Authors: Saravan Veylan, Tessa Rowland
This blog has been updated as of April 2020 to include updates from the B.C. government.
The government of British Columbia is in the process of enacting Bill 23- 2019: Land Owner Transparency Act (the “Act”), which received royal assent on May 16, 2019. The Act is set to come into force when supporting regulations are passed later this year.
The Ministry of Finance first solicited feedback on the Act’s White Paper through a public consultation from June to September 2018. The Act will establish a public registry (the “Registry”) that collects information regarding beneficial land ownership and makes it accessible to the public.
Currently, the land title system in British Columbia requires that only the legal or registered owner of the property be disclosed in the land title office. This allows for the beneficial interest in real property to be vested in another entity – whether an individual, a partnership, a corporation or a trust – without registering such interest. The proposed Act would require the disclosure of the ultimate beneficial owner of an interest in land to the Registry and make such interest available to public scrutiny.
The Land Title and Survey Authority launched the Registry website on April 23, 2020. Although the Registry has not yet been implemented, the website provides an overview of the Registry in order to make it more accessible to the public. The website discusses filing requirements and exclusions, an overview of the data the Registry will contain, and who may access certain data, all required fees, and enforcement information. The website also offers an FAQ section and a list of definitions for common terms used in relation to the Registry and real estate dealings generally.
The Reporting Requirements
The province’s Land Title and Survey Authority will administer the Registry. The Act creates a number of new concepts, including reporting bodies (relevant corporations, trustees of a relevant trust and partners of a relevant partnership), transparency declarations and transparency reports.
Under the Act, a transparency declaration, which will attest to whether the transferee is a reporting body and, if so, what type of reporting body, will be required in the following circumstances:
- on any application to register an interest in land in the name of a reporting body;
- any time there is a change of interest holders or beneficial owners (even when this does not result in a transfer of legal title of land); and
- during an initial prescribed transition period. In this period, all reporting bodies who are registered owners of an interest in land will be required to file a transparency report.
Under section 11 of the proposed Act, the registrar must refuse an application to register an interest in land if a transferee fails to submit a transparency declaration. That way, the transparency declaration will become an additional mandatory component of the land title registration process and must be accompanied by a filing fee of $5.00.
In addition to transparency declarations, reporting bodies will be required to file transparency reports concurrent with registration along with a $35.00 filing fee. These transparency reports will be the source of the beneficial ownership information contained in the Registry.
At this time, the reporting requirements vary slightly depending on which type of reporting body the transferee is. In respect to corporations, information which must be disclosed includes:
- Identification information about the corporation, including name of the corporation, address of head office and incorporation or business number;
- Identification of each individual who directly or indirectly owns or controls 10% or more of the issued shares or otherwise falls under the definition of a corporate interest holder as provided by the Act;
- Each corporate interest holder’s date of birth, last known address, social insurance number or individual tax number, residency status pursuant to the Income Tax Act (Canada), the date on which they became an interest holder, and the nature of the interest of the reporting corporation; and
- Information about the person completing the report.
Given the complex structure of some reporting bodies, section 21 of the Act prescribes that a reporting body must take reasonable steps to obtain and confirm the accuracy of the information it provides in a transparency declaration. We note that the Act provides no guidance on what measures are considered reasonable steps.
In the event that the prescribed information cannot be obtained, the reporting body must still complete a transparency report outlining the information it was able to obtain, what information it was unable to obtain, and the steps taken to obtain or confirm this information.
In the event that a reporting body fails to file a transparency declaration or provides false or misleading information, an enforcement officer may impose an administrative penalty. In the case of an individual, this penalty would be the greater of $25,000 and 5% of the assessed value of the property, and in all other cases, the greater of $50,000 and 5% of the assessed value of the property.
Access to Registry Information
Basic identification information disclosed under the Act will be made public, and a member of the public may search the publicly accessible information for a prescribed fee of $5.00. The public will be able to search the Registry in the fall of 2020 using myLTSA Explorer. The Registry can be searched by an individual’s name, or by a parcel identifier (“PID”).
The Act will attempt to balance the need for increased transparency while at the same time taking into consideration privacy concerns associated with a public database. At this time, the Act proposes to address privacy concerns by restricting access to sensitive information to authorized government authorities only. Furthermore, under section 40 of the Act, vulnerable individuals, such as victims of domestic violence, can apply to have their personal information omitted from being made public. An application to omit information will cost individuals $30.00.
It is further worth noting that the Act falls in line with recent changes to the Canada Business Corporations Act, R.S.C., 1985, c. C-44 (the “CBCA”). As of June 13, 2019, the changes will require corporations registered under the CBCA to create and maintain a new type of register that lists all individuals with “significant control” over the corporation.
In accordance with the amendments, an individual will be deemed to have “significant control” if he or she owns 25% or more of the voting rights attached to the corporation’s outstanding voting shares. Also included in this definition are individuals acting jointly who meet the 25% threshold and who have the ability to exert influence. These individuals must be identified under the new “Control Register.”
This definition of control falls in line with the Act’s definition of a corporate interest holder. The Control Register will require a corporation to include similar information to that required by the transparency declaration under the Act.
The government of British Columbia has made similar amendments to the Business Corporations Act, S.B.C. 2002, c. 57, whereby private companies are required to keep and maintain a transparency register on similarly defined individuals with significant control over the corporation. Due to the COVID-19 emergency, this requirement is set to be implemented on October 1, 2020.
This new register will include information on registered owners, beneficial owners and owners who have indirect control. The new transparency register will enable corporations to maintain the information required for transparency declarations.
The Act also mirrors changes already made to information collection required by the Property Transfer Tax Return, updated in 2018 to include reporting on corporate interest holders of purchasers.
As mentioned, all reporting bodies that have a registered interest in land when the Act comes into force will be required to file transparency reports within the prescribed transition period. While there still is no indication on how long the prescribed transition period will be, requiring pre-enactment reporting bodies to prepare and file transparency reports will likely take far longer to complete and be a larger administrative burden than the government envisions for reporting bodies and lawyers alike.
Pre-enactment obligations aside, the reporting requirements pursuant to the Act are onerous enough that compliance will necessitate additional time, money and resources. It is presently unclear whether liability will fall to lawyers or other professionals to ensure their clients report as necessary.
The Act appears somewhat inconsistent with the purpose of a Torrens system, the land title and transfer system implemented in British Columbia. The hallmark of the Torrens system is indefeasibility of title, meaning the name registered on title is conclusive evidence of its interest, ownership or otherwise. Requiring disclosure beyond what is registered on title could potentially call into question a lawyer’s opinion of good and marketable title, especially if the Act acknowledges instances of unattainable or imperfect reporting despite “reasonable steps.”
If implemented, the Registry will be the first of its kind in Canada. The ultimate aim of the Act and the Registry is to provide tax authorities and law enforcement with information to limit tax evasion, identify tax fraud and limit money laundering, which has become increasingly common in British Columbia’s real estate market. The introduction of the Act comes at a time where both the federal government and the provincial government are making amendments to their respective corporate legislation in an attempt to provide greater transparency.
For more information about this or other real estate issues in British Columbia, contact our real estate team.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.