British Columbia's new Land Owner Transparency Act
British Columbia’s Land Owner Transparency Act (“LOTA”) is coming into force effective as of November 30, 2020. LOTA creates a land owner transparency registry for ownership of real property in BC and imposes disclosure obligations on both existing and new owners of real property. Due to its expansive scope, we anticipate that LOTA will have a significant impact on most owners of real property or interests in real property in BC including individuals, corporations, partnerships and trusts. This bulletin will summarize the key provisions of LOTA and its regulations.
Introduction
On May 16, 2019, LOTA passed third reading in the legislative assembly of BC and received Royal Assent. On September 20, 2020, the Lieutenant Governor of BC signed Order in Council 549 containing the Land Owner Transparency Regulation (the “Regulation”) and bringing LOTA and the Regulation into force effective on November 30, 2020.
The BC Government has announced that the Act is intended to end the hidden ownership of real estate in order to prevent tax evasion, fraud and money laundering. Corporations, trustees and partners that currently own or buy land will be required to file transparency reports containing information regarding the “interest holders” of such entities.
LOTA requires that all applications made to the BC Land Title Office on or after November 30, 2020 to register certain interests in land - including fee simple ownership interests - must include a transparency declaration which discloses whether any transferee is a “reporting body”. A transferee that is a “reporting body” must also complete and file a transparency report which discloses information about the transferee and indirect owners of the interest in land called “interest holders”. Failure to file a transparency declaration and a transparency report, if applicable, will result in a rejection of the registration application by the Land Title and Survey Authority of British Columbia (“LTSA”) and the transfer of interest will not complete.
LOTA also requires that all existing reporting bodies that hold such interests in land in British Columbia file a transparency report by November 30, 2021. In addition, each time the interest holder(s) of a reporting body change, the reporting body must file an updated transparency report (regardless of whether such change coincides with an application to register an interest in land). Finally, when a registered owner of an interest in land ceases to be a reporting body, a notice must also be filed.
Under LOTA a publically searchable registry is established which will be compiled based on the transparency reports filed and administered by the LTSA. The public registry is not expected to be accessible until at least April 30, 2021, being the date on which the relevant provisions regarding the registry in LOTA come into force.
Interest in land
LOTA and the Regulation apply to most types of land in BC, including residential and commercial, with limited exceptions (for example, treaty lands, recognized self-governing First Nations Lands, Reserve lands and certain other types of land prescribed by regulation).
In addition, LOTA requires disclosure from holders of interests in land including fee simple holders, life estate holders, holders of leases with a term or remaining term over 10 years (not including any unexercised renewals), holders of a right to occupy or require transfer under an agreement for sale and other rights which may be prescribed by regulation. Currently, no other interests in land are prescribed by the Regulation.
Reporting body
There are three types of reporting bodies under LOTA: relevant trusts, relevant corporations and relevant partnerships.
Relevant corporations include all corporations and limited liability companies (within the meaning of the Business Corporations Act) unless exempt by Schedule 1 of LOTA or by regulation. Notable exemptions include publically traded corporations, Crown corporations, local governments, strata corporations, schools, insurance companies, trust companies, corporations owned by an Indigenous nation and savings institutions.
Relevant trusts include all express trusts, unless exempt by Schedule 2 of LOTA or by regulation. Relevant trusts include arrangements whereby the registered interest in land is held by a bare trustee or nominee for a beneficial owner. Notable exemptions include testamentary trusts, charitable trusts, alter ego or joint spousal trusts and real estate investment trusts (REITs).
Relevant partnerships include all partnerships, unless exempt by regulation.
Currently, the Regulation does not exempt any entities from the definitions of relevant corporation, relevant trust or relevant partnership.
Interest Holders
Reporting bodies must disclose information regarding their “interest holders”. The definition of “interest holder” varies based on the type of reporting body for which disclosure is required.
An interest holder of a relevant corporation is a “corporate interest holder”. A corporate interest holder is an individual that:
a) owns or controls, alone or with others, directly or indirectly, 10% or more of the issued shares of
the relevant corporation or issued shares of the relevant corporation that carry 10% or more of the
right to vote at general meetings;
b) has the right, directly or indirectly, to appoint or remove a majority of the directors or the indirect
control of such right; or
c) has a prescribed interest.
An interest holder of a relevant trust is a “beneficial owner”. A beneficial owner is an individual that:
a) owns a beneficial interest in the interest in land;
b) has the power to revoke the trust and receive the interest in land;
c) is a corporate interest holder of a corporation that has a beneficial interest in the land or the
power to revoke the trust and receive the interest in land; or
d) has a prescribed interest.
a) is a partner in the relevant partnership;
b) is a corporate interest holder of a corporation who is a partner in a relevant partnership; or
c) has a prescribed interest.
With respect to “corporate interest holders”, the Regulation defines the concept of “indirect control”. While the definition is highly technical, the concept is intended to capture individuals who would otherwise constitute “corporate interest holders” but for a chain of ownership by intermediary entities between the relevant corporation and the individual. In order for the concept of “indirect control” to attach to an individual, each intermediary in the chain of intermediaries must itself be a relevant corporation, relevant partnership, trustee of a relevant trust, an agent or a personal or other legal representative and must control the intermediary directly below it in the chain.
The Regulation also notably defines a person (individual or entity) that controls a partnership to include any partner of the partnership, except for limited partners. For limited partnerships, a person is deemed to control a limited partnership if the person is a limited partner 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.
Information required
Transparency reports must include “primary identification information” with respect the various persons to which they relate. The type of information deemed “primary identification information” varies depending on the kind of person to which the information relates:
a) Corporations: name and registered office address, head office address, jurisdiction and prescribed
information, if any;
b) Individuals: full name, whether or not the individual is a Canadian citizen or permanent resident of
Canada, country of citizenship if not a Canadian citizen or permanent resident, the city and province
of the individual’s principal residence if within Canada or the country and city if the principal
residence is outside of Canada and prescribed information, if any; and
c) Partnerships: registered business name, the type of partnership (e.g. limited partnership), the
address of the partnership’s principal business premises, jurisdiction and prescribed information if
any.
Only the primary identification information contained in transparency reports will be made publically available in the public registry. Sensitive information such as social insurance numbers will not be made publically available. In addition, LOTA provides a mechanism for concerned persons to apply to the administrator to have their primary identification information excluded from the public registry if they have a reasonable belief of threat to safety to themselves or a member of their household. Any such application must include evidence to support the application and the administrator may require additional supporting records or other information. The administrator must omit information pending review and determination.
Enforcement
Contraventions of LOTA may result in administrative penalties up to the greater of $25,000 or 5% of the assessed value of the property for an individual or the greater of $50,000 or 5% of the assessed value of the property for a non-individual. Contraventions that are subject to administrative penalties include failure to file a transparency report when required, filing a non-compliant transparency report and providing false or misleading information.
Administrative infractions also constitute an offence and may be prosecuted. A person that commits an offence under LOTA is liable to a maximum fine up to the greater of $25, 000 or 15% of the assessed value of the property for an individual or the greater of $50,000 or 15% of the assessed value of the property for a non-individual.
Conclusion
This article provides only general information about legal issues and developments, and is not intended to provide specific legal advice. Please see our disclaimer for more details.
