Practice Watch: Potential liability for GST for vendors of commercial real estate

Felicia S. Folk, Practice Advisor

Lawyers will wish to note a 2004 decision of the Tax Court of Canada on liability for GST. A BC partnership sold a commercial building. The purchaser’s agent advised the vendor’s lawyer in writing that the purchaser was a GST registrant, gave its purported GST number and stated that it would self-assess the applicable GST, as contemplated by s. 221 of the Excise Tax Act. Accordingly, the vendor did not collect tax on the sale. It was subsequently determined that the purchaser was not a GST registrant, and the Tax Court of Canada upheld the assessment against the vendor for having failed to collect GST on the sale: Lee Hutton Kaye Maloff v. the Queen, 2004 GTC 439.

Section 221 requires a vendor to collect GST on the sale of commercial property unless the purchaser is a GST registrant. When acting on non-residential real property sales, the solicitor for the vendor should at the least obtain the purchaser’s GST number and contact the Canada Revenue Agency (CRA) at 1-800-959-5525 for confirmation that the purchaser is registered under the number.

It would be even more prudent to require that the purchaser execute an affidavit confirming that it is a current GST registrant and setting out its registration number, and then to confirm that information with the CRA office.

New First Nations land registries

Some First Nations Bands now have the right to create and run their own land registry systems. The Lawyers Insurance Fund has received a report from a lawyer who acted for the purchaser and lender with respect to the assignment and mortgage of a sub-lease on Indian lands. The transaction had completed, the Indian Land Registry had provided registration numbers, and money had been paid out. Over a month later, Indian and Northern Affairs Canada advised the registry agent that the registration was cancelled as the registrations would now be under the First Nations Registry System and that the documents would have to be submitted for re-registration.

As of the date the lawyer was notified, the First Nations Registry System for the Band was not in place.

If dealing with First Nations land, you should make enquiries to determine whether the land falls under the First Nation Land Management Act. Make such enquiries before filing documents for registration. If the Act applies, be sure to read the Band’s “land code.”

If there is a Band Land Registry, you may be able to obtain necessary information from the Band and from the Band’s land code. You may go to the website of the First Nations Land Management Resource Centre, which has information about the Framework Agreement on First Nation Land Management: .

You may also wish to discuss your questions with Susan Burgess, Counsel at Indian and Northern Affairs, Operations and Programs Section, 10 Wellington Street, Gatineau, Quebec K1A 0H4, tel: 819 953-0153 or fax: 819 994-4641.

Law firm website links

Chapter 14, Rule 6 of the Professional Conduct Handbook prohibits lawyers from endorsing products or services for sale to the public except the lawyer’s own law practice or publication, or a product designed to assist in the practice of law.

If a law firm’s website provides a link to another commercial site, such as that of a mortgage broker, is this an endorsement of the product advertised on the other site? The Ethics Committee said in 2001 that such a link is an endorsement of the products on that other site. The Committee also said that a disclaimer on the lawyer’s website stating that the links are provided for convenience only and that the lawyer does not endorse the products of any of the links would be adequate to keep the lawyer from violating the rule.

Practice in the United States

The states of Georgia and Pennsylvania now allow foreign lawyers to practise temporarily in the United States. The ethics codes in those states allow a foreign lawyer to practise temporarily in a US jurisdiction for matters that:

  • are done in affiliation with a lawyer licensed in the jurisdiction who actively participates in the matter;
  • are related to a proceeding heard by a foreign tribunal before which they are authorized to practise;
  • are related to an alternative dispute resolution proceeding that is reasonably related to the foreign lawyer’s practice in a jurisdiction where he or she is licensed;
  • are for a client with offices in the jurisdiction where the foreign lawyer is licensed;
  • have a substantial connection with the jurisdiction where the foreign lawyer is licensed; or
  • are governed primarily by international law or the law of a foreign jurisdiction.

For more information, see