History

Passed by the legislative assembly on May 16, 2019, and approved by Order in Council on September 20, 2020, the British Columbia Land Owner Transparency Act (the “Act“) comes into force on November 30, 2020. The Act creates the Land Owner Transparency Registry (the “LOTR“), which will require the mandatory disclosure of all  beneficial land ownership in British Columbia. With the intent of combating fraud, money laundering, and tax evasion, the Act will make information on beneficial land owners available to prescribed government entities, law enforcement agencies, and the public.

The Land Owner Transparency Regulation (the “Regulation“) also comes into force on November 20, 2020, and includes important definitions, requirements for declarations and reporting, and rules concerning access to the LOTR.

 

What is the LOTR?

The LOTR is a government-maintained registry that will provide information about individuals who are deemed by the Act and the Regulation to have an indirect ownership interest in land in British Columbia.  On April 30, 2021, the LOTR will become searchable by prescribed government entities, law enforcement agencies, and the public. While those prescribed government entities and law enforcement agencies will have full  access to all information in the LOTR, only limited information will be available to the public.

As of November 30, 2020, every application at the Land Title Office (“LTO“) to register an interest in land must be accompanied by a new ‘Transparency Declaration’ and, depending on the nature of the applicant, a new ‘Transparency Report’.

An ‘interest in land’ pursuant to the Act includes:

  • fee simple estates;
  • life estates;
  • lease with a term greater than ten years;
  • a right to occupy or require a transfer of land under an agreement for sale; and
  • other prescribed real property interests.

Reporting under the LOTR

Persons who are acquiring an interest in land are responsible for filing ‘Transparency Declarations’, and if those persons are considered a ‘Reporting Body’ pursuant to the Act, they will also be required to file a ‘Transparency Report’.

A ‘Reporting Body’ includes:

  • ‘Relevant Corporations’ – which includes all privately held corporations, but excludes those entities specifically exempt under Schedule 1 of the Act (including strata corporations, government bodies, and schools);
  • ‘Relevant Trusts’ –which includes bare trusts and all express trusts, but excludes those trusts specifically exempt under Schedule 2 of the Act  (including testamentary trusts and charitable trusts);
  • ‘Relevant Partnerships’ – which includes virtually all partnerships.

A ‘Relevant Corporation’ must disclose in its ‘Transparency Report’ information for all “Corporate Interest Holders”, which are individuals who:

  • own or control, alone or with others, directly or indirectly, 10% or more of the equity or voting rights of the corporation; or
  • have the right, alone or with others, directly or indirectly, to appoint or remove a majority of the directors of the corporation.

If another corporation meets either of the two requirements above with respect to a ‘Relevant Corporation’, information must be disclosed for individuals who meet the foregoing criteria for that corporation.

A ‘Relevant Trust’ must disclose in its ‘Transparency Report’ information for all ‘Beneficial Owners’, which are individuals who:

  • hold a beneficial interest in the subject land;
  • have the power to revoke the trust and receive the interest in land; or
  • are a corporate interest holder of a corporation that has a beneficial interest in the land, or has the power to revoke the trust and receive the interest in the land

A ‘Relevant Partnership’ must disclose in its ‘Transparency Report’ information for all ‘Partnership Interest Holders’, which are:

  • a partner in the relevant partnership; or
  • a ‘Corporate Interest Holder’ of a corporation that is a partner in the ‘Relevant Partnership’.

Information that must be disclosed for individuals in a ‘Transparency Report’ includes:

  • full legal name;
  • citizenship or permanent residence;
  • city and province of residence (or country of residence if outside of Canada);
  • date of birth;
  • social insurance number;
  • tax number (if any);
  • residence for tax purposes; and
  • description of interest held in the ‘Reporting Body’ (for example the percentage of the shares held by the individual in the ‘Reporting Body’).

Information that must be disclosed for corporations in a ‘Transparency Report’ includes:

  • business number; and
  • incorporation number.

Information that must be disclosed for a ‘Relevant Trust’ in a ‘Transparency Report’ includes:

  • information about the settlor of the trust; and
  • the Land Title Act instrument number for the registered trust.

In practice, ‘Transparency Declarations’ and ‘Transparency Reports’ will need to be filed concurrently with all LTO applications for the transfer of land.

The disclosure requirements of ‘Reporting Bodies’ are ongoing, which means that a ‘Reporting Body’ must file an updated ‘Transparency Report’ every time its interest holders change, regardless of whether there is a change in the registered ownership of land in the LTO. There is also a requirement that  ‘Reporting Bodies’ file a ‘Transparency Report’ if they cease to be a ‘Relevant Corporation’, ‘Relevant Trust’, or ‘Relevant Partnership’.

 

Pre-Existing Owners And Retroactive Disclosure

The Regulation requires that ‘Reporting Bodies’ that own an interest in land when the Act comes into force must file a ‘Transparency Report by November 30, 2021. This will affect most corporate interest holders who hold a beneficial or indirect interest in land through a corporate ownership structure. If a pre-existing beneficial owner transfers its registered interest in land prior to November 30, 2021, that beneficial owner is exempt from the filing requirement because the . purchaser will be required to file a ‘Transparency Declaration’ and, if the purchaser is a ‘Reporting Body’, a ‘Transparency Report’ as well. If the purchaser only acquires a beneficial ownership interest before November 30, 2021, then they must file a ‘Transparency Report’ by that date as a one-time obligation.

Importantly, these requirements do not apply to individuals who hold an interest in land as legal and beneficial owner.

