British Columbia

Court documents outline alleged scheme to evade B.C. property transfer tax

A court fight between two Vancouver real estate companies details an alleged scheme to evade B.C.'s property transfer tax.  

Lawsuit alleges dishonesty at the heart of court battle between 2 Vancouver realty brokerages

Two Metro Vancouver-based realty companies have been fighting in court since December of 2018. (Graeme Roy/The Canadian Press)

A court fight between two Vancouver real estate companies details an alleged scheme to evade B.C.'s property transfer tax.  

A notice of claim filed in B.C. Supreme Court alleges Realtors closed deals with overseas clients so they could pay a reduced property transfer tax while avoiding the troublesome issue of bringing cash into Canada.

According to court documents, Maxcel Westcoast Realty, Dracco Pacific Realty and Dracco Westcoast Realty have been embroiled in a civil lawsuit involving claims and counterclaims since December 2018.

In the lawsuit, Maxcel accuses four people, including a former company director who left to establish the two Dracco companies with her sister of sabotaging its realty business by transferring listings for properties totalling more than $52 million and using insider information to establish the new brokerage.

Tim Xu, a former managing broker for Maxcel who left to work for Dracco, alleges while still at Maxcel he spoke to directors at a meeting and "instructed [them] against consulting or assisting" anyone to evade the property transfer tax — what is referred to in court documents as the "scheme."

Tim Xu has filed a counterclaim against Maxcel Westcoast Realty. (Dracco Pacific Realty)

According to the court documents, the "scheme" starts with a buyer and seller entering into a contract for a property in B.C. It's alleged they agree to an "altered" price in the sales contract that is lower than the "true price."

The buyer allegedly pays the "altered" price in B.C. — but pays the difference between the two prices outside of Canada.

Lowering the price on the B.C. sales contract reduces the property transfer tax. Exchanging the rest of the money in another country allows buyers to bypass the cash export limits imposed by foreign governments.

In his counterclaim against Maxcel Westcoast Realty, Xu claims that a director with Maxcel told a team leader she closed three deals using the "scheme".

Xu alleges his employment was terminated in November 2018, three days after he voiced his concerns. 

He says he was not given a reason and claims he was wrongfully dismissed because he "fulfilled his duty to instruct against participation in transactions using the 'scheme' and that he has sustained losses and damages as a result thereof."

None of the allegations have been proven in court.