Land Ownership Exposed!
It is not uncommon in the world of land ownership to see title to a property where a corporation, trust, or another entity other than an individual, holds an interest in the land. Title can be held in this manner for various reasons, including tax planning, limitation of liability, or mere privacy. Whatever the case, the registered owner on title may not hold any actual interest, or in legalese, any beneficial interest, in the property.
In May 2019, Bill 23, the Land Owner Transparency Act (the “Act”) received Royal Assent in the British Columbia legislature. Once in force, the Act will create a publicly accessible registry of all beneficial interests in land. In other words, there will soon be a public database where the true owners of all properties held in British Columbia are unmasked.
The Act focuses its attention on the phrase “interest in land”, which includes freehold interests, life interests, leasehold interests under leases with a term of more than 10 years, contractual rights to occupy land or require the transfer of a freehold interest and other interests prescribed by regulation. Any interest in land that fits this category will require compliance and disclosure.
Who Will Have to Report?
- relevant corporations – corporations and limited liability companies, other than certain exempt corporations such as government bodies, municipal corporations, statutory authorities, certain financial institutions, public companies and corporations owned by Indigenous nations;
- trustees of relevant trusts – trustees, including under express trusts and bare trusts or similar relationships under the laws of other jurisdictions, subject to exceptions, including for special trusts such as charities, pension plans, mutual funds, REITs, estate trustees and bankruptcy trustees and exceptions to be prescribed by regulation; and
- partners of relevant partnerships – partners, including under general partnerships, limited partnerships, liability limited partnerships, professional partnerships and foreign partnerships, subject to exceptions to be prescribed by regulation.
How Will Reporting Occur?
Upon application to register an interest in land in the land title office, the registering party will be required to file a “transparency declaration” stating whether or not it is a reporting body. An applicant fitting one of the categories of reporting bodies above will be required to file a “transparency report” in which it will disclose all underlying interest holders.
The obligation to file a transparency report will arise upon:
- registration of an interest in land in the name of a reporting body; and
- any change of interest holders.
Simply stated, whether a reporting body acquires title to a property, or the reporting body has any internal change insofar as interest holders, they will be required to report. During the initial transition period immediately after the Act comes into force, all parties that qualify as reporting bodies will be required to file an initial transparency report.
The transparency report will include the following information about the reporting body and “interest holders":
- corporate interest holders – for a corporation, individuals directly or indirectly owning or controlling 10% or more of the shares or voting rights, or who otherwise fall under the definition of a“corporate interest holder";
- beneficial owners – for relevant trusts, individuals who have a beneficial interest in the land, have a power to revoke the trust in respect of an interest in the land, or are a corporate interest holder of a corporation that has a beneficial interest in the land or the power to revoke a trust in respect of an interest in the land; and
- partnership interest holders – for partnerships, individuals who have an interest as a partner or are a corporate interest holder in a corporation that is a partner.
Further, the transparency report will include:
- for relevant corporations: the corporation’s name, registered address and head office address (if any), jurisdiction of incorporation or continuation and incorporation number, and business number;
- for relevant trusts: information about the individual or corporate trustee(s) and settlor(s) corresponding to certain of the information that would be required for individual interest holders or relevant corporations;
- for relevant partnerships: the partnership’s business name, type of partnership, registered address or head office address and address of principal business premises, jurisdiction of organization and identification number (if any), and business number;
- in each case, for each interest holder: the individual’s name, date of birth, social insurance number, tax number, location of principal residence and last known address, the date on which each individual became or ceased to be an interest holder, the nature of the individual’s interest in the reporting body, and whether or not the individual is a Canadian citizen or permanent resident of Canada.
Although basic information, including names of interest holders, will be publicly available, the Act recognizes that sensitive information such as social insurance numbers and dates of birth will only be available to government and law enforcement agencies.
Certain information will also be omitted from public view of the database, such as information on minors or those otherwise legally incapable of managing their affairs. Persons at risk from disclosure of such information (such as victims of domestic violence) can apply to have information omitted from the public database.
What Are the Consequences for Failure to Report?
The registrar of land titles will be mandated to refuse to accept an application to register an interest in land if the transferee does not submit a transparency declaration, or if a reporting body does not submit a transparency report. A reporting body that fails to file a transparency report or provides false or misleading information in a transparency report may be subject to a fine of up to the greater of (i) $50,000 for a corporation or other entity or $25,000 for an individual, or (ii) 15% of the assessed value of the property. Other offences under the Act may be subject to a fine up to $100,000 for a corporation or other entity or $50,000 for an individual.
When Does the Act Take Effect?
At this juncture, it is unclear as to when the Act will come into force and when the public registry will be running. However, it is best to plan ahead now as this major change is coming to land registration soon.
For more information on this or other real estate concerns in B.C., please feel free to contact us through our website, or call us at (250) 385-6004 / (888) 385-6004.
Note: laws may change over time and should only be interpreted in the context of particular circumstances. These materials are not intended to be relied upon or taken as legal advice or opinion, and readers should consult a legal professional for specific advice in any particular situation.