Understanding the Impact of BC’s Land Owner Transparency Act

Real Estate

Much buzz has been heard of late about the new Land Owner Transparency Act (the “Act”), which was introduced by Bill 23 (the “Bill”) introduced almost a year ago in June, 2018, by the BC Minister of Finance and Deputy Premier, Carole James. The Act received Royal Assent from the BC legislature on May 16, 2019, and a copy of the Bill that the Act will be formed on can be found here: Bill 23 – 2019: Land Owner Transparency Act. The Bill was originally introduced following the BC government’s 2018 budget, which saw the BC government presenting a plan known as “Homes for BC: A 30-Point Plan for Housing Affordability in British Columbia” (the “Plan”). The intention of the Plan was to address the housing crisis, ‘hidden ownership’ in real estate and to prevent tax avoidance and tax evasion by creating a new ‘beneficial ownership registry’ that would be accessible to the public (the “Registry”). The intention of the Act is to create the Registry and increase the transparency of land ownership in BC by eliminating the ability to hide or veil ownership of land through vehicles or structures such as trusts and shell corporations.

The Registry

The Registry will hold public records of the individuals behind the various ownership structures of a particular piece of land, including corporations, offshore and domestic trusts and partnerships. The intention is to ‘drill down’ through the ownership structures of a particular piece of land, until the individuals behind the structures have been disclosed. The obligation to disclose the individuals involved with land ownership would apply to all land in BC, unless it is specifically excluded under the Act.

Obligation to Disclose

The obligation to disclose the individual ownership connected to lands would arise in three situations:

  1. On any application to register an interest in land (ie. A transfer or other registration filed at the Land Title Office);
  2. Any time there is a change of owner, included a change in beneficial owner (which can mean an ‘unregistered owner’ or where the transfer does not result in a change to the legal title to the land); and
  3. Now that the Act has become law, all persons holding an interest in land for someone else (such as a trustee holding an interest for a trust, or a general partner holding for partners) will have a period of time to voluntarily offer the information.

The administrator under the Act will be empowered to refuse to register an interest in land if the appropriate disclosure is not made.

Where the party required to provide the necessary disclosure is unable to confirm the accuracy of the information or confirm the identity of the individuals who must be disclosed, the Act provides that they are required to take steps to try and determine the identity of the relevant individuals, outline the steps that were taken to identify the appropriate individuals, and provide the reasons the identity could not be confirmed.

Disclosure of Personal Information

Before filing the requisite report with the administrator under the Act, the entity filing the report must take reasonable steps to give written notice to each individual required to be identified in the report of the following:

  1. that the information about the individual is required under the Act;
  2. that the individual has a right, under the Act, to request that some or all of the information disclosed be omitted from or obscured in publicly accessible information; and
  3. that unless the individual makes a request under the Act within 90 days after the filing of the requisite report, the individual’s primary identification information (as discussed in more detail below) will be publicly accessible after the end of that 90-day period.

What Information Is Disclosed?

Of utmost concern to most people is what specific information will be disclosed in this publicly accessible Registry.  First, we will address the disclosure requirements for the structures, and then we’ll explain what of that information is specifically available to the public.

Corporations

The following information must be disclosed in the requisite report by a relevant corporation:

The following information must be disclosed in the requisite report by a relevant corporation:

  • identification information about the corporation itself (including name, head office and business or incorporation number);
  • identification information about each individual who is a ‘corporate interest holder’ (including name, citizenship and place of residence) who directly or indirectly owns or controls a “significant number of shares” (generally speaking, 10% or more of the shares, or 10% or more of the vote in the corporation), or otherwise falls under the definition of a “corporate interest holder”;
  • each corporate interest holder’s date of birth, social insurance number or individual tax number, and the nature of the interest in the reporting corporation; and
  • information about the person completing the report (including name, position name or title, and contact information)

Trusts

The following information must be disclosed in the requisite report by a trustee of a relevant trust:

  • identification information about the trustee, beneficial owner(s) and settlor(s);
  • date of birth and social insurance number or individual tax number of beneficial owner(s) and settlor(s); and
  • information about the person completing the report.