 

Key Definitions

Corporate Interest Holder a “corporate interest holder” is an individual who directly or indirectly, through beneficial ownership or indirect control of a significant number of shares, owns or controls 10% or more of the issued shares or 10% or more of the voting rights of a relevant corporation. For most standard corporate structures, determining who controls the shares or the voting rights of a relevant corporation is a relatively simple task. . Where a complex corporate structure has been established, with multiple intermediaries involved, compliance with the disclosure requirements under the Act will be far more onerous.

The Regulation provides two definitions that will help land owners and professionals determine who has “indirect control” of a ‘Relevant Corporation’, ‘Relevant Trust’, or ‘Relevant Partnership’.

The definitions are as follows:

Relevant intermediary – means a person that is one or more of the following and is controlled by another person:

  1. a ‘Relevant Corporation’;
  2. a ‘Relevant Partnership’;
  3. an individual, ‘Relevant Corporation’ or ‘Relevant Partnership’ that is a trustee of a ‘Relevant Trust’;
  4. an individual, ‘Relevant Corporation’, or trustee of a ‘Relevant Trust’ that is an agent; and
  5. an individual, ‘Relevant Corporation’, ‘Relevant Partnership’ or trustee or a ‘Relevant Trust’ that is a personal or other legal representative.

Chain of relevant intermediaries – means a group of two or more relevant intermediaries having a hierarchical relationship to each other in which:

  1. the first relevant intermediary in the chain is controlled by an individual who is not a relevant intermediary; and
  2. each relevant intermediary in the chain, controls the relevant intermediary below it.

The definitions above add some clarity to the requirements surrounding the level of disclosure required for indirect ownership. With layered corporate ownership structures where an individual, who is not a relevant intermediary, has indirect control over a share of a relevant corporation, the Regulation indicates that disclosure of the first relevant intermediary in a chain of relevant intermediaries, and disclosure of the last relevant intermediary in the chain, who is the registered owner of the share, is required.

‘Control’

The Regulation also provides a definition of “control” in relation to different reporting bodies. ‘Transparency Reports’ will require the disclosure of information relating to  interest holders who have control of ‘Relevant Corporations’, ‘Relevant Partnerships’ or ‘Relevant Trusts’ as follows:

Relevant Corporations – a person controls a ‘Relevant Corporation’ if that person has the right to elect the majority of the directors of the ‘Relevant Corporation’.

Relevant Trusts – a person controls a trustee of a ‘Relevant Trust’ if that person, in the case of a trustee that is the registered owner of a share of a ‘Relevant Corporation’, has the power to direct how the trustee exercises any of the rights attached to the share. If the trustee controls a ‘Relevant Intermediary’ below the trustee, a person controls a ‘Relevant Intermediary’ if that  person has the power to direct how a trustee exercises control over that ‘Relevant Intermediary’.

Relevant Partnerships – a person controls a ‘Relevant Partnership’ if:

  1. a person is a partner, other than a limited partner, in the ‘Relevant Partnership’; or
  2. a person is a limited partner in the ‘Relevant Partnership’ and:
    • is entitled to at least 25% of the profits of the partnership assets;
    • is entitled on wind up to at least 25% of the assets of the partnership;
    • has at least 25% of the votes in the partnership management; or
    • has the right to appoint or remove the majority of the partnership’s management.

Notably, the definition of ‘control’ for ‘Relevant Partnerships’ will alleviate the disclosure requirement for  minority-limited partners who fall below this  25% threshold. For complex ownership structures with various layers of ownership, establishing which persons fall under the applicable definitions and preparing corresponding  ‘Transparency Reports’ will undeniably increase costs to the real estate industry, and will likely lead to delays in closing some transactions.

 

Leases and Exemptions

Any lease with a term that is greater than ten years is considered an ‘interest in land’ subject to the Act.

The Regulation has clarified that the “remaining term” of a lease for the purposes of the Act does not include any extension or renewal term(s), and that a ‘Relevant Corporation’, trustee of a ‘Relevant Trust’ or partner of a ‘Relevant Partnership’ are not required to file a transparency report if the interest in lands to be acquired is a lease that, on the date of the application is made in the LTO, has a remaining term of ten years or less.

Further, ‘Reporting Bodies’ who are registered holders of a leasehold interest in land with a remaining term of ten years or less as of November 30, 2020 are not required to file a transparency report when the Act comes into force. Holders of  registered leasehold interests in land  who become a ‘Reporting Body’ after the Act comes into force are also not required to file a ‘Transparency Report’ if the lease has a remaining term of ten years or less.

 

Administrative Penalties and Offences

If a ‘Reporting Body’ fails to file a ‘Transparency Report’, they may be subject to administrative penalties, and could be found guilty of an offence under the Act. ‘Reporting Bodies’ have until November 30, 2021 to comply with the Act.

 

Property Transfer Tax (“PTT”) On Beneficial Transfers

As of the date of this bulletin, the government of British Columbia has not amended the Property Transfer Tax Act to require the payment of PTT on the transfer of a beneficial interest in land. It is uncertain as to whether, or when, the Provincial government may make the transfer of a beneficial interest in land subject to PTT.

 

Conclusion

With the Act coming into force and the LOTR being operational on November 30, 2020, all ‘Reporting Bodies’ involved in real estate transactions will need to be mindful of the new disclosure and reporting requirements under the Act.

‘Reporting Bodies’ will be responsible for the cost of preparing and filing ‘Transparency Declarations’ and ‘Transparency Reports’ by November 30, 2021, unless they transfer their interest in land before that date. ‘Reporting Bodies’ will also have to review all of their registered leases to confirm whether the remaining term of their lease is 10 years or more as of November 30, 2020.

Individuals and corporations should start preparing now for the additional time and costs that compliance with the Act and the Regulation will require for real estate transactions in British Columbia on and after November 30, 2020.