Refinance Dilemma - Form T776 Statement of RE Rentals, JV Agreement

[Neil1]

Hi,

My friend has a fourplex. He is both on mortgage and on title.

After purchasing he signed a JV agreement (50/50) with his JV partner.

The value of the property increased significantly and they now want to refinance it, probably with a new bank.

A couple related questions:

1. Should only my friend apply, or because of the JV agreement both my friend and his JV partner should apply?
If both apply, will it not trigger a sale tax? or/and land transfer tax?

2. Since they wanted to do things right from the start they prepared two T776 Forms 'Statement of RE rentals' - one for my friend and one for his JV partner in order to reflect in their tax returns, the JV agreement they signed.
Both have T776 showing they own this 4-plex 50% each.
Did they make a mistake with regards to T776 because only my friend is on the mortgage? or the way they did it is also what other REIN members recommend?

The reason I am asking is question/scenario #1 above can contradict #2 or casue an issue If for example only my friend applies and the new bank wants to see his T776 , as part of the refinance application, and sees only 50% ownership shown(?)

Thanks,
Neil

 

[Thomas Beyer]

Differentiate between legal and beneficial ownership.

He is the legal owner, but only the 50% beneficial owner.

Bank may care about that, or maybe not. As such, they may, or may not, require each person to be on the mortgage. Tell the bank the truth, and let them tell you what they want.

T776 are OK, 50/50, as each get their share of rental income / expenses, regardless of who is on the mortgage or on title !

 

[Neil1]

[quote user="ThomasBeyer"]Differentiate between legal and beneficial ownership.

He is the legal owner, but only the 50% beneficial owner.

Bank may care about that, or maybe not. As such, they may, or may not, require each person to be on the mortgage. Tell the bank the truth, and let them tell you what they want.

[/quote]

Ok Thanks.

[quote user="ThomasBeyer"]
T776 are OK, 50/50, as each get their share of rental income / expenses, regardless of who is on the mortgage or on title !

[/quote]
Well that's the thing - they are 50/50 on T776 and as a result one bank he already contacted (one of the top 3 banks in Canada) is now telling him you can not have more people on title than are on the mortgage. Well, my friend does not have more people on title than on the mortgage. As mentioned above, it is only him on both but what the banker probably meant, is that Form T776 and the people on title/mortgage should be in synch. In other words, this banker would want to see all people "on the property" (banker's words) to be in the application. Guess this means his JV partner should be included in the application.. which brings us back to the first question above - will there probably be some complication / tax triggered as a result? Or maybe no big deal if both are on the application and this can actually strengthen the application(?)

Thanks,
Neil

 

[Thomas Beyer]

Your T776 is correct as each party owns 50% beneficial interest. Who is on title or mortgage matters not here. To banks that does matter though. As stated, a bank therefore might require both parties to be on title and on mortgage. Other banks might think differently.

 

[Neil1]

[quote user="ThomasBeyer"] Your T776 is correct as each party owns 50% beneficial interest. Who is on title or mortgage matters not here. To banks that does matter though. As stated, a bank therefore might require both parties to be on title and on mortgage. Other banks might think differently.

[/quote]
I understand. It depends on the bank.
Thank you Thomas