — longer than the couple had hoped, but in line with what similar applications typically take. When it was issued, it confirmed a tax liability on Raymond's share of the gain of roughly $24,000, based on the property's original purchase price and the closing costs from the sale, both of which reduced the taxable gain below what a flat percentage of the gross price would have suggested. The escrow agent released the difference — about $13,500 — back to Raymond once the certificate was in hand.

It was not a clean, fast outcome. Raymond had part of his share of a property he had already sold sitting in someone else's trust account for four months, and he still owed real tax on the gain once the certificate confirmed the number. But the alternative — letting the buyer's lawyer remit the full amount straight to the tax authority at closing, or refusing to close until a certificate that would take months to arrive was in hand — would have been worse for everyone. The escrow compromise let the sale proceed on schedule, protected the buyer from any personal liability for Raymond's tax, and still left Raymond with a path to recover the portion that turned out not to be owed.

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