Of note is that certain trusts are excluded from this requirement, including but not limited to charitable trusts, testamentary trusts, alter ego/joint spousal/common-law partner trusts, trusts where the trustee is the Public Guardian and Trustee, trusts where the trustee is an administrator of an estate, and trusts where each beneficiary is an Indigenous nation.

Partnerships

The following information must be disclosed by a partner of a relevant partnership:

  • identification information about the partnership (including name, head office and business number);
  • identification information about individuals that have an interest as a partner in the interest in the land or are a corporate interest holder in a corporation that is a partner;
  • date of birth and social insurance number or individual tax number of these individuals; and
  • information about the person completing the report.

Of the above disclosed information, the information that will be available to the general public is known as “primary identification information”. As it relates to corporations, this includes the name of the corporation, the registered office address, the corporation’s head office and the jurisdiction in which the corporation was incorporated. With respect to individuals, “primary identification information” includes the individual’s name, whether they are a permanent resident of Canada and the individual’s principal residence. With respect to a partnership, “primary identification information” includes the partnership’s registered business name, the partnership’s registered office and address of the partnership’s principal business premises.

Protection of Information

The administrator under the Act must remove or obscure from the publicly accessible information an individual’s primary identification if the individual is under 19 years of age, or if an individual has been determined as incapable of managing the individual’s financial affairs. An individual may also apply to the administrator to request that some or all of the individual’s identification information be omitted from or obscured in the publicly accessible information on the basis that making the information publicly accessible could reasonably be expected to threaten the safety or mental or physical health of the individual or member of the individual’s household.

Penalties

If it is determined that an individual has not complied with or contravened the Act, the person may be deemed to have committed an offence or be required to pay an administrative penalty. Certain factors will be analyzed by an enforcement officer under the Act to determine whether a person is subject to an administrative penalty or not.

The administrative penalty for a person who is not an individual must not exceed, the greater of $50,000 and 5% of the assessed value of the relevant property and in the case of an individual, must not exceed the greater of $25,000 and 5% of the assessed value of the relevant property.

Property Transfer Tax

In BC, every transfer of land that is processed through the Land Titles Office is subject to the requirement that a buyer must pay property transfer tax pursuant to the Property Transfer Tax Act (the “PTT Act”), unless the transfer qualifies under very specific exemptions. The property transfer tax (“PTT”) payable on a qualifying transaction is calculated as 1% of the fair market value of the land up to $200,000, 2% on the fair market value of the land on the amounts between $200,000 and $2,000,000, and 3% on the fair market value of the land on any amount over $2,000,000.  In land deals of significant value, it is not uncommon for parties to use a transfer of shares of a company owning a piece of property, or an unregistered transfer of beneficial interest, instead of transferring the ownership of the property itself as a means of conveying ownership of the property. This has conferred significant benefit on buyers by enabling them to avoid paying PTT on the transfer.

One of the main concerns that has arisen with respect to the Actl is whether, by creating a transparent Registry of all the individuals connected with a real estate transfer, the BC government will extend the tentacles of the PTT Act such that it will apply to transfers of real estate that aren’t registered at the Land Titles Office. With the Registry it will be clear who the individuals in the ownership of any piece of land in BC are, which some are concerned could assist the BC government in seeking out the payment of PTT in situations where it wasn’t previously payable. Time will tell, of course, as to whether the BC government intends to extend the reach of the PTT Act in this regard.

When will the Act become law?

The Bill received Royal Assent on May 16, 2019, which means it has become law. The actual implementation of the requirements under the Act will come into force by regulations. Those regulations have not yet been created, so the exact timeframe for ones’ obligation to comply with the Act is currently unknown. We will continue to keep people updated on the progress as we learn more.

If you have any concerns or questions as to the content of the Act, you should contact your local Member of the Legislative Assembly at their constituency office to express your concerns with respect to the same. You can find your local MLA here: MLA Members

For any questions about the above, or general real estate inquiries, please contact Erin Easingwood, at [email protected] or 604 484 3071 or Kiran Sidhu at [email protected] or 604 484 3052.

Erin J. Easingwood
Partner, Business Law
Lindsay Kenney – Vancouver Office
Kiran Sidhu
Associate, Business Law
Lindsay Kenney – Vancouver Office