Quebec Welcome Tax and Furniture: Allocating the Price in the Deed of Sale

You are buying a cottage sold fully equipped, or a turnkey condo with the furniture in it. The agreed price then pays for two things: the property and its contents. Quebec's transfer duties, the so-called welcome tax, apply to the transfer of the immovable, the property itself. Which items count as part of the property and which stay movable is covered in our article on inclusions and exclusions in a Quebec purchase offer. This one picks up from there: how the share of the price that pays for the movables gets written down, justified and capped.

One price, two things sold

In most home sales, whatever the seller leaves behind has little value: a few used appliances, curtains, a garden shed that comes apart. Nobody thinks to give it a share of the price. Some sales, though, transfer real furniture: a cottage with its furniture, bedding and gear, a condo sold furnished to an investor, a family home sold with everything in it after an estate settles.

In those cases the total price buys both the property and a set of movables. Since transfer duties target the transfer of the property, the part that pays for the movables can be treated separately, on one condition: it has to be identified clearly, in writing.

Where the allocation is written: the offer, then the deed

The allocation starts in the promise to purchase. Buyer and seller list the movables included and agree on the value assigned to them within the total price. That is where the decision is made, while both sides are still negotiating.

It is then confirmed in the deed of sale prepared by the notary, which sets out the total price and the share for the property and for the movables. An allocation that lives only in a conversation, or in an attached list with no amounts, does not have that effect. The notary, who records the figures used for transfer duties, needs to see it in writing to take it into account. Our article on the notary's role in a Quebec real estate purchase covers the rest of what they do.

A realistic, documented value

The value assigned to movables should be what used goods are worth on the day of the sale: what a reasonable buyer would pay for that furniture as it stands, not what it cost new. A sofa that was expensive ten years ago is no longer worth that, and writing the old price into the deed does not make it so.

For the allocation to hold up, you need to be able to explain it:

• a precise list of items, room by room, rather than a general "furniture included";
• a value per item or group of items that fits their age and condition;
• where useful, photos or receipts showing the items exist and what shape they are in.

An allocation inflated to cut the duties protects nobody. It can be challenged, it shifts part of the price artificially, and the buyer who thought they were paying less may end up having to justify a number they cannot defend.

The allocation also has a hard limit: it never takes the duty base below the municipal assessment multiplied by the comparative factor, a floor explained in our article on Montreal's comparative factor.

When the allocation is worth it, and when it is not

The saving on duties is proportional to the share of the price genuinely attributable to movables. It can be worth the effort in three situations:

• a cottage sold furnished and equipped, where furniture, outdoor gear and accessories add up to real value;
• a turnkey condo, often bought by an investor who wants to rent it out without furnishing it;
• an estate sale, when the heirs leave a full set of furniture that the buyer agrees to take over.

For a few used appliances and light fixtures, on the other hand, the difference in duties is small. The list still matters, because it states clearly what goes with the property, but giving those items a separate value changes little.

Before you sign: the checklist

• Does the promise to purchase include a precise list of movables and the value assigned to them?
• Does that value match what used goods are worth, and can it be supported?
• Are the listed items really movables, rather than fixtures built into the structure?
• Has the notary received this information in time to carry it into the deed?

These questions get settled before signing: with your broker for the offer and with the notary for the deed. Once the deed is signed, the allocation is on paper, and that is what will be read.