renting to family member unauthorized suite - david ingram expert US CANADA cross border non-resident income tax help and prepar


QUESTION:

i have given my cousin 3 months notice to vacate our basement suite...3 months ago..
he is not moving and it is the eve of his last day...we have sold our house and have to be out in 6wks....

what can we do to get him to leave?


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david ingram replies

I am so out of this that i am not even really interested in the answer. However, in the old "Dear Abby" style, I have another EXPERT

My old partner Ross McDonald manges 3 0r 400 rental units and specializes in out of country owners (hint for those of you living in Paris or Dubai, etc., He can be contacted at rossmcd@shaw.ca

I asked him to give you an answer and although he has answered it from a British Columbia perspective which is different  from Manitoba or Minnesota or California or New York, his hints at the end would apply to anyone with the same problem anywhere.

It is therefore going out to everyone rather than just the Canada list.  I just know someone in Milwaukee is renting a suite to a cousin.

Ross is a partner in Lighthouse Realty in Abbotsford, BC and he and I participated in over a 1,000 investment real estate deals in the good old days. We had real estate investments in Campbell River, Comox, Victoria, Calgary, Ottawa, Brampton, Oshawa and Phoenix and I am sure I missed some places.
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Ross writes

 There is not a lot of information to go on - but . . . 

1) I will assume this question is from British Columbia

2) The first questions to be answered are: Was proper notice given and is the cousin continuing to pay rent.
To be given properly the notice must be delivered either in person to your cousin or sent by registered mail (in which case it is deemed received 5 days after it is postmarked) and the notice must be on the prescribed Province of BC, Residential Tenancy Office forms and it can only be given for prescribed reasons.  If you put your house on the market and gave him notice it is not enforceable.  Notice can only be given after you have received an offer on the house and all subjects have been removed.  Then the notice has to be given before the 1st of the month for at least 60 days in the future - and the last month must be free.  If cousin is not paying rent then a 10 day notice to vacate can be given.

3) This could be messy.  If notice was not given properly ( and my guess is that is was not) and if the deal closes in 6 weeks ( 42 days) - it is now too late to give proper notice.

4) It gets worse.  The Purchase and Sale Contract will for sure say that you give vacant possession.  Having your cousin still there on possession day could put you in breach of contract and the buyer has a choice to either walk away from the deal or sue for damages (such as making you pay for a hotel, meals, furniture storage etc until you can give vacant possession.

5) So it is going to cost you a lot of money if cousin does not move.  Your choices are:

a) Give proper notice, pay for new buyer to live in hotel etc, take cousin to arbitration in 60+ days, get an order of possession, get an enforcement order for the order of possession, get the sheriff to physically remove your cousin and his/her belongings, complete the sale of the house and sue the cousin for all your costs.  This could be very expensive.

b) Negotiate with and pay your cousin to move

c) rent a place for your cousin, pay the security deposit and the first months rent, offer to help with the move and get all your family to talk, beg, and plead with your cousin to be reasonable:

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You can find out more about LIGHTHOUSE REALTY in Abbotsford at http://www.lighthouserealty.com/

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SUGGESTED PRICE GUIDELINES - Aug 5, 2008
 
david ingram's US / Canada Services
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This is not intended to be definitive but in general I am quoting $900 to $3,000 for a dual country tax return.

$900 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only (but were filing both countries) - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
 
$1,200 would be the same with one rental
 
$1,300 would be the same with one business no rental
 
$1,300 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
 
$1,600 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,700 would be for two people with income from two countries

$3,000 would be all of the above and you moved in and out of the country.
 
This is just a guideline for US / Canadian returns
 
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $200.00 up. However, if you have a stack of 1099, or T3 or T4A or T5 or K1 reporting forms, expect to pay an average of $10.00 each with up to $50.00 for a K1 or T5013 or T5008 or T101 --- Income trusts with amounts in box 42 are an even larger problem and will be more expensive. - i.e. 20 information slips will be at least $350.00
 
With a Rental for $400, two or three rentals for $550 to $700 (i.e. $150 per rental) First year Rental - plus $250.
 
A Business for $400 - Rental and business likely $550 to $700
 
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
 
Moving in or out of the country or part year earnings in the US will ALWAYS be $900 and up.
 
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
 
8891 forms are generally $50.00 to $100.00 each.
 
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
 
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.

Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable.  In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years.  We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund. 

Email and Faxed information is convenient for the sender but very time consuming and hard to keep track of when they come in multiple files.  As of May 1, 2008, we will charge or be charging a surcharge for information that comes in more than two files.  It can take us a valuable hour or more  to try and put together the file when someone sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and emails for instance. 

This is a guideline not etched in stone.  If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully.

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IRS Circular 230 Disclosure:  To ensure compliance with requirements imposed by the IRS, please be advised that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used or relied upon, and cannot be used or relied upon, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.--

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