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Joo Kim Tiah, of Holborn Group, right, shakes hands with Donald Trump after announcing Trump Tower in Vancouver in 2013.

JONATHAN HAYWARD/THE CANADIAN PRESS

Holborn Properties scored a hit with Trump International Hotel and Tower in Vancouver, setting a record price when the building sold out.

But now there's a hitch in the process with the new 15-per-cent foreign-buyer tax, as the date fast approaches for a fall completion. Developer Joo Kim Tiah, chief executive officer for Holborn Group, says the tax has affected his offshore presale buyers who might not want to close and face the 15-per-cent levy.

"I am affected, too, because I have a small percentage of foreign buyers," says Mr. Tiah, who is the 36-year-old son of one of Malaysia's wealthiest businessmen, Tony Tiah Thee Kian. "Those contracts are in jeopardy now."

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In May, Holborn said it had sold all 214 luxury condominiums in the project, including a number of $6.4-million sub-penthouses, at an average $1,615 per square foot – a record for a new condo project in Canada. The top floor penthouses are expected to be priced starting at $20-million when they go on the market next year.

"A small percentage [of buyers] have stated they may not be able to close," Mr. Tiah says. "We are trying to work with them. We are trying to get them financing so that they can close."

When asked if he'd give them a break on the price, he asked, "Why would I do that? It's not my fault government changed the goal posts."

Instead, Mr. Tiah is helping buyers close by allowing them to assign their properties to a Canadian relative, for a fee. He said that's become standard industry practice in order to ensure deals close on time.

"Most developers now are allowing them to assign to a local, right? So a lot of these people, if they have family, which they do, [they say] 'I assign to my son and then I don't have to apply 15-per-cent tax.' The majority of these people were on their way [to citizenship] here. They assign to aunt or brother-in-law or someone like that. I think a lot of people are going to do that.

"Assignments are a common thing in presales. And we don't allow them to flip [the property] to increase the price. They have to assign it at the same price, only."

Mr. Tiah estimates that buyers with foreign passports purchased about 10 per cent of the units at the luxury Trump Tower, named after the controversial presidential candidate. Mr. Tiah says he is in frequent communication with Donald Trump's children, Ivanka, Donald Jr. and Eric, who run the business.

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"My hope is that everyone will close," he says. "But yeah, if they don't have a local to take on the assignment, then they are stuck."

It is not illegal to assign a presale condo. Developers include clauses in contracts that commonly require 1.5 per cent of the purchase price or something in that ballpark if the purchaser chooses to assign his interest in the property. The risk to the vendor is that the new buyer is an unknown, hence the extra fee.

Mr. Tiah says he supports the new tax, but not the fact that it applies retroactively, to purchases that were in process. He says he understands there was a need to cool the market, but he thinks the provincial government should have consulted with the real estate industry.

"I don't think the 15 per cent in general will hurt the market going forward in the long term, but the retroactive nature of it is very unfair. Immigrants come here because they like the certainty, they like order. You can't change the rules or the goal posts all of a sudden. Those people who entered into contracts two or three years ago and are about to complete, and realize they have to scramble to get 15 per cent more, that's really not cool. They either are stuck with losing the 20- or 30-per-cent deposit they've put down, or they have to cough up 15 per cent more."

The 15-per-cent property-transfer tax is going to be hard to dodge, says lawyer Ron Usher, who this year sat on the provincially appointed advisory panel on questionable real estate industry practices.

The tax only gets paid when a buyer registers ownership with the land titles office. Presale purchases are made years in advance, but the tax doesn't kick in until the residents take occupancy.

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Developers whose buildings are nearing completion aren't going to want to deal with a lot of presale buyers who would rather lose their deposit than close on their deals.

"Imagine now you're the developer in this new instance. You are going to consent to these assignments because you need these deals to close," says Mr. Usher. "There was a time when they were quite cranky about assignments, but on these ones, they won't mind. In this case, it's in the developer's interest. He has a couple hundred units to close and he does not want to see sales collapsing. The deposits don't pay off the mortgage."

The assignment of a property to a relative is not a loophole, unless the deal involves a secret arrangement about future ownership. If there was such a deal to transfer ownership back to the original buyer to get around the tax, it's a risk, says Mr. Usher.

"The assignment is an assignment of all your rights to the property – you've sold your rights. Maybe later you are going to buy it from the sister, and she may agree to transfer it back to you. But all these transactions are subject to CRA [Canada Revenue Agency] scrutiny. CRA has been vigorously auditing these flips.

"People come up with all kinds of ideas to avoid the PTT but the reality is the loopholes got sorted out many years ago. I always tell people this is not a tax with many loopholes, and this one is very rigorously enforced. In that sense, it's a very mature tax with a very thought-through regime of enforcement and compliance monitoring. It's not a good place to cheat. It's a pretty solid tax."

Because foreign buyers are trying to dump properties, it might even be a good time for Canadian bargain hunters, adds Mr. Usher.

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"I have no doubt there is substantial wheeling and dealing going on out there as people figure out this big legal obligation they have coming up."

As for the long-term effect of the tax, Mr. Tiah doesn't think it will have a major impact on the market.

"From now till end of the year, everyone is going to wait and see what happens. I think volume will go down."

Mr. Tiah, who is now a major player in Vancouver's development community, says people don't acknowledge the amount of wealth here from overseas, he says. Housing is affordable, when that wealth is factored in. The $76,000 median household figure is irrelevant because it doesn't reflect the true money flowing into the market.

"Everybody knows [that statistic] is flawed because we have a lot of immigrants that come here and they make their money overseas, so the wife lives here, and the house is probably in the wife's name or kid's name, who goes to school. They buy $5-million house. What is their income? Zero. They have no income in Canada. Or they have a small income, and big house. He's not a Canadian, but the family members are, and if he gives anything to the wife, it's not taxable. So it fudges up the price-to-income ratio. It doesn't work.

"So wealth is here, in that sense."

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When asked about low locally generated incomes, he says the province needs more jobs.

"We need to bring business here. That's No. 1, and it's not even in the discussion."

Mr. Tiah has other projects on the go, including the first phase of the former social-housing site, Little Mountain, scheduled to begin next year. He's currently marketing single-family and multifamily dwellings at University Heights in Squamish. And he's working on a mixed-use rezoning plan for the downtown block bordered by West Georgia, Seymour, Dunsmuir and Richards, including the heritage building at 500 Dunsmuir.

While the Trump tower in Toronto has seen its share of problems – including new ownership, and lawsuits by investors – Vancouver's 63-storey Trump tower set a sales record. The luxury units sold at $1,610 per square foot, the highest price per square foot for a multifamily building of its size in Canada.

Mr. Tiah said a big part of the building's success was the Trump name. Vancouver Mayor Gregor Robertson and Councillor Kerry Jang had called for the removal of the Trump name from the tower, in light of Mr. Trump's offensive remarks earlier this year about Mexicans and Muslims.

"To be frank, I think it's a little judging for other nationalities to make comments and judge, and to tell people what they should vote, when they are not an American. I don't want to get into that. That's my personal feeling. It's not our place. Let the American people decide who their leader is, and respect their decision. Let them do their thing.

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"So for me, I have a business deal. I sign multiple contracts – not just with the Trump organization, but many of the purchasers who bought into Trump residence, and I can't just take down the name. I am breaking the contract that I signed with multiple people. I would be in a huge legal battle, and potentially lose a lot of money. And when I sign something, I plan to execute on it."

